Dangerous liaisons: SA’s Russian roulette jeopardises trade agreements with US and other Western nations
The International Criminal Court’s (ICC’s) arrest warrant for Russian President Vladimir Putin puts at stake South Africa’s privileged exports to America. The ICC problem encapsulates South Africa’s growing dilemma, as its ever-warmer embrace of Russia and China, in particular, increasingly irritates its Western economic partners.
The arrest warrant issued by the International Criminal Court for Russian President Vladimir Putin has further complicated South Africa’s already tense relations with the US and could jeopardise its privileged exports to America.
The ICC problem encapsulates South Africa’s growing dilemma, as its ever-warmer embrace of Russia and China, in particular, increasingly irritates its Western economic partners.
They are finding it difficult to understand why the ANC government is drifting ever further away from its proclaimed non-aligned position and closer to the West’s rivals – even though South Africa’s economic ties with the West are so much more valuable.
South Africa exported about 178 times more to the EU, the US and the UK in 2022 than to Russia and nearly four times more than it exported to China.
In 2022, South Africa exported goods worth more than R53-billion to the US under the African Growth and Opportunity Act (Agoa), which gives SA duty- and quota-free access to the US market.
This represented an increase of about 50% over 2021. The 2022 figure represented about 20% of total SA exports to the US of R257-billion and largely contributed to SA recording a trade surplus with the US of about R141-billion.
But South Africa’s refusal to condemn Russia’s invasion of Ukraine last year – and its growing ties with Moscow, Beijing and other Western enemies such as Iran – could jeopardise its Agoa privileges.
South Africa is due to host this year’s Agoa summit. It was originally scheduled to be held in September – just days after the country is to host the annual summit of the BRICS Forum – comprising Brazil, Russia, India, China and South Africa.
International Relations and Cooperation Minister Naledi Pandor recently confirmed that Putin had been invited to attend the BRICS summit, along with the leaders of the other BRICS nations.
But last month Putin was indicted by the ICC, which issued a warrant for his arrest for complicity in the alleged abduction of Ukrainian children and deportation of them to Russia.
If South Africa welcomes a fugitive from the ICC in August, many, perhaps all, of the US Senators and Representatives due to attend the Agoa summit in September would probably not attend.
And they are the ones who have to decide whether South Africa continues to be a beneficiary of Agoa – or even if the whole programme is renewed when it expires in 2025.
In February, the chairperson of the US House of Representatives Africa Subcommittee and other Republicans tabled a resolution calling on the Biden administration to review US relations with South Africa, including its Agoa benefits, because of its growing ties with Russia and China, and diminishing links with the US.
House Resolution 145 cited a joint naval exercise South Africa conducted with Russia and China off the KwaZulu-Natal coast in February and also expressed concerns about China allegedly being allowed to establish “police stations” in South Africa to monitor Chinese dissidents.
Western officials have also noted with concern the recent arrival of the massive Chinese satellite- and missile-tracking ship Yuan Wang 5 in Durban and of the Iranian Navy’s large forward base ship Makran and corvette Dena in Cape Town. Both visits are being seen as signs of increasing military engagement with autocratic rivals of the West.
“You say you’re non-aligned but over the last few months, you haven’t been looking non-aligned,” said one Western diplomat. He also cited Pandor’s recent insistence that “we have made it clear that Russia is a friend” and that the two would not become sudden enemies “on the demand of others”. This week’s visit of an ANC delegation – including deputy minister of international relations Alvin Botes – to Moscow to visit Putin’s United Russia Party is also being seen as evidence of an increasingly “aligned” position by SA.
The US and SA are apparently scrambling to get around the problem of the proximity of the BRICS and Agoa summits, possibly by rescheduling or moving the Agoa summit elsewhere.
Pretoria is also trying to figure out how to manage the Putin dilemma. As a member of the ICC, it is legally obliged to arrest him if he sets foot in South Africa. The government is seeking legal advice on how to invite him yet not have to arrest him.
But most legal experts believe Pretoria will have to ask him not to visit South Africa for the BRICS summit.
Some economic commentators are perplexed that Pretoria could be jeopardising its valuable economic ties with the US and other Western states in favour of better ties with states such as Russia, China and Iran, with which it does relatively little commerce.
“Russia has never broken one percent of our trade in the last 10 years,” says Donald MacKay, head of XA Global Trade Advisors.
“So, what do we wish to gain by taking the stance that we are taking on Russia?”
MacKay sees exports as the touchstone of trade relations. He notes that in 2022, nearly 22% of SA’s exports went to the EU, almost 9% to the US and and just over 5% to the UK – a total of 35.6% to the three main Western markets.
MacKay also notes that a total of 65% of South African exports in 2021 had gone to the 144 nations that voted in the UN General Assembly to condemn Russia for its invasion of Ukraine. Just 26% of SA’s exports went to the 31 countries that, like SA, abstained from the vote. And only 0.31% of exports went to the seven states that voted against condemnation of Russia.
MacKay notes Daily Maverick had recently reported that Pandor had said South Africa’s membership of BRICS was helping it to expand trade and investment in the Global South. She said total South African trade with BRICS had increased from R487-billion in 2017 to R702-billion in 2021.
Read more in Daily Maverick: BRICS collaboration helps find solutions for challenges facing Global South
But MacKay said SA’s trade with the major Western nations had been much more beneficial, as a considerably greater share of its exports to these markets had been of value-added, manufactured goods which create more jobs.
The EU says that the largest share – 22% – of SA exports to the union in 2021 was in motor vehicles. And machinery, vehicles, electronics, other manufactured goods, clothing and chemicals totalled some 31% of SA exports to the US in 2021, whereas a much larger percentage of exports to the BRICS countries has been in raw materials – in the case of China especially.
SA’s exports to Russia were a minuscule 0.23% of all exports in 2021, MacKay says.
Some analysts fear that SA could lose its Agoa benefits even sooner, but MacKay suspects SA could lose them in 2025 when the US Congress reviews Agoa.
If that happens, the greatest impact would be on the auto industry, he said. “The automotive industry cannot simply replace lost US exports with exports elsewhere.”
MacKay notes that, although many EU countries were also irked by South Africa’s drift further into the Russia/China camp, the reciprocal free trade agreement with the union would give SA some protection, “as they can’t simply withdraw benefits” as the US can.
“But we may find it takes very long for the newly negotiated improved access to things like wine to materialise,” he said. And he also thought the EU could be less cooperative in dealing with other trade issues, such as, the Carbon Border Adjustment Mechanism in Europe to tax the trade in carbon-intensive goods.
One US analyst of America’s relations with SA notes that although House Resolution 145 is a directive with few teeth, it sends a message to the administration and to SA that the Congress is watching them.
He also notes there is growing discomfort with SA’s position as articulated by Pandor last week – when she insisted that Russia would remain SA’s friend regardless of criticism from the West – and also about former president Thabo Mbeki’s assertion that the world would be better off with a diversified financial system rather than an over-reliance on the US dollar – a reliance he suggested the conflict in Ukraine had aggravated.
“Removal from Agoa is a possibility,” he believes, especially because the Republicans control the House of Representatives. But he also believes that the Democratic Senate and the Democratic Biden administration might put the brakes on that.
“I doubt it will go that far, as we have other matters to engage on with SA, including the $700-million a year the US spends on healthcare in South Africa.”
Veteran Washington-based South Africa watcher Tony Carroll, the director of Acorus Capital and adjunct professor in the African Studies programme at Johns Hopkins University, agrees, saying: “I would not sound the alarm bells now, but I do detect a faint smell of smoke.” DM168
Exports from SA in 2022
To the EU: 21.7%
To the US: 8.8%
To the UK: 5.1%
(a total of 35.6% to those three Western regions)
To China: 9.4%
To Russia: just 0.23%
(According to EU Trade)
Motor vehicles account for the highest share of SA’s exports to the EU, at 22%. In 2022, SA recorded a trade surplus with the EU of about R36-billion.
(Source: EU Embassy, Pretoria)
In 2022, SA exports to the US under Agoa totalled more than R53-billion, an increase from just over R37-billion in 2021. The 2022 figure represented about 20% of total SA exports to the US of R257-billion and largely contributed to SA recording a trade surplus of R141-billion with the US in 2022.
(Source: US Embassy, Pretoria)
Origin of FDI stock in SA in 2020
(Source: Russian embassy for the Russian figure; South African Reserve Bank March 2022 Bulletin for the rest)
In the recent United Nations vote on whether Russia should withdraw from Ukraine, 144 countries voted for it to withdraw (31 were African – 22% of the votes, but 66% of the African vote). A total of 31 abstained, including South Africa and 15 other African states, and seven voted for Russia to remain (the usual reprobates, such as North Korea, Eritrea and, of course, Russia). The rest didn’t vote. A total of 65% of SA exports go to the countries that voted for Russia to leave Ukraine, 26% to the abstentions and 0.31% to those who voted in support of Russia.
(Source: XA Global Trade Advisors)
This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R25.