South Africa: Look after trade relations, Chamber warns
South Africa should focus on attracting foreign investment and extending trade relations, the South African Chamber of Commerce & Industry (Sacci) said after business confidence fell to a year low.
An index compiled by the chamber showed average business confidence declined to 106.9 in May from 107.1 a month earlier. The latest figure is the lowest since May 2022, when global headwinds exacerbated by Russia’s war on Ukraine fuelled inflation and capital outflows.
“With a global economy that is slowly recovering, to perform optimally it is essential that due attention be paid to place South Africa back on a trajectory attracting foreign investment and extending lucrative trade relations,” Sacci said in a statement on Wednesday.
South Africa’s relations with the US, its second-biggest trading partner, and other Western allies have come into focus in the past year because of Pretoria’s stance on Russia. The country has angered the US by abstaining from UN resolutions condemning Russia’s invasion of Ukraine, and by hosting naval exercises with China and Russia.
Last month, a diplomatic row broke out when US ambassador Reuben Brigety accused South Africa of supplying weapons to Russia. Brigety implied that South Africa may lose its duty-free access to US markets, a prospect that sent the rand to a record low against the dollar before the two governments sought to smooth over the spat.
President Cyril Ramaphosa has denied the allegations about the weapons shipment and ordered an inquiry. Duty free trade between the US and South Africa was estimated at $23.3bn (about R425bn) last year. That compares with $850m of exports and imports between South Africa and Russia, according to IMF data.
South Africa has duty-free access to the world’s biggest economy under the African Growth & Opportunity Act (Agoa) and the so-called generalised system of preferences — last year it exported $2.7bn of goods under the programmes. Agoa expires in 2025 and US officials have previously said the qualifying criteria for beneficiaries could be revised or the programme replaced.
Earlier this week, four members of congress urged the Biden administration to relocate an Agoa event that’s scheduled to be hosted in South Africa in November. If the US and its allies in the EU decide to retaliate against South Africa over its Russia ties, the country may lose as much as $32.4bn in export revenue — almost a 10th of its GDP, according to Ndivhuho Netshitenzhe, an economist at Stanlib Asset Management, which has more than R650bn of assets under management.
“Threats of losing out on lucrative trade agreements may dent an important element of South Africa’s economic relationships and wellbeing. This calls for government to ease speculations and remove lingering uncertainties,” Sacci said.
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