An own goal.
If the United States’ firm belief that South Africa sent arms to Russia is true, that’s what South Africa could have scored, according to two economists who spoke to The Independent on Saturday yesterday.
When it comes to the probability of the African Growth and Opportunity Act (AGOA) benefits that South Africa enjoys from the United States being renewed in 2025, there has been a slip from uncertain to unlikely, according to Chris Hattingh, the head of policy analysis at the Centre for Risk Analysis.
Worst-case scenario would be some kind of sanctions, said Ashton Roberts, head of business development at the economic consultancy Econometrix.
“The ANC now finds itself between a rock and a hard place. It has been called out for its actions which the US views as an act of hostility,” he said.
“The ANC now faces a dilemma. If it placates the US, it could lose alleged Russian party funding ahead of next year's elections. If it sides with Russia, the US will surely follow through with penalties of various sorts, including reviewing the Agoa trade agreement or, in the worst-case scenario, some kind of sanctions.”
Roberts said that isolating SA from such key trading partners in the West would “amount to a spectacular own goal”.
“As it is, SA is struggling to attract foreign capital due to load shedding, the greylisting and the state of the economy.
“Add more of these headwinds, and the only possible result is a further spike in interest rates, a brutal blow to the economy and a very difficult adjustment phase to a new, more isolated existence for SA.”
Hattingh went on to say that one of the major benefits of AGOA for South Africa is duty-free access to the US market for more than 1 800 products.
“In a global environment of lower growth, emerging markets such as South Africa can ill afford to lose access to large consumer markets like the United States.”
He said along with increased trade flows, the benefits of AGOA extend to a more positive investment relationship between the countries, job creation, and skills sharing and development.
Hattingh said exports from South Africa to the US were valued at around $9.8 billion, roughly $1.8 billion more than imports from the US to South Africa. For 2021, the last year before the Russo-Ukrainian war, trade between Russia and South Africa was valued at $1.3 billion.
“The South African Reserve Bank forecasts GDP growth of 0.2% for South Africa in 2023. That is unlikely to be exceeded while high-stage load shedding persists (as is expected over the short-to-medium term), and while the administration continues to score own goals in the foreign policy space.”
He said it was hard to imagine that the government does not know whether it has been supplying Russia with weapons. “Also consider that the episode could benefit Russia strategically, if it creates greater division between South Africa and the United States, and helps bring South Africa further over into the Russian camp. The cancellation of AGOA would be a significant step in this direction,” Hattingh said.
Political analyst Daniel Silke said that if these allegations of South Africa providing arms to Russia are correct, it would be damaging to the country not only diplomatically but also economically.
“If these allegations are correct, it will undermine the credibility of South Africa in terms of her broader global outreach when it comes to seeking foreign direct investment. These actions by South Africa will be noted in Western capitals and South Africa, we'll find that she becomes somewhat tainted as a result of this relationship with Russia,” he said.
“We are at such a critical juncture domestically, in terms of our own weak economy, dysfunction in policy making and the energy crisis, that we can ill afford any kind of alienation of our biggest trading partners,” he added.
He also warned that if it is true that the president didn’t know about the arms deal, it would be damaging to his government.
“It could very well be that we've got rogue elements operating within the South African state, should these allegations be correct.
“This would point to great dysfunction, at the top echelons of the South African government.”
Silke warned: “The first signs of the effects of this was to dampen the currency. So this should be a warning that cohesive actions and critical actions are really required.”
On the political front, Democratic Alliance leader John Steenhuisen, said the government supplied arms to Russia in exchange for financing the ANC.
“There is only one logical explanation why President Ramaphosa could not give a straight answer yesterday (on Thursday) whether his government has provided weapons to Russia during its invasion of Ukraine. It is because they have done so,” he said.
“Unless you factor in that Russia is financing the ANC, it makes no sense at all for South Africa to side with Russia. There is a lot at stake in going against the West.”
Action SA’s Herman Mashaba said the scandal highlights the urgent need for foreign policy guided by economic pragmatism and respect for human rights, and macroeconomic policies that would ignite growth and job creation.
“The rand’s deterioration – which will likely increase inflation amid a cost-of-living crisis – and signs of an economic recession show the disastrous impact President Cyril Ramaphosa’s ANC has had since his election as president in 2018,” he said.
“He has now presided over two recessions during his Presidency.”
The Ukraine Association of South Africa (UAZA) said if the allegations were true then South Africa shared responsibility for over 80 000 documented war crimes that Russia committed in Ukraine.
The president of UAZA Kateryna Aloshyna said the fact that the information came from US intelligence, rather than from the institutions that provide government oversight meant that there were serious issues with democratic governance in South Africa.
“South Africa has already made a dangerous compromise of the status of non-alignment, when [it] invited the Russian military ship with war markings (the letters Z and V on board) to South African peaceful southern ocean waters. To have those military trainings during the time of the anniversary of the war in Ukraine, made South Africans doubt that their country is neutral and non-align.”
Aloshyna said since Lady R docked in Simon’s Town in December it has been a concern to the public.
“Russia is killing Ukrainians on a daily basis and thus we believe this is a matter of extreme urgency. We hope that bureaucracy won’t be used as a method to delay investigation on the matter,” she said.
The Independent on Saturday