South Africa must get its house in order 

South Africa must urgently get its own house to avoid the worst consequences of a diplomatic fallout with the United States and disruptions to global trade. 

This is feedback from Old Mutual Wealth investment strategist Izak Odendaal, who explained that South Africa should rather keep its head down and focus on structural issues with the local economy. 

Odendaal’s comments come amidst an increasingly tense diplomatic spat between South Africa and the US in early February. 

It also followed the first instance of the Trump administration threatening tariffs on countries to draw concessions from their governments. 

February started with President Trump imposing hefty 25% import tariffs on Canada and Mexico and 10% on China. Odendaal said the market reaction was understandably negative.  

After talks between Trump and his Mexican and Canadian counterparts, the implementation of the tariffs was put on hold.

Trump also lashed out at South Africa, to the surprise of many who weren’t sure the country would be on his radar considering the size of the economy and its trade with the US. 

Odendaal said Trump’s comments on the new Expropriation Act are somewhat misguided since the constitutional protection of property rights remains unchanged, but they could hurt sentiment towards South Africa.  

Other Trump associates also attacked the country’s black empowerment policies and perceived anti-American stance. 

Trump suspended American funding to South Africa, most of which goes for HIV/Aids treatment, but it should be noted that US aid and development funding to other countries has also been cut. 

A White House statement also added that Trump is going to announce a program to resettle Afrikaners, including farmers and their families, as refugees.

This was met strongly by the South African government, which said it was disappointed to observe that such narratives seem to have found favour among decision-makers in the US.

The government reiterated that South Africa remains committed to finding diplomatic solutions to any misunderstandings or disputes.

South Africa must focus on itself

Despite the negative light now shining on South Africa, it is unlikely to derail the improvements that are taking place here, Odendaal said.  

However, it is vital that the country remains on good terms with the US, a very important trading partner and a major source of foreign direct investment. 

The most immediate risk would be duty-free access to the American market under AGOA, which covers around a third of South Africa’s exports to the US. 

President Ramaphosa’s State of the Nation Address (SONA) tried to balance asserting South Africa’s sovereignty while holding out an olive branch to the US.

“The past week’s events should also reinforce how urgent it is that the country gets its own house in order amid an increasingly uncertain global environment,” Odendaal said.  

It was notable that the bulk of SONA was dedicated to growing the economy and improving public services. 

It also appears that tensions within the government that emerged in recent weeks have been reduced, and compromises have been reached, notably on the issue of National Health Insurance.

The country is good at making plans and bad at implementing them, so scepticism is warranted. 

What is different about SONA 2025 is the consistent theme of creating space for the private sector to get involved in network industries and infrastructure spending, Odendaal said. 

The growth of the economy will not depend on clever plans drafted by government bureaucrats but on crowding in the private sector. 

This requires more effective support from the government, but also the government getting out of the way – less government and more governance.

This is especially true of local government, which remains dysfunctional in many parts of the country. 

The president highlighted important initiatives to improve the operational and financial health of municipalities. Many of these are still in the early stages of implementation and will take years to bear fruit. 

Overall, the global picture still presents more questions than answers at this stage, but there are developments on the ground we can track. 

Locally, there is real progress underway, but there will be setbacks, too, including the possible headwinds of global trade wars.