It has become clear over the last nine weeks that under the presidency of Donald Trump, any conventional geopolitical and economic expectations of the United States can no longer be taken for granted. <\/p>\n\n\n\n
A marked change in the value system underlying the decisions made at the highest levels of US leadership has created much international uncertainty, with a recent analysis by the Financial Times<\/em> finding that US conservatives\u2019 global civil values are more aligned to the authoritarian politics of nations like Turkey and Russia than to traditional Western allies.<\/p>\n\n\n\n Trump\u2019s focus on US protectionism, alongside the recent skirmishes with the South Africa government over alleged human rights violations (which led to the suspension of most US foreign aid), are significant events that indicate South Africa may suffer increased scrutiny and reprisal from America.<\/p>\n\n\n\n This period of volatility means that South Africa\u2019s economy, and by extension its banking sector, could face significant headwinds in the future. For all the innovation and excellence within South Africa banking institutions, the industry has been continually hamstrung by prolonged mediocre economic growth, which may be aggravated by the turbulence created by Trump.<\/p>\n\n\n\n A key concern for South African economic growth is a potential slowdown in interest rate cuts across 2025 stemming from volatile economic conditions resulting from America\u2019s unpredictable foreign policy decisions. The most pressing example of this is Trump\u2019s imposition of excess tariffs, which threatens to spark a global trade war. <\/p>\n\n\n\n With South Africa\u2019s repo rate having come down to 7.5% in January 2025 from 8.25% in September 2024 (the highest the rate has been since 2009 after the Global Financial Crisis), central banks were hopeful that rates would continue to fall this year, benefitting their economies through access to cheaper financing. However, it now seems that rate cuts are likely to stall.<\/p>\n\n\n\n The South African Reserve Bank<\/strong><\/a> already highlighted its concern over an uncertain global outlook in January, and even suggested that US rates may increase this year in response to inflationary decision making. Ultimately, this prevents emerging markets from lowering their rates due to the negative impact on their asset competitiveness compared to the US. While banks would benefit from elevated net interest income, essential long-term credit growth will remain subdued.<\/p>\n\n\n\n Another concern for the South African economy, which feeds into the growth of the banking sector, will be targeted penalties from the US. The most obvious is South Africa\u2019s possible exclusion from the Africa Growth and Opportunity Act (AGOA), which is set to expire on September 30, 2025. AGOA provides duty-free access to the US market for several industries, but particularly the automotive, chemical and agricultural sectors. In 2023, South Africa\u2019s exports under AGOA amounted to around $3.2 billion<\/strong><\/a>.<\/p>\n\n\n\n\n
\u201cIt\u2019s the economy, stupid\u201d<\/h2>\n\n\n\n
Gambling with AGOA<\/h2>\n\n\n\n