Final straw for South Africa’s economy: CEO

 ·15 May 2023

Business Leadership South Africa (BLSA) says poor relations with the US could be the final straw that breaks the back of South Africa’s fragile economy as it already faces widespread crime and load shedding.

Writing in her weekly newsletter, Busi Mavuso, the CEO of BLSA, an organisation that represents the interests of private entity heavyweights, called on the South African government to take a clear position on arms trade with Russia, or it could face further economic backlash.

She said that South Africa must consider adopting the position of a non-aligned country in the Russia-Ukraine war, committing itself not to supply arms to either country – a similar strategy as China which is also a member of the BRICS alliance.

The government, guided by the views of the ANC, has repeatedly stated that it wishes to remain a ‘neutral party’ regarding the war and has even put its name forward to act as a mediator for a peaceful resolution. Despite this, the country’s ties with Russia are everpresent, and the international community has taken note.

On top of taking a firm stance against supply arms, BLSA has called for a concerted effort to restore positive relations with the United States.

Mavuso said that South Africa’s economy is already suffering from widespread crime and load shedding, and having poor trade relations with the US will only further set South Africa back as a place of business.

US relations weakened last week following the US ambassador Reuben Brigety raising the alarm over the possible supply of arms to Russia by South Africa when a sanctioned Russian cargo vessel, the Lady R, was docked in Simon’s Town. The US said that the shipment does not suggest the actions of a non-aligned country.

Mavuso said there was then an ambiguous response from the government, promising an independent enquiry to be led by a retired judge. President Cyril Ramaphosa instituted the inquiry but expressed disappointment over the remarks, which he said undermined the spirit of cooperation and partnership.

This was followed by an ambiguous apology from the ambassador after the South African government urged him to.

Concerns over the alleged supply of arms to Russia had a serious impact on financial markets.

“The rand hit its weakest ever level against the dollar. Bond yields spiked, pushing up the cost to the government of borrowing. This reflects market concerns that South Africa’s economy is going to be damaged by the saga,” said Mavuso.

“It is obvious how it might be – South Africa is the largest beneficiary of the US’s Africa Growth and Opportunity Act (AGOA), exporting $15 billion of goods and services in terms of that act. One of the conditions for a country to qualify under AGOA is that it is not a threat to American national security interests.”

“Supplying arms to Russia is obviously going to leave us afoul of that requirement. It probably wouldn’t stop there – we also have a free trade agreement with the European Union that could be at risk, and trade relations would also be affected with the United Kingdom.”

The CEO said that on Friday last week (12 May), BLSA enquired whether an export has been granted to supply arms to Russia. The Department of International Relations and Cooperation said that the National Conventional Arms Control Committee has ‘no record’; of an approved sale of arms to Russia.

“This means that if arms were loaded that day in Simon’s Town, it was done illegally. The relevant legislation allows for a fine and imprisonment for up to 25 years for exporting arms without a permit,” Mavuso said.

Ultimately, the incident in Simon’s Town requires clarification, said Mavuso, however even docking the ship in the harbour without an active transponder was unwise.

The CEO said that the incident in Simon’s Town has been a source of confusion and requires further clarification. It is crucial for the government to address this situation promptly by providing a transparent account of who authorized the docking and what was unloaded and loaded onto the ship, said Mavuso.

She said that immediate action is required to prevent irreversible harm, rather than waiting months for an inquiry to conclude.

Read: Load shedding is pushing rich South Africans out the door

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