South Africa’s massive R400 billion gamble

 ·9 Apr 2023

President Cyril Ramaphosa is reportedly sending an envoy to the United States to smooth over simmering tensions around South Africa’s cosy relationship with Russia – while R400 billion worth of trade hangs in the balance.

Speaking to the Sunday Times, minister of the Department of International Relations and Cooperation (Dirco) Naledi Pandor said that the envoys would be sent to “engage and persuade” stakeholders on the country’s stance on Russia and its president, Vladimir Putin.

The International Criminal Court (ICC) has issued a warrant for Putin’s arrest over his invasion of Ukraine and driving a war that has lasted more than a year and led to many human rights abuses.

As a signatory to the Rome Statute, South Africa is obligated to carry out the arrest if Putin were to enter the country.

In August 2023, Putin is expected to attend a BRICS conference being hosted in South Africa, prompting speculation over whether or not the president will be arrested.

The Sunday Times reports that the answer is no, with cabinet officials saying that the country has never, and will never, arrest a sitting head of state. However, this is unlikely to go over smoothly with countries like the United States and nations in Europe, who are leading ever-tightening sanctions against Russia.

Diplomatic and political fallout over the issue could put South Africa’s R400 billion in trade with the United States at risk.

Big risks

South African chief executives, analysts, economists and risk specialists have been warning for months that South Africa’s close ties to Russia are quickly becoming one of the biggest in the country – and the trade being gabled is bigger than just the United States.

The South African government has repeatedly taken a neutral stance on Russia’s aggression in Europe in any official international communications. It has called for a diplomatic solution to the war and wants to help facilitate peace talks.

However, back home, officials have been more explicit in their position, calling the invading nation a “friend” and hosting war games and other conferences with its ambassadors and political counterparts.

Intellidex chair Stuart Theobald said this week that South Africa appears to be committed to “an international political blunder of epic proportions” through its friendship with Russia, putting it on the wrong side of a war and in the crosshairs of its biggest trade partners.

“Russia has very little economic relationship with South Africa. We export 50 times more to the US than we do to Russia. We export 150 times more to Europe (including the UK) than we do to Russia. The relative imports are of similar orders of magnitude,” he said.

“Consider also that, according to IMF data, SA’s five biggest direct investors are the Netherlands, the UK, Belgium, the US and Germany, with $136 billion (R2.5 trillion) between them. The IMF records Russian investments in SA of just $5 million. Even if the real number is far larger, it is a fraction of the major Nato powers.”

Since 2004, the US has invested more than $8 billion in South Africa through the President’s Emergency Plan for Aids Relief alone, Theobald noted. Russian assistance to South Africa does not even show up on any of the major international aid databases.

“All of this is at risk,” he said.

FirstRand chief executive officer Alan Pullinger said that the government’s open support of Russia has already been called out by trade partners,

According to chief risk advisor of the Institute of Risk Management in South Africa (IRMSA), Christopher Palm, South Africa severely underestimates the risk present in the growing divide between East and West.

South Africa’s position in terms of foreign policy is critical to this.

“There will be a global viewpoint taken (on Russia and China), and South Africa will be expected to take a position,” Palm said, adding that all South African businesses will face repercussions.

Regardless of the cause or source – whether the country picks a side, tries to stay neutral, or something else – businesses need to assess their position and to this and how it will impact their operations.

Read: South Africa won’t cut ties with ‘friendly’ Russia

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