PETER BRUCE: Here we are, at the end of a limb

It’s hard to believe the US will from Friday impose a 30% tariff on most imports from SA. We are not alone as US President Donald Trump tries out his demented economics on the rest of the world, but there’s little doubt we are going to suffer more than most industrial economies of our size. 

It’s also hard to believe the Americans think pushing our economy up against the wall will be without consequence. Like it or not, we command — nominally at least — the most viable sea route between East and West other than the Suez Canal. We have vast mineral wealth that under any responsible government would be humming with investment, and we have the most productive agriculture in Africa. 

Inevitably we will now be forced to pivot to other markets and other polities and power blocs, China being first among them. It won’t be easy, and the state is so boundlessly amateur it will take forever. But it will slowly happen. 

Just this week the department of trade, industry & competition was telling journalists nondisclosure agreements meant it could not discuss details of its trade talks with the Trump administration as the August 1 tariff deadline approached. And in the same breath it was revealing, in detail, exactly what it  had proposed to Washington. 

Apparently we have offered to buy 75-100 petajoules of liquefied natural gas (LNG) from the US for 10 years. That, according to the departmental jargon, would “unlock” $12bn. Today SA consumes about 180 petajoules a year, but there’s a strong push inside the ANC to use more LNG even though the only serious user is Sasol.

The hole the ANC keeps digging is its problem in SA is the ANC’s 1960s-style fixation with industrial policy as a cure-all for unemployment.

You can see why: there are LNG terminals to build, according to the latest infrastructure build-book, at Richards Bay and Coega. The LNG landed at Coega would need thousands of kilometres of new pipeline to get gas to Gauteng, where it is mainly used. 

The potential tenders must be mouthwatering to a cabal as corrupt as the ANC. But even the high demand case for gas used for electricity (after Eskom’s emergency diesel plants are converted at vast cost) demand is likely to be less than 20 petajoules a year. One petajoule is roughly the amount of electricity used by 870,000 fridges in a year. 

The hole the ANC keeps digging is its problem in SA is the ANC’s 1960s-style fixation with industrial policy as a cure-all for unemployment. But it is way too late for that. Our manufacturing has fallen from about 23% of GDP in 1990 to about 12% now. That’s a familiar story in almost all Western industrialised economies. 

And factories everywhere employ fewer people as they automate. The Economist recently pointed out there’s no really reliable correlation between economic growth and manufacturing anymore. India has grown rapidly even as its manufacturing languishes at about 15% of GDP, while China struggles to meet its growth targets despite its manufacturers dominating many high-value sectors in the global marketplace. 

Shovelling BEE entrepreneurs into industry is not doing them any favours either, but the ANC is stuck in its rut. And while the DA has the right to nominate a deputy trade, industry & competition minister, it has been a month since President Cyril Ramaphosa fired Andrew Whitfield. Meanwhile the minister, Parks Tau, merely fiddles with the optics of BEE; there is just no rousing new thinking about growth coming out of his department. 

So from Friday, barring a miracle, we will find ourselves at the end of a limb we have spent 30 years crawling along. We can, gradually, diversify our markets for what we already produce. But our politics should be about what we want to be producing and the modern tools we should be using to survive beyond 2040. 

• Bruce is a former editor of Business Day and the Financial Mail.