SA’s foreign policy stance, and its disconnect from SA’s economic interests, has edged firmly onto the radar screens of foreign investors and local executives lately, amid warning noises from the US in the wake of SA’s naval drills with Russia.
And with SA chairing the Brics bloc this year and the G20 in 2025, as well as hosting an African Growth & Opportunities Act (Agoa) forum later this year, the approach it adopts to its foreign policy could be make or break for its stature on the global economic stage.
Economists report they are starting to get questions from international bond market investors about SA’s perceived pro-Russian stance and whether it could ultimately prompt sanctions by SA’s major trade and investment partners. FirstRand CEO Alan Pullinger used the occasion of the banking group’s recent financial results to sound the alarm that SA’s failure to condemn the Russian invasion could prove “catastrophic” for the economy. SA risked being locked out of international markets and payments systems, he said, as well as having its duty-free access to markets such as the US revoked.
Meanwhile, Republicans in the US Congress want the US to review its trade relations with SA. And US ambassador to SA Reuben Brigety used the oped pages of the Sunday Times at the weekend to regret how hostile to the US leaders of the ANC had become — and to remind SA just how dependent it is on investment, trade, tourism and aid flows from his country, whose companies collectively account for 10% of SA’s GDP.
In many countries foreign policy is closely linked with trade and investment policy, with the two often housed in the same government ministry. Not so in SA, where the two have long tended to be divorced. But the disconnect between SA’s foreign policy and its economic and commercial interests has become ever starker since last March, when SA abstained from the UN resolution calling for Russia to get out of Ukraine, and continued to abstain on all the subsequent UN resolutions condemning the war.
Number crunching by XA Global Trade Advisors’ Donald Mackay shows the extent of the disconnect. Less than 0.5% of SA’s exports go to the handful of countries (including Russia) that voted against the latest UN resolution. The share of our exports going to the 32 countries that abstained (including China and India) has declined over the past decade to under 26%. By contrast, the 141 countries that backed the UN resolution to condemn Russia have increased their share of SA’s exports to almost two thirds, from 58% a decade ago.
They include the countries of the EU, which as a bloc is SA’s largest trading partner, as well as the US. What’s important about these countries too is that official figures show SA runs large trade surpluses with them, earning more from them in exports than we pay them for imports, and that includes manufactured exports (which our trade policy identifies as a priority) as well as commodities and agricultural goods.
Economists calculate SA’s total trade with Russia in 2020 was 13 times smaller than with the US, 45 times smaller than with the EU, 26 times smaller than with China and 6.5 times smaller than with the UK. The pattern of foreign direct investment mirrors that. All of which makes it more important that SA makes the most of the opportunities it has in coming months and years to capitalise on the opportunities it has by virtue of its seat at the global table — instead of digging itself into economic irrelevance.
One concern about SA’s hosting of the Brics summit in August is the prospect that the bloc might expand to add more undemocratic countries to the ones it already has, such as Saudi Arabia and Iran. That wouldn’t look good for SA as host. Another concern is the possibility that Russian President Vladimir Putin might attend in person — which could make US leaders pretty reluctant to come to SA for the Agoa summit just weeks later. With Agoa expiring in 2025, SA can’t afford to mess up that summit.
Nor can it afford to mess up its hosting of the G20 by clinging to a narrow view of its political allies and interests that could erode its stature internationally. SA was a founder of the original G20 in the wake of the emerging markets currency crises of the late 1990s; it remains the only African member of the forum, punching well above its economic weight.
Chairing the G20 leaders summit successfully requires particularly careful choreography now, given the need to balance Russian participation with the antipathy to that country from the Western powers. Indonesia managed that balancing act as 2022’s chair, enhancing its global stature in the process. It succeeded in getting the leaders to agree on a communique that acknowledged that most of them condemned the war; it succeeded too in getting its priorities onto the global agenda.
India is this year’s chair; Brazil is next year’s and SA the year after that. That means SA will next year become part of the so-called Troika — immediate past, present, and future chairs — that shapes the G20 agenda. That’s an opportunity for SA to distance itself somewhat from Russia and China in the Brics and instead align itself clearly with India and Brazil (which voted yes on the UN resolution). As importantly, SA has an opportunity to shape the global economic agenda in ways that are good for Africa’s interests, and its own. It shouldn’t waste it.
President Cyril Ramaphosa is good at this stuff. He’s made a point of rebuilding relations with Western powers, visiting US President Joe Biden’s White House, paying the UK’s King Charles his first state visit, attending the G7 summit in Germany 2022 as an invited guest, and helping to clinch the $8.5bn just energy transition investment package from the UK, US and Europe.
The trouble with Ramaphosa’s approach to foreign policy, as with his energy reforms and other reforms, is that his government and the governing party don’t always align with his lead. As SA prepares to play host, the domestic political balancing act looks as tough as the global diplomatic one.
• Joffe is editor-at-large.
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