Falling investments in South Africa is a major concern, but we cannot get investments to increase without working infrastructure.
Now is the time for South Africa to stand together as a nation as the country faces the US tariffs, GDP grew slightly, and investment levels fell to their lowest level since 2003.
Busisiwe Mavuso, CEO of Business Leadership South Africa (BLSA), says in her weekly newsletter that although trade talks with the US are intensifying, we cannot wait for external solutions. “Trade negotiations with the US show momentum after minister Parks Tau’s visit, but success remains uncertain given the unpredictable nature of US politics and domestic policy demands.”
Efforts to resolve South Africa’s trading relationship with the United States have stepped up a gear, with trade, industry and competition minister Tau visiting the US last week and preparations underway for President Cyril Ramaphosa to visit the country this week.
The DTIC said that Tau met with US trade representative Jamieson Greer last week after three days of discussions between officials.
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Meeting with US last week, a welcome sense of momentum
Mavuso says while this does not mean the end of the 30% tariffs on imports from South Africa, it is a welcome sense of momentum towards a resolution. “The US and South African teams agreed to a road map of future discussions toward a conclusion of the trade negotiations.
“The tariffs have a serious effect on parts of our economy, especially the automotive industry, agricultural products, chemicals and many more. We have already seen significant job losses as factories suspended production lines as US orders collapsed.
“Our officials have been working hard to try and achieve a breakthrough in an extremely complex political and legal environment, with multifaceted demands not only from the US but also from other trading partners.
The South African side had to build a negotiating approach that recognises that South Africa is an important trading partner for the US, but our below-average growth rate means we are becoming less relevant over time.”
She says, understandably, the US will look at the likes of Angola and Nigeria through a different lens, given the rapid gross domestic product (GDP) growth achieved there compared to our sub-1%. “US demands include intruding on domestic policy issues like foreign ownership rules. There is no easy route to a solution.”
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Activity this week as trading partners attend United Nations this week
When Ramaphosa attends the UN General Assembly this week, there will be extensive activity on the sidelines as many trading partners attempt to use the opportunity to make a breakthrough, Mavuso says and points out that South Africa is preparing an extensive engagement plan with business leaders and investors, as well as politicians.
However, she says, it is far from clear that we will be successful. “As many other countries learnt, US engagement and response can be unpredictable. Domestic US politics can have as significant an impact as any proposal the South Africans table. Therefore, while we may hope for the best outcome of these trade discussions, we do have to be prepared in case negotiations fail.”
That is why Mavuso warns that business as well as political decision makers must plan for all scenarios. “In those where we do not reduce any of the punitive US trade barriers, or indeed even see heightened measures, we have little alternative but to focus efforts to build trade relations with the rest of the world.
“Our African Continental Free Trade Agreement is important to accelerate the flow of goods to the rest of Africa. Mutual recognition arrangements, such as those signed in July with India and the UK, ease customs and border procedures, removing trade frictions.
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Looking for other markets also important for the nation
“The Brics arrangements also offer enhanced trade and investment opportunities as well as better advocacy for a fairer global trade system. There is also much we can take forward out of the B20 process, particularly the trade and industrial transformation recommendations, including deeper regional trade through the AfCFTA and the adoption of green and digital technologies to re-energise manufacturing.”
According to Mavuso, the DTIC is also preparing a mission with South African companies to Indonesia, Vietnam and Malaysia next month as part of its broader efforts to promote new trading corridors. “These efforts are well-supported by business and reflect a global structural shift as countries elsewhere simultaneously attempt to reduce their exposure to the US economy. As a country, we must grasp every opportunity to build new markets.
“Beyond trade negotiations, these efforts are part of addressing our wider economic challenges, where recent data offers cautious reason for optimism. There was a glimmer of optimism in the growth figures released earlier this month for the second quarter of the year, which showed growth of 0.8% for the quarter.”
She points out that this is far from what we need, but it is a step in the right direction, coming after 0.1% growth in the first quarter. It was also slightly ahead of most economists’ forecasts. As a result, several economists now see growth for the full year to likely come in just over 1%.
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Improved energy supply and logistics will encourage investment
“Several factors are helping, including the boost in precious metal prices and lower interest rates, which were held steady last week, but seem likely to move down further at some point as inflation stays well contained.”
Mavuso says the fruits of the efforts of business and government to resolve the electricity crisis, as well as the country’s logistics crisis, will start to be felt as businesses are able to resume investing, confident that they can now build production with reliable energy and be able to trust that goods can reach markets around the world.
However, she points out, the investment component of the GDP figures was a big disappointment, coming in at the lowest level since 2003, equivalent to 13.5% of GDP. “Public corporations, particularly Transnet and Eskom, were especially weak.
“Consider that the Budget set an infrastructure investment target of R1 trillion over the next three years, and it is clear that public spending plans are not getting out of the starting blocks. That needs to change, and our efforts to resolve the electricity and logistics crises are critical to making that happen. The gap between ambition and execution has never been starker.”
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Warning that months ahead will test nation’s resolve and adaptability
She warns that the months ahead will test our collective resolve and adaptability as a nation. “Whether we achieve a breakthrough in US trade negotiations or must navigate continued barriers, the imperative remains the same: we must accelerate our economic transformation through diversified partnerships, improved infrastructure and increased investment confidence.
“The modest growth we achieved this quarter, while encouraging, underscores that we cannot afford to wait for external solutions. Business and government must work together with renewed urgency to unlock the investment and productivity gains that will drive sustainable growth and job creation. In an increasingly fragmented global economy, South Africa’s success will depend not on any single trading relationship, but on our ability to build resilience through multiple pathways to prosperity.”
