South Africa has a window of opportunity to implement structural reforms and introduce stimulus measures to help protect the economy against the potential damage of Trumponomics.
US president-elect Donald Trump, who will be inaugurated on January 20 2025, is expected to rapidly implement his “put America first” campaign promises, which include sweeping tariffs of 60% on Chinese products and 10% on those from other countries, and cutting US taxes, with potentially harmful economic consequences for emerging markets.
Funding Trump’s plans would require an increase in US debt, which is more attractive to investors than that of emerging markets, which will result in higher borrowing costs. Trump’s policies are also expected to result in higher inflation, trade disruptions and a slowdown in global economic growth.
“This is on the back of already high debt levels and debt servicing costs in our economy and region,” says Xhanti Payi, senior economist at PwC in South Africa.
The duration of the dollar strength — and resulting rand weakness — fuelled by Trump’s victory is uncertain, but if it persists it will further affect local and regional inflation, says Payi.
There is more. Though China is expected to be Trump’s priority when he takes office, there are concerns that the US may not renew the African Growth & Opportunity Act (Agoa) when it expires in September 2025. This law grants tariff-free access for about 6,800 products to qualifying Sub-Saharan African countries. Locally, wine, citrus and automotive exports are the main beneficiaries.
Additionally, there are fears that funding for the US President’s Emergency Plan for Aids Relief (Pepfar), which is budgeted to run until March 2025, could be halted, and that the US may again withdraw from global climate commitments, reducing related funding and incentives.
The good news is that addressing South Africa’s self-inflicted economic pain can help provide some protection in the short and medium term.
This is an excellent time for South Africa to get its house in order. Many of our problems are local, and our focus should now be predominantly local
— Independent economist Elize Kruger
“This is an excellent time for South Africa to get its house in order,” says independent economist Elize Kruger. “Many of our problems are local, and our focus should now be predominantly local.”
Kruger notes that, under the government of national unity, South Africa has seen progress on several structural issues, such as improved electricity supply and visa reform, contributing to positive economic sentiment.
“We need to build on this momentum by focusing on implementation. If you look at logistics, for example, we have an approved freight logistics road map for needed reforms, but we are battling with implementation. If we can get logistics right, it will have a significant positive impact on our economy, regardless of what is happening in the US.”
Kruger notes that the US Federal Reserve’s November decision to cut interest rates by 25 basis points (bp) presents a “window of opportunity” for the Reserve Bank to implement its own rate cut on November 21, providing much-needed economic stimulus. “We have a great opportunity to capitalise on the reform momentum, so ideally I’d like to see a 50bp cut.”
Energy industry reform is another area where progress on domestic efforts — such as establishing a transmission system operator and improving grid access — can unlock further investment, regardless of Trump’s climate policies. That’s according to Saliem Fakir, executive director of the African Climate Foundation, a nonprofit focused on facilitating climate-friendly energy investments on the continent.
With costs continuing to decline, renewable energy investments will be increasingly lucrative, even without incentives. As a result, funding from key investors in renewable energy on the continent, including the EU, China and developmental finance institutions such as the World Bank, is expected to continue, says Fakir.
“If projects are business-friendly and make economic sense, we will also continue to attract US business and government attention,” he says.
Relationship reset
In addition to economic reforms, South Africa’s diplomatic relations can benefit from some fine-tuning.
Stavros Nicolaou, group senior executive for strategic trade development at Aspen and South Africa Inc’s international cheerleader-in-chief, says South Africa’s presidency of the G20 in 2025 provides “a real opportunity to recalibrate” the Pretoria-Washington relationship after the “ups and downs of the past four years”. As the US will take over the presidency of the G20 in 2026, close collaboration between the two countries will be required.
It will not be in anybody’s interest for a frosty relationship to set in or to take decisions to cancel things [like Agoa and Pepfar]
— Stavros Nicolaou
“It will not be in anybody’s interest for a frosty relationship to set in or to take decisions to cancel things [like Agoa and Pepfar],” Nicolaou says.
Recent strains in US-South Africa relations have been caused by, among other things, the row over the Lady R, the sanctioned Russian cargo ship that docked at Simon’s Town naval base in December 2022. This led to public allegations by the US ambassador that South African military supplies were loaded onto the ship in support of Russia’s invasion of US-supported Ukraine. Just under a year ago, South Africa filed its case at the International Court of Justice accusing Israel — a close ally of the US — of committing genocide against Palestinians.
Nicolaou, who attended the Agoa Forum in the US earlier this year, is reasonably confident that the US will extend the legislation and that funding will continue for Pepfar, which has received $120bn and saved an estimated 25-million lives to date. South Africa has been one of the largest beneficiaries.
“Currently, Pepfar provides antiretroviral [ARV] treatment for about 40% of the 6.5-million people in Africa on ARVs,” Nicolaou says. Discussions are continuing on allowing local ARV producers to benefit from Pepfar’s significant procurement budget, with hopes that treatment for about 2-million patients could be sourced from the continent, he says.
Not everyone shares Nicolaou’s views on Agoa. Some trade experts believe the US will continue to extend the pact as a counter to China’s rising influence on the continent; its Belt and Road initiative has brought substantial infrastructure investment, mainly aimed at securing key natural resources needed to fuel China’s economy. Others expect the US to demand reciprocity in the form of formal trade agreements, such as the one the previous Trump administration started negotiating with Kenya. Another possibility is that Agoa will be extended but that South Africa, given its middle-income country status, will lose its benefits in 2026.
Neither Trump nor Kamala Harris, the Democratic Party candidate, campaigned on any specific Africa-focused policies, indicating that the continent is not a top priority for the US. During Trump’s first term, he sparked a diplomatic storm by describing immigrants from the continent as being from “shithole countries”.
However, Trump’s first administration did launch Prosper Africa, a programme aimed at facilitating trade between the US and Africa, complementing Agoa. This programme was expanded by the Biden administration.
Should South Africa lose its Agoa benefits, the economic pain may not be substantial — consulting firm Krutham forecasts it would cut economic growth by 0.1bp-0.2bp in 2026 — but it will likely lead to job cuts.
“South Africa should have prepared a long time ago to reorient its relations with the US,” says one trade policy expert. “It is quite an anomaly for a country of South Africa’s size not to formalise an agreement with a key trade partner of the US’s size as an insurance policy against the multilateral trading system. This speaks to South Africa’s lack of an overall trade strategy.”
Agoa, originally enacted in 2000, does no more than provide tariff-free market access for specific products, and Washington can cancel its benefits for countries it deems are failing to uphold human rights, labour rights and the rule of law, or are clashing with US foreign policy interests. In contrast, formal trade agreements cannot be revoked unilaterally and can include supply chain and small business development support and ways to improve broader economic competitiveness, which could be much more beneficial to a country such as South Africa, the expert says.
Regardless, building a competitive export base requires a lot more work than simply signing a trade agreement.
Take wine as an example. South African exports to the US, the world’s biggest wine market, totalled a mere 12-million litres in 2023, accounting for only 0.001% of all US imports, according to SA Wine Industry Information & Systems. South Africa’s market share of global wine production is about 3.9%, illustrating that we are punching below our weight in the US market, even with the current benefit of duty-free access under Agoa.
One challenge is that other major exporters such as Australia also enjoy tariff-free wine access to the US, thanks to formal free trade agreements. Another challenge is creating consumer awareness. Wines of South Africa (WoSA), a nonprofit industry body tasked with promoting South African wine exports, is funded by a levy on wine sales, and the weaker rand means the WoSA marketing budget only stretches so far.
We also don’t have many South African companies with the economies of scale to come into the US market at an attractive price point and then have the budget for marketing spend
— Jim Clarke, WoSA
“Even small European wine regions — and I’m not talking about the likes of a Bordeaux — far outspend us in terms of marketing in the US,” says Jim Clarke, WoSA’s marketing manager in the US. “We also don’t have many South African companies with the economies of scale to come into the US market at an attractive price point and then have the budget for marketing spend.”
Clarke warns that it is misleading to think of the US as one big market; regulations, consumer behaviour, trends and awareness of South African wine vary from state to state and from region to region.
Building the market therefore requires constant work and collaboration with a wide range of stakeholders, including the embassy and consulates in the US, and industry bodies such as South African Tourism and Wesgro, Clarke says.
What is clear is that a strong diplomatic presence in the US is a minimum requirement for protecting South Africa’s interests. Ronald Lamola, minister of international relations & co-operation, announced the reappointment of former Western Cape premier Ebrahim Rasool as ambassador to Washington, a role he previously filled under the Obama administration between 2010 and 2015. Following his ambassadorial term, Rasool has served as a scholar in residence at Georgetown University in Washington and as a senior fellow at Rutgers University in New Jersey.
Speaking at a media conference on November 12, Lamola said there is an “urgent need for South Africa to have a presence in the US” and that Rasool’s credentials are expected to be processed “quickly” as he has served in Washington before.
Describing the relationship between the US and South Africa as one that “has never been straightforward” and that remains “dynamic and evolving”, Lamola expressed confidence that Rasool is well suited to engage successfully with a wide range of stakeholders across party lines.
“Obviously there will be challenges on a number of issues,” Lamola said. “We will continue to engage to find mutually beneficial outcomes on Pepfar, Agoa and a number of other mutually beneficial programmes.”
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.