South Africa stands to lose as much as $32.4 billion in export revenue, almost a 10th of its gross domestic product, should some of its main trading partners retaliate against its unwillingness to take a stance against Russia’s war in Ukraine.
“Together, the EU and US account for 30.4% of total exports by South Africa,” compared with Russia’s 0.23%, or 0.07% of GDP, said Ndivhuho Netshitenzhe, an economist at Stanlib Asset Management (Pty) Ltd., an investment manager with more than R650 billion in assets under management.
This means, she said in a note, should geopolitical tensions escalate and the West acts against South Africa, it could lose up to R612.7 billion in export revenue.
South Africa says it has adopted a non-aligned stance toward the war in Ukraine and has abstained from several United Nations votes condemning Russia’s invasion.
This neutrality has become “seemingly compromised” as the nation consistently interacts with Russia through diplomatic and military channels, Netshitenzhe said.
In February, South Africa held naval exercises with China and Russia. The manoeuvres were criticised by the US and the European Union, who questioned the timing — one year after Russia launched its invasion of Ukraine.
Last month, a diplomatic row broke out between South Africa and America over accusations by US Ambassador Reuben Brigety that Pretoria supplied arms to Russia. The allegations were denied, and the nation’s Finance Minister Enoch Godongwana said the spat was resolved.
The increased risk and perceived closeness to Russia is likely to drive foreign investors out of the country, Netshitenzhe said.
Foreign ownership of government bonds fell to 26% by April from as high as 43% in 2018, she said, and the rand is the third-worst performing emerging market currency against the dollar this year.
“The rand’s performance is unsurprising as South Africa has systematically lost investor confidence,” she said. “South Africa’s poor policy choices, weak economic performance and ineffective political leadership have contributed to increased capital outflows.”