In a year’s time the US will inaugurate a new president. As things stand, notwithstanding his legal problems it looks like the man taking the oath of office could be Donald Trump, the enormously divisive self-styled “blue-collar billionaire”.
While the US is increasingly distracted from a volatile world by its internal divisions, bubbling up in commentary around Republican primaries and Trump’s various legal misadventures, the increasingly likely prospect of Trump 2.0 seems to be far away from SA’s thinking. It would be wise to start though.
Of course, we are just as distracted as they are. For the first time our own voting projections require us to start running scenarios. As much as we need political change to address our many problems, for the first time as a democracy businesses and investors are encountering the difficulties that come with a level of uncertainty.
Whereas before it was always reasonably clear that an ANC majority was the likely outcome of an election, this time around it’s far from certain. Most commentators seem to be pricing in that the ANC will lose its majority by a small margin, but profound risks and rewards exist if this projection is wrong in either direction by only a few percentage points.
It is not a time to be sitting comfortably. As businesses, banks and bond and stockholders get into scenario planning, it is sensible to layer this “what if” approach to the US presidency over our own domestic uncertainties when contemplating the world in 2025.
The first thing is to acknowledge that the markets are vulnerable to geopolitical disruption, and it is almost unnecessary to remind people that disruption is what Trump specialises in.
Last week, Ninety One’s co-head of SA & Africa fixed income, Peter Kent, told Business Day about the impact of the “Lady R” debacle in 2022. “I have been back in SA now for over a decade. I would honestly say that was the worst quarter I have ever experienced since I have been back,” he said.
It is therefore wise for our leaders in the department of international relations & co-operation and businesses to consider how this country will pitch itself during a second Trump presidency. The US’s major allies, anxious about Trump’s take on defence guarantees, defence spending, Taiwan, Ukraine, Nato and persistent trade imbalances, are already preparing to answer the Trumpian call when it comes.
When we come to position ourselves, it will help to work with what we think we can predict. This is incredibly difficult with Trump, who can be impossible to read. He has variously (and legendarily) described this continent as replete with “shithole countries”, as well as waxing lyrical about its beauty and how much he loves it. He negotiated with North Korea after threatening to nuke it. He presided over the transformative Abrahamic Accords but has a strange soft spot for Vladimir Putin.
What we know is that he is protectionist. He will likely impose protectionist measures, even against allies who he feels are taking advantage of the US market. He will take a belligerent stance against China and Iran.
Agoa
For SA, we can learn something from the past. Trump signed the extension of President George Bush’s US President’s Emergency Plan For Aids Relief (Pepfar) in 2018, but his position on the African Growth & Opportunity Act (Agoa) — through which SA enjoys preferential access to the US market — is not wholly clear.
As has been said before, Agoa is designed to help countries graduate to more normal bilateral trade arrangements, and SA’s removal from the programme would — in a worst-case scenario — cause exports to the US to fall by about 2.7%, according to our columnist Gracelin Baskaran, writing for the Brookings Institute.
Nonetheless, losing Agoa would have an effect on “investment and market confidence, both of which SA has struggled with in recent years. The RMB/BER business confidence index (BCI) has been above the neutral midpoint (score of 50) for only two of the past 62 quarters, since 2008”, she wrote.
SA’s recent foray into geopolitical waters with its intervention in the Israel/Hamas war at the International Court of Justice, and its clear support for Hamas, as well as the echoes of its support for Russia’s invasion of Ukraine, suggest that this country hasn’t thought too hard about how a more pugilistic and aggressive White House might perceive us, and the very real importance of genuine non-alignment.
If SA goods were to lose their Agoa benefits and associated benefits of perception, were to also come under Trump’s proposed blanket 10% tariff, were to fall foul of restrictive visa and immigration regulations, and if the country were to continue to pretend the EU’s carbon border adjustment mechanism (CBAM) doesn’t exist — the EU requires exporters to submit their first reports to the CBAM transitional registry by Wednesday this week — then our geopolitical grandstanding could come at a colossal cost to all South Africans.
The US, resource-hungry as ever, will no doubt note our rich endowment with certain rare resources, which the country will need if Trump’s dream of repatriating manufacturing is to be met, but the man is nothing if not unpredictable, and if I was in government I would be tempted to lift my eyes beyond the election to the potentially perilous terrain that lies ahead.
Politicians around the world are generally not very good at seeing what lies beyond elections, but there is little excuse for people leading businesses and allocating capital. The time for contemplating the Trump scenario is now.
• Parker is Business Day editor-in-chief.
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