Capitec, SA’s largest retail bank by client numbers, is not leaving anything to chance, having developed models on how the country’s exclusion from the African Growth & Opportunity Act (Agoa) and withdrawal of US aid might affect its loan book.
With more than 24-million customers, the lender has in its planning factored in possible credit losses it might suffer due to the breakdown of relations between Washington and Pretoria, as corporate SA gets anxious about how the frosty diplomatic situation will end.
In its forward-looking macroeconomic provision for expected credit losses, the lender has moved millions of rand in loans from stage 1 to stage 2, the last stage before a loan is deemed distressed. These are loans from its clients working in the sectors most exposed to the US tariffs, such as agriculture.
“A supplement was added to the forward-looking macroeconomic model provision for expected credit losses for the risk of withdrawal of US aid to SA, the possibility that SA might cease to be part of Agoa,” the company said on Wednesday.
“As a result of the assessment of the impact of these factors on balances in stage 1, particularly the balances of clients employed in the agriculture, forestry, fishing, community organisation, social and personal services, and manufacturing sectors, R507m in balances was moved into stage 2 due to loans with significant increases in credit risk.”
Stage 1 represents well-performing loans.
US President Donald Trump essentially nullified Agoa after announcing a wave of tariff increases last month, including on countries that have historically benefited from the act.
Agoa unilaterally provides duty-free access to the US to most African countries, and SA is the biggest beneficiary, having dispatched $3bn worth of goods in 2023.
SA’s car manufacturing sector, the anchor sector in the industry, is also set to feel the wrath of the tariffs imposed by the US.
Business Leadership SA CEO Busisiwe Mavuso, in her weekly letter published on Tuesday, said SA’s automotive industry was the industrial backbone of the economy, responsible for 60% of the country’s manufactured goods exports. Mavuso urged authorities to forestall the impact of US tariffs on the sector.
Ripple effects
“The US was the destination of 6.5% of vehicles exported from SA last year, but that figure had grown 22% from the year before, making the US the fastest-growing region for our vehicle exports,” Mavuso said.
“The tariffs will have a significant impact on particular models that are exported there, in some cases dealing major blows to the factories and towns where they are produced, with ripple effects throughout the value chains that link to them.”
Relations between the US and SA have deteriorated since January after Trump’s inauguration as the president of the world’s largest economy.
Rhetoric by the Trump administration suggests that bilateral relations with SA may deteriorate over the next four years.
Trump’s chief diplomat, Marco Rubio, declined an invitation to attend a Group of 20 (G20) meeting held in SA earlier this year, while Trump has also cut initiatives such as the Just Energy Transition Partnership and funding for the US Agency for International Development (USAID)— leaving workers in the sector in peril.
The tension between the two countries, both members of the G20 bloc, of which SA holds the presidency for the first time, came to a head last month when the US expelled SA ambassador to the US Ebrahim Rasool.
In a bid to smooth relations, President Cyril Ramaphosa has appointed former deputy finance minister and MTN chair Mcebisi Jonas as SA’s special envoy to the US, entrusted to “advance SA’s diplomatic, trade and bilateral priorities”.
Standard Bank on Tuesday said: “We are monitoring developments related to geopolitics and tariffs. The impact thereof on confidence and activity, interest rates and macroeconomic growth across the markets in which we operate is uncertain.
“At this stage, the group’s 2025 guidance released in March remains unchanged.”
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.