Trumponomics: SA waits and watches

ALL SMILES: US president-elect Donald Trump speaks at an election night rally in Manhattan, New York Picture: EPA/SHAWN THEW
US president-elect Donald Trump speaks at an election night rally in Manhattan, New York Picture: EPA/SHAWN THEW

Too early to tell what stunning upset means for country, experts say

Uncertainty was the overriding reaction in South Africa yesterday after Donald Trump’s stunning upset victory in the US presidential election. However, Trump is likely to be as indifferent to Africa as he was in his first foreign policy campaign speech in April – when he barely mentioned the continent.

Trump beat market favourite Hillary Clinton to become the 45th US president yesterday.

Nelson Mandela Bay exporter SJM Flex South Africa head Deon Joubert, vice-chairman of the Eastern Cape chapter of the Exporters Club of South Africa, said it was too early to tell if Trump’s utterances in the run-up to the election would be realised.

“It is too early, things should settle down first,” he said.

“It is premature to speculate on the effects, economic and otherwise, of his election.”

Nelson Mandela Business Chamber chief executive Kevin Hustler said: “Since this is early days, we are unable to predict how this will affect the markets long-term, but we are sure that over the coming days as his economic and international relations policies unfold, the impacts will be discerned.”

South African businesses, including wine, fruit and the luxury car business which trade under the African Growth and Opportunity Act (Agoa) are unlikely to be affected negatively until 2025, when the legal trade agreement ends.

The act improves access to the American market for many South African goods and allows fruit and wine from the Western Cape to be exported duty-free into America.

“This is law enacted by Congress. It will not be directly affected by the presidential election,” SA Poultry Association head Kevin Lovell said.

Trump has promised to “put America first” before other countries, raising concerns about changes in US foreign policy.

Yesterday, US ambassador to South Africa Patrick Gaspard talked up the trade merits of a Trump presidency in the US, but analysts were more circumspect in their outlook.

Trump has described the Geneva-based World Trade Organisation as a disaster and suggested that he could pull the US out of the organisation if the rules prove to be an obstacle to his plans to protect manufacturing in the US.

He has promised to punish US firms that move jobs to Mexico and slap a 45% tariff on Chinese imports to try to claw back a trade deficit with China that the US government put at $367-billion (R49-trillion) last year.

Gaspard said there was nothing to suggest that a Republican administration would meaningfully affect the healthy trade relations between the two countries.

The US is South Africa’s third-largest trading partner, with trade between the two countries topping R155-billion last year.

The more than 600 US companies operating in South Africa account for 10% of the country’s GDP.

Those figures have been helped in no small way by Agoa. “We’ve inherited many initiatives from prior administrations”, of which Agoa and HIV/Aids aid programme Pepfar are two, Gaspard said.

“Bipartisan support of US African policy is longstanding.

“We don’t expect that to change with president-elect Trump.

“Agoa was renewed last year for a further 10 years, and is unlikely to be affected by the incoming administration.”

Economist Iraj Abedian, of PanAfrican Investment and Research Services, said Agoa would be of little value should Trump tamper with the architecture of global trade trends.

“From as far back as [the administration of former president Bill] Clinton, the global trend was towards multilateral free trading zones, which have benefited emerging economies such as India and China,” he said.

Should Trump then follow through on some of the controversial statements he offered during the divisive campaign against Clinton, Abedian says there will be a movement towards world disorder that will affect South Africa severely, regardless of Agoa.

“If Trump decides to slap 45% tariffs on China or pull the US out of the Nafta [North American Free Trade Agreement], or cancel agreements with Europe that have been 30 years in the making, then we are looking at the kind of global disorder from which Agoa will not save us,” Abedian said.

Trade and Industry Minister Rob Davies said there was little to suggest at this stage that such speculation would materialise.

“As it stands, we are sitting with a piece of legislation, Agoa, which is legally protected through to 2025, from which South Africa benefits,” he said.

“To speculate on anything else the US president might or might not do is something I am not prepared to do.”

The American Chamber of Commerce in South Africa, which represents more than 250 US entities, was cautiously optimistic about the outcome of the vote.

“We are entering uncharted waters,” chief executive Carol O’Brien said.

“The comforting fact is that Trump is a businessman. And Africa is a new frontier.

“And we hope he, as a businessman, will see the wisdom in that,” she said.

Free Market Foundation executive director Leon Louw said South African goods could be priced out of the US market if Trump raised import duties on them.

“The elephant in the room is [Agoa], which Obama was very close to shutting down,” he said.

“The question is whether he [Trump] will still support Agoa.

“My prediction is that he will not tamper with the duties and Agoa.

“Remember what he does must be ratified by Congress.”

The possibility of a hike in duties was also raised by University of the Witwatersrand lecturer Tinashe Chuchu of the School of Economic and Business Sciences.

“If it spikes by 15%, it would discourage foreign nations from doing business,” he said.

“However, I don’t think he will, or will be able to, implement much of what he said in his electioneering.

“He will need the support of Congress for what he wants to do.”

Coega Development Corporation spokesman Ayanda Vilakazi said he did not foresee any immediate impact on the CDC or the Coega Industrial Development Zone (IDZ), which is import-export focused.

“I think it will be up to the Department of Trade and Industry to foster relationships with the new government and discuss any effects on trade agreements,” he said.

“Generally, I think, we are in a wait-and-see situation,” he said.

Nelson Mandela Metropolitan University business and economic sciences faculty executive dean Dr Ismail Lagardien said: “The markets will react to almost any movements or changes in political leadership.

“We have to wait for the dust to settle and clarity to emerge on Donald Trump’s actual policies.”

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