So what now? South Africa’s decision to abandon its nonpartisan stance and side with Russia, which has attacked Ukraine and laid siege to its neighbour for 15 months, displacing civilians and visiting hardship on millions across the world through food price increases, would not matter so much if it did not have such huge implications for our economy and international relations.
The key issue for business is working out what happens next and how individual companies navigate the uncertainty ahead.
It would be irresponsible not to start painting scenarios. The warm relationship between the US and South Africa has engendered business opportunities for both. A chilly future relationship ushers in a new world.
Finance minister Enoch Godongwana, one of the coolest heads in the government and the ANC today, plays down the possibility of looming shocks sparked by US ambassador Reuben Brigety’s accusation that South Africa loaded arms onto a Russian ship in Simon’s Town. Godongwana said “a number of actions were taken to ensure that our relationship with the US remains and that relationship should be normal and cordial”.
“The Americans are not likely to respond with any anger tomorrow,” he said on Sunday.
That is an excellent and positive scenario: all things stay pretty much the same, trade with the US continues unhindered, and South Africa continues to support Russia in its invasion of Ukraine.
There may be merit in Godongwana’s thinking. Countries that have in the past been cut out of the African Growth & Opportunity Act (Agoa), the US trade preference programme, are in a league of their own in terms of violating international human rights. Ethiopia, Mali and Guinea were kicked out of Agoa in January 2022, in Ethiopia’s case because of gross human rights violations and in Guinea and Mali’s case because of coups.
South Africa is nothing like those three, but selling arms to a country under sanctions would be a serious breach. Agoa, now 23 years in existence, gives duty-free access to the US for about 1,800 products, in addition to the more than 5,000 products eligible for such treatment under the generalised system of preferences. It’s a big deal.
Last week gave us a snapshot of the consequences if South Africa were to be excluded from the programme: the rand slumped to its weakest level yet against the dollar and yields on government bonds soared as the market reacted to fears of trade disruption.
But South Africa could overplay its hand if it believes its geopolitical importance makes it immune from US retaliation
The US needs South Africa, an important and influential economic and political player on the continent. The last thing the US wants is to see South Africa jump into bed with Russia.
South Africa knows this. That is why it thinks it can afford to allow its chief of the army to hold talks in Moscow this week and that it was OK for senior ANC officials including Obed Bapela to visit Russia last month. High-level bilateral contact includes a warm call between President Cyril Ramaphosa and Vladimir Putin on Friday, which the ANC national executive committee applauded enthusiastically in a show of love for Russia.
But South Africa could overplay its hand if it believes its geopolitical importance makes it immune to US retaliation. The danger is that if the allegations about South Africa sending arms to Russia or otherwise assisting it in its war turn out to be true, then global players would regard the US as weak if it failed to act. Washington cannot afford that.
If South Africa shows the US the middle finger, it has to consider that Agoa expires in 2025. Would the US renew the programme without a major continental player being part of it? Other continental players may have a thing to say about such a scenario.
South Africa is on the cusp of a major shift in international relations. It’s decision time. The key person in the process is Ramaphosa. Local business needs to draft scenarios too, and act accordingly. It cannot evade the issue.
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