Four members of the US Congress recently wrote to US secretary of state Antony Blinken urging the state department to relocate the African Growth and Opportunity Act (Agoa) Forum meeting, scheduled to be held in SA later in 2023, due to SA’s perceived bias towards Russia.
SA is currently the largest single beneficiary under Agoa, with more than R290bn worth of exports to the US in 2021. The agreement will be reviewed in 2025 and there are serious concerns that SA will be excluded in future. According to the Solidarity Strategic Institute, Agoa is directly responsible for 66,000 jobs and indirectly for 425,000 job opportunities in SA.
A further concern is that the US might introduce other sanctions against SA, and that our major European trading partners could do the same. More than 40% of our trade is with Europe (excluding Russia), while the US accounts for 10%-15%. This while our exports to Russia total about R4bn per annum. US and European sanctions and international isolation would therefore have enormous implications and consequences for SA.
This scenario is, of course, disturbingly familiar to many older South Africans. In the 1970s and 1980s the country was forced to its knees economically by anti-apartheid sanctions. In the broad political and state environment of the 1980s, SA fought for survival on several fronts, which formed the background for the political changes that would inevitably follow. States of emergency, riots, terror, economic downturn, international isolation and sanctions all played a significant role.
According to late former president FW De Klerk, SA faced seven international crises in the 1980s:
- a crisis of morality, because SA’s political positions were rejected as immoral;
- the crisis of legitimacy, because the apartheid government was increasingly seen as illegitimate rule by a minority over a majority;
- a crisis of credibility, because our political integrity was questioned;
- a crisis of security, with riots, terror and the armed struggle;
- a crisis of rejection, through international isolation and sanctions;
- a crisis of interference in our affairs; and
- a crisis of shrinking options.
SA’s isolation and sanctions
In November 1966, the UN General Assembly declared that apartheid was a crime against humanity, and in 1973 the Convention on the Suppression and Punishment of the Crime of Apartheid was adopted. It is interesting that both the resolution and the convention were political initiatives of the Soviet Union.
After the 1976 Soweto uprising, renewed international action against SA began. In 1979 ,Opec began an oil boycott against SA, but SA managed to overcome the ban by secretly obtaining oil and developing the country’s own oil from coal.
On November 4 1977, the UN Security Council accepted an embargo on the sale of arms to SA. Notwithstanding the embargo, SA successfully managed to circumvent the embargo by developing its own arms industry through Armscor. Despite the ban, SA was also able to develop its own nuclear programme and weapons.
By 1979, SA was beginning to find it increasingly difficult to obtain international loans. The country also had to start paying higher interest rates on short-term loans. In August 1985, the SA Reserve Bank was forced to launch an international rescue effort to negotiate funding for the country's $24bn short-term debt (by 2022 it would be about R353.5bn). The Bank of England, US Federal Reserve and Citibank were approached. However, no country was willing to reschedule or renew the loans.
Due to the drastic weakening of the rand against international currencies, the government announced a week-long closure of money markets and the JSE. On the eve of the reopening of the stock exchange and money markets in 1986, the finance minister announced a unilateral suspension of the repayment of foreign loans for four months.
Two weeks before the so-called Rubicon speech of prime minister PW Botha on August 15 1985, Chase Manhattan Bank made the decision not to renew further loans. The day after the Rubicon speech, the rand fell from R2.22/$ to R2.43/$. From October 1985 to December 1985 it weakened to about R2.70/$.
On August 5 1986, Commonwealth sanctions were introduced. At the Commonwealth’s mini-summit, a comprehensive list of voluntary economic and other sanctions was accepted, including restrictions on visas, tourism and flights, as well as a ban on new investments and loans. An import ban was placed on SA agricultural products, coal, uranium, iron and steel.
In the US, the pressure on SA also began to increase, including a ban on new loans to the SA government, excluding those related to social and educational projects for all races; all US companies were requested to comply with the so-called Sullivan principles established in 1977; and US companies increasingly began to experience pressure from investors to disinvest from SA. During 1985 and 1986, General Electric, Coca-Cola, IBM and Warner Communications withdrew from SA.
After US president Ronald Reagan's election at the end of 1984 this pressure was initially resisted, but he later had to put together his own sanctions package. After the disastrous Rubicon speech in August 1985, the US passed the Comprehensive Anti-Apartheid Act of 1986, which included a ban on any new US investments and no new loans to SA; a withdrawal of landing rights in the US for SAA; and a ban on the import of SA uranium, coal, iron and steel and agricultural products. The SA business sector calculated that this would negatively affect about 5% of SA exports.
Cultural, academic and sports boycott
In 1980, under increasing international pressure, the UN General Assembly adopted Resolution 35/206, which asked all states to refrain from cultural, academic, sporting and other types of exchanges with SA. There was also an appeal to writers, artists, musicians and other personalities to boycott the country. The appeal included the termination of all academic and cultural institutions' links with SA.
As part of the international campaign against apartheid Commonwealth heads of government concluded the Gleneagles Agreement in Scotland in 1977. Accordingly, it was agreed to discourage contact and competition with athletes, sports organisations, teams or individual athletes from SA. In 1964 the International Olympic Committee withdrew its invitation to SA to participate in the Olympic Games, and the country was expelled from the IOC in 1970.
Furthermore, SA's membership of the International Athletics Federation was suspended in 1970, followed by expulsion in 1976. A moratorium on international cricket tours by international cricket body the ICC came into effect in 1970. International boxing suspended SA's participation in 1975, and the country could not participate in the Rugby World Cup championships of 1987 and 1991.
The economic cost of apartheid
According to seasoned Financial Times journalist Patti Waldmeir, the economic costs of apartheid, especially the effect of the Rubicon speech, heralded the final moments of truth for apartheid.
Sanctions proved to be an effective weapon in the international resistance against apartheid. However, the costs associated with the alternative industries in SA also had enormous financial implications for the country.
To put things into perspective, seven categories of costs for apartheid were calculated: direct costs associated with the implementation and maintenance of apartheid and apartheid programmes; indirect costs related to these; costs associated with the enforcement and policing of apartheid; costs associated with lost opportunities, including lost investments and restrictions on the development of skills; punitive costs as a result of embargoes and sanctions; the human cost as a result of the suffering that apartheid caused; and the cost to neighbouring states that were forced to defend themselves.
With reference to calculations from 1977 and according to the criteria used then, the cost of apartheid in 1985 was about R56bn (about R824.8bn in 2022 terms). When De Klerk became president in 1989, SA had already lost R30bn in capital leaving the country (about R247.8bn in 2022 terms).
According to Anthea Jeffery of the Institute of Race Relations, an investigation by Trust Bank in 1989 estimated the cumulative foreign-exchange losses due to economic sanctions at about R40bn (R330.4bn in 2022 terms). She adds: “The macro-multiplier effect of this loss has been a total production loss of about R80bn and a total spending or standard of living loss of about R100bn.”
Apart from the foreign debt, and to cope with the international sanctions, SA spent billions on the development of strategic industries to cope with the embargoes on oil and weapons. The sophisticated weapons industry under Armscor and the oil from the coal industry at Sasol could meet energy needs. The Mossgas oil-from-gas plant was erected at a cost of about R11bn (R79.4bn in 2022 terms).
In addition to the country’s ability to develop sophisticated weapons, SA was one of the few countries in the world that possessed a nuclear capability.
SA’s first atomic bomb was completed in 1982, after which five more followed. Development of the seventh atomic bomb was well under way when the international nuclear treaty was adopted. The cost of the nuclear bomb project would have been formidable. The Washington Post estimated that the project, on which 1,000 people worked, would have cost nearly $800m. At a 1990 exchange rate value this would be about R2.1bn, or R31.8bn in 2022 terms.
De Klerk's observation was that the sanction years in the 1980s cost SA about 1.5 percentage points of the annual economic growth rate. The above certainly indicates that SA has the potential to establish alternative industries in the event of international sanctions, but this would be at immense cost.
Sanctions in 2023
It is unclear how long SA would be able to resist the international pressure of sanctions and isolation today, especially in the light of already increasing domestic instability. However, low economic growth, a weak exchange rate, high levels of unemployment, internal ANC factional battles, increasing service delivery protests, crime and load-shedding are already placing the country under severe pressure. In addition, policies such cadre deployment and BEE and discriminatory laws and regulations are resulting in an unprecedented “brain drain” that is affecting all race groups.
Sanctions and isolation are one thing, but if there is increasing unrest and even terror, the country could become ungovernable. As in the apartheid era, political solutions would have to be found.
With the existing expertise, SA will not be able to rise to the occasion. The astronomical costs of setting up industries in the 1980s have already been highlighted. SA simply does not have the financial capacity or available budget to get it right again. We only need to look at the Kusile and Medupi power stations, which were constructed excessively over budget and far outside planned time frames and are still not functioning as they should.
If the West were to impose sanctions today, these could include restrictions on trade in goods and services and restrictions on engaging in commercial activities. This would harm SA tremendously. If there are to be punitive measures we should therefore lobby for targeted financial sanctions, including asset freezes and travel bans on designated persons and entities in the ANC and government.
The ideological circumstances in which the government finds itself comes down to choices. Loyalty towards Russia must be demonstrated by the ANC government at all costs, even if it is also to the economic detriment of the country. In the light of the above, the proposal by Flip Buys of the Solidarity Movement that government leaders be targeted individually with sanctions, would make sense.
The question whether the current government, in the current economic circumstances, would have the ability and the expertise to circumvent sanctions is a valid one. Unfortunately, the industries established over decades during the apartheid era are now severely weakened and dysfunctional.
SA was a pariah country in the 1970s and 1980s and was able to circumvent sanctions and international isolation to some extent. The ANC government’s loyalty and friendship towards Russia could cost us again, but this time sanctions could be fatal.
• Bosman is chief secretary of the Afrikanerbond.
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