The rise of Donald Trump to being elected as US president, after defeating a much-favoured Hillary Clinton, may have stunned the world on Wednesday, but it also has far-reaching consequences for South Africa.
The US is one of SA’s largest trading partners and the outcome of the race to the White House brings uncertainty regarding the policy ties between two countries.
Arguably, the most important trade pact heading on the path of uncertainty is the African Growth and Opportunity Act (Agoa), which provides SA and other African countries with duty-free access through exports to the US market.
The trade pact – introduced in 2000 by the US Congress for SA to export products ranging from textiles, automotive to agricultural goods into the US– was recently renewed until 2025 after drawn-out discussions between the two countries.
Tempers flared during renewal negotiations with concerns that the US benefitted more from Agoa as it had could dump cheap chicken imports into SA, which has riled up local chicken producers (read more here).
SA’s trade with the US totalled US$13 billion (or R176 billion in rand terms) in 2015 – making it the country’s 39th largest goods trading partner, according to the United States Trade Representative. Agoa is believed to have created more than 50 000 jobs in the last 15 years in labour-intensive industries such as agriculture, automotive and textile.
Market watchers say that based on Trump’s policy proposals during the campaign trail, the US might not prioritise free-trade agreements with the Southern African Customs Union, which is an African regional economic organisation and its member states include Botswana, Lesotho, Namibia, SA, and Swaziland.
Clinton is viewed to be pro-Africa trade.
SA implications
If trade ties are severed, it could have economic and political consequences not only for SA but the African continent.
Economist at economists.co.za Mike Schüssler says SA might take a hit as there are possibilities that Agoa will not survive under Trump’s leadership.
“Our government has never been good friends with the Republicans and this will make our life difficult. We have seen a rise in protectionism in the US, which is not good for a middle-income country like SA,” Schüssler tells Moneyweb.
Protectionisms is the practice of having policies that often restrict trade in a bid to help out local and national businesses by curbing foreign competition.
A protectionist US is bad news, as SA depends on exporting commodities to the world’s biggest economy, says Schüssler. However, it’s still early days, uncertainty still reigns supreme.
The chief economist at Efficient Group Dawie Roodt says SA will “have to realise that there is a new guy on the block.” “If we play politics right with the US, there will be good news for SA and our policies will be maintained,” says Roodt.
Ashburton Investments’ portfolio manager Wayne McCurrie says a Trump victory (ranked by many commentators to be worse than the fallout from the UK’s imminent divorce with the European Union) has more political consequences and is “not going to cause an economic catastrophe.”
McCurrie sees three scenarios: the US will cut taxes and spend more money “which is not bad for an economy and financial markets”; inflation and debt will rise; tax incentives will be awarded to companies.
“On the impact to SA, it’s not going to be easy to implement policy changes as proposals have to go to the US Congress and it’s a long process,” says McCurrie.
-Brought to you by Moneyweb
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