Say what you like about US President Donald Trump, but he is nauseatingly effective at economic brinkmanship. He has once again bent a major trading partner to his will.
Watching EU chief Ursula von der Leyen capitulate to Washington’s tariff threats and agreeing to a 15% import tariff — half the level Trump initially threatened — and committing to $600bn of investments in the US alongside vast purchases of American energy and military equipment while the US gets tariff free access to the bloc, reminded me of the adage that the US innovates while the EU regulates. The Europeans will spin this as a “deal” that averts a trade war. It is, in reality, a settlement.
The EU’s predicament is not accidental. For years the bloc has chosen to protect its social welfare architecture rather than build strategic economic power or invest seriously in innovation. The result is an ageing, complacent economy that is now paying a premium to keep Trump’s tariffs at bay. German carmakers, once the pride of Europe’s industrial strength, will breathe a sigh of relief that the 30% tariff has been halved to 15%, but this is hardly a victory.
Sadly, SA is making similar mistakes. Like the EU we have been reluctant to confront the structural weaknesses of our economy. We spend too much political capital defending the past, from state-owned dinosaurs to rigid labour markets, and too little on fostering globally competitive industries. We talk of industrialisation, but our trade data reveals the opposite: a deepening reliance on commodities, declining value-add and rising vulnerability to global shocks.
Our relationship with the Brics is a case in point. In 2022 the bloc accounted for 21.3% of our total trade, but the lion’s share, about 68%, is with China. India accounts for 26.5%, while Brazil and Russia barely register at 4.2% and 1.7%, respectively. We recorded a $14.9bn trade deficit with the bloc last year, a staggering fourfold increase in the deficit from 2010. If Brics is meant to offer an alternative to Western trade dependencies, it is a deeply unbalanced one.
The structure of our exports to Brics is disturbingly narrow. Half of what we send — coal (19.1%), iron ore (18.9%) and manganese ore (12.2%) — are essentially bulk commodities. Add ferroalloys and chromium ore, and 70% of our exports are still stuck in the resource-extraction model. Manufactured exports are negligible, and the modest rise of citrus and nuts barely registers in the big picture.
Imports, by contrast, are dominated by high-value products: refined petroleum ($3.5bn), telecom equipment ($2.6bn), data processing machines ($1.4bn), passenger vehicles and electric accumulators. China and India are supplying the building blocks of the fourth industrial revolution, while we supply them with the raw materials of the 19th century.
Brazil, supposedly a kindred spirit in the Global South, is a clear illustration of this imbalance. In 2022 we exported $506m to Brazil, mostly coal and aluminium, while importing $1.6bn worth of poultry, automotive components and chemical pulp. Our trade deficit with Brazil alone was $1.1bn. With Russia the story is even worse: almost half of our $280m in exports to Moscow last year was citrus fruit, while imports continue to rise.
The EU’s new “deal” with Trump should be a warning to Pretoria. Europe has been humbled because it prioritised redistribution over competitiveness. It now faces tariffs, while paying Washington to preserve market access. SA is stumbling down the same socialist path: our fixation on political symbolism, from Brics summits to anti-West rhetoric, obscures the uncomfortable reality that we are failing to build an economy capable of competing in a world dominated by technology, scale and capital.
Which brings me to China. I’m told that despite numerous promises made at various bilateral and Brics meetings to grant SA exporters greater access to the Chinese market, little follow-through has been forthcoming. One senior business leader tells me the Chinese trade negotiators are running circles around us, which is hardly surprising. All while we allow Temu and Shein access to our market to attack local small businesses, and Chinese EVs undercut Western original equipment manufacturers that have invested heavily under various automotive industry development programmes.
Trump’s looming tariffs this Friday on 8.8% of our exports to the US, notably cars and agriculture, merely highlight the weakness of our position and exposes our complete lack of economic strategy. The notion that Brics will cushion the blow is delusional. The bloc buys our ores and coal, not our cars or
hi-tech goods. If anything, our Brics partners are accelerating our deindustrialisation.
The question is not whether we should tilt east or west. It is whether we will finally invest in building a modern, diversified economy capable of thriving without perpetual dependence on raw material exports. If we fail we will share Europe’s fate, reduced to paying economic tribute while celebrating hollow “deals” as victories.
Thankfully, as Charlie Munger says, the secret to a happy life is to have low expectations, so I won’t be overly disappointed that this is unlikely to happen.
Hyprop’s exit leaves minorities in the crossfire
Hyprop’s withdrawal from its MAS bid changes the power dynamics but does not resolve the core issue: the continuing secrecy around the development joint venture (DJV). For minority shareholders the concern now is that Prime Kapital’s (PKI) offer becomes the default option, even though its terms and governance track record remain under scrutiny.
Hyprop’s exit is in some ways a double-edged sword. On one hand its voluntary offer represented the only credible counterweight to PKI’s creeping acquisition. Its decision to walk away, citing an unsurprising lack of transparency from MAS’s board over the DJV contracts, reinforces the minority investors’ argument that MAS has not been forthcoming about its most critical agreements. If even a listed company such as Hyprop can’t access the information required to conduct due diligence, what confidence should ordinary shareholders have?
On the other hand, Hyprop’s departure risks consolidating PKI’s influence over MAS. With R4.75bn of funding lined up, PKI is now unopposed, and its narrative — that it is a better long-term steward of MAS — will go uncontested. For minorities, this is a precarious moment: if PKI edges closer to a controlling stake the window for pushing through governance changes may start to close.
The DJV remains the elephant in the room. It accounts for almost half of MAS’s net assets, yet the contractual terms have never been fully disclosed. Shareholders, already demanding a board shake-up via the extraordinary general meeting (EGM), will now likely double down on their calls for an independent review.
Until this veil is lifted suspicion will continue to cloud both MAS and PKI’s intentions.
• Avery, a financial journalist and broadcaster, produces BDTV's ‘Business Watch’. Contact him at michael@fmr.co.za.
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