More pain coming for South Africa

Kruthum managing director Peter Attard Montalto says that the Trump administration is coming after South Africa for a “pound of flesh”, which the country will just have to give before it can hope to restore its broken relationship with the United States.

Speaking to Business Day TV, the analyst said that this “pound of flesh” will likely encompass more and far worse than what has already materialised in the first two months of the new rulers in Washington.

While the United States has cut funding to key programmes and booted out South Africa’s ambassador, the country should brace for more.

This includes getting kicked out of the African Growth and Opportunity Act (AGOA), potential visa bans, more funding cuts and punitive tariffs, and possibly more officials being expelled.

But Attard Montalto said that this shouldn’t come as a surprise to anyone, as the writing has been on the wall for a long time—even before Trump.

“The United States’ relations with South Africa were always going to get rocky, as long as South Africa charged down this somewhat performative route of relationships with Iran and others,” he said.

“The Democrats, the previous US administration, were already pretty concerned, but they decided to largely sweep it under the carpet. “Now the re-emergence of the Republicans has put things out into the open.”

Attard Montalto said that there has been a long-standing lack of trust between the US and South Africa.

While much focus has been on the former ambassador to the US, Ebrahim Rasool, getting booted in recent weeks, “people have forgotten that the actual mission (to the US) has been exceptionally weak.”

“There are people not turning up for meetings on (Capitol Hill); there is simply a lack of relationship depth for South Africa,” the analyst said.

“There is a fundamental lack of trust that needs to be built up, and it will take quite a lot of time to do so.”

He said the South African government needs to do a simple cost-benefit analysis on its foreign policies and what it wants from the United States.

“What stance on foreign policy is ultimately in the best interests of the country? Ultimately, that’s jobs and development in the broadest sense of the word,” he said.

“I think there is a lot of frustration from businesses and others in the country about the lack of pragmatism here.”

He added that no one is saying South Africa should not have a human rights-based or solidarity-based foreign policy, “but, ultimately, you need to know what side your bread is buttered on”.

AGOA will be lost

Attard Montalto said that before South Africa can begin forging a new relationship with the United States, it will have to take its licks.

“We expect a ‘pound of flesh’ will be extracted first before a deal will be done between South Africa and the Trump administration,” he said.

This will include a host of economically damaging moves that South Africa will unlikely be able to avoid.

“Everything coming out of Washington DC points to South Africa getting booted out of the AGOA, and the question is more around timing,” he said.

AGOA gives South Africa preferential access to United States markets and supports the local agriculture and manufacturing sectors.

The Act is expected to generate around $21 billion in trade with the United States—but it is up for review in September.

“We think it will be lost in April. South Africa can be booted at any time under an executive order; you don’t have to wait for the renewal in September,” Attard Montalto said.

This might be considered part of the ‘pound of flesh’. Visa bans and officials getting booted could also occur.

South Africa has already seen the cutting of funding, but the analyst warned that this could escalate.

He said that the Trump administration has put a particular focus on reciprocal tariffs around the world. With South Africa, it views BEE as a type of tariff on businesses.

“So we might see additional tariffs on top of reciprocal tariffs. This is part of the pound of flesh that we see coming,” he said.

The analyst said that “South Africa is going to have to take it, and move on from there” to try to find where a deal can be done after that.

The analyst said that the global south, particularly South Africa, still has a lot to offer the United States and US companies.

Aside from big American businesses already rooted in South Africa, like Microsoft and Amazon, there are also big chemical and mineral resources that the US would like to access.

He said there is a good relationship for trade and relations to be had, but it requires the government to have its “ducks in a row”.