The risk of SA being kicked out of the African Growth and Opportunity Act (Agoa) and being sanctioned over its ties to the Kremlin has receded, Standard Bank group CEO Sim Tshabalala has told the bank’s shareholders.
He told investors and pundits after the release of the group’s results that the bank believes the Ramaphosa administration has done enough to assuage Washington’s concerns that it had aligned with Russia in its war with Ukraine, a post-results transcript shows.
“In our view, the risk of SA losing Agoa preferences — or of sanctions being imposed — has receded ... President Ramaphosa visited both Kyiv and Moscow to encourage negotiations, and senior government representatives visited Washington to clarify SA’s stance,” the transcript reads.
Integrity
Tshabalala, who heads Africa’s biggest bank by assets, pointed to the August visit by US deputy secretary of state Victoria Nuland as an indication that progress has been made in mending relations with the US.
“While she did not want to pre-empt the decision by US lawmakers on whether SA would retain Agoa status, President Ramaphosa’s statements would help to motivate for an extension,” Tshabalala said.
“To quote secretary Nuland directly, ‘when SA stands up and says Russia’s war against Ukraine must be settled in a manner that defends the UN Charter, that defends sovereignty and territorial integrity of nations, that says no to taking land by force, that [statement] has unique weight.’”
Agoa has since 2000 been the US’s primary economic policy tool in Africa, offering qualifying countries duty-free access to the US market for many goods. The current agreement expires in 2025.
Lady R
The relationship between SA and the US has been tested in the past year due to perceptions that Pretoria had taken Moscow’s side in its war with Ukraine.
Tensions between the two countries, which have enjoyed good bilateral and trade relations since 1994, came to a head in May when US ambassador to SA Reuben Brigety said SA had supplied Russia with weapons in furtherance of its offensive against Kyiv.
This resulted in some US legislators, both Republicans and Democrats, approaching the Biden administration to kick SA out of Agoa.
An independent panel, appointed by Ramaphosa and led by retired judge Phineas Mojapelo, has cleared SA of allegations it supplied Russia with arms. According to the allegations, the arms were loaded onto the sanctioned Lady R cargo ship in Simon’s Town last December.
Business leaders have over the past few months piled pressure on Pretoria to make clear its position on the Russia/Ukraine war, which has hamstrung global economic growth.
SA’s largest asset manager, Ninety One, in May said that appearing to support Russia while claiming neutrality is dangerous for SA and not in the national interest.
The Ramaphosa regime and captains of industry seem to have found each other over the past two months. CEOs of more than 115 companies pledged to deploy their collective resources and business acumen to tackle the socioeconomic crises facing SA, including energy and logistics bottlenecks.
Unbundling
Tshabalala said one of the positive developments is structural reforms being implemented.
“SA continued the unbundling of Eskom and concessioned Durban Container Terminal Pier 2, which handles 46% of port traffic. We hope that ambitious structural reforms of this sort will continue to accelerate.”
William Jackson, chief emerging-markets economist at London-based Capital Economics, said the government must do more to make the economy competitive.
“The good news is that some reforms are under way, particularly around private participation in energy supply.
“But many of the changes that SA needs would be politically unpopular or challenge vested interests. And coming ahead of elections next year, it’s hard to envisage much progress,” Jackson said.
“While the business environment is generally quite favourable to the private sector, there are areas where lack of competition harms productivity. In particular, there’s a high degree of regulation in network industries such as energy and transport,” he said.
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