It feels odd being so focused on something apart from the budget on the morning of normally one of the most important days of the year. The foreign policy question has become so all-consuming here because of the uncertainty, first on the US side, and then in terms of the messiness of the SA response.
I think it is important to remember that the US has not as an institutional machine got its ducks in a row yet — pending investigations that are ongoing for another month or so. The fact that these investigations shouldn’t throw up any new information is beside the point.
If you go and read the human rights reports the US puts out every April, you can see the view on SA was stark even under less hostile administrations. As such, we must be quite clear that there are a range of different layers which has got lost in the media melee.
The Expropriation Act and BEE, and even the farm murder issue, are all secondary in terms of the scope of influence they have across the US polity and policy-making class.
Post the Lady R incident in Simon’s Town there has been deep concern across the aisle over SA’s Iran connection and terrorist financing issues, as well as the broad alignment of SA foreign policy. This ultimately comes down to a question of trust. Government leaders from the president down have been insistent that the country is non-aligned, but Western capitals — not just Washington — have struggled with this notion when juxtaposed with our foreign policy performative fluff.
The fact is that much of SA’s foreign policy stance skews far away from what is in SA citizens’ — and especially jobseekers’ — pragmatic self-interest. Add to this deep strains of anti-Westernism inside parts of the ANC and parts of the department of international relations & co-operation, and there is no environment for trust and meaningful and honest conversations.
In my column two weeks ago I was head-in-hands over Gwede Mantashe’s comments about cutting mineral exports to the US, and like predictable clockwork he has done it again this week with comments about acquiring nuclear technology from Iran and Russia (“Lessons in communication as ANC adopts softer tone”, February 5).
Given that nuclear power is no longer in his portfolio, and given that the man is far from stupid, we must take at least as our working assumption that he deliberately intervened in this way to stir up a domestic base inside the ANC. Yet this makes it even harder to generate trust in the current situation and shows that the president has weak control over messaging. Delays to various trips to Washington further complicate communicating a direct and honest message.
The markets have been remarkably calm through all of this, perhaps given the fact that there is realism about the limited costs of losing access to the African Growth & Opportunity Act (Agoa) benefits (at a macro-level — it would catalyse but not cause the structural decline we are likely to see in the car sector given the inability of the policy environment there to shift to the new realities) and given that the US has relatively limited levers.
Lobbying to keep SA on the financial action task force greylist is hardly a new shock, just the lack of realisation of what was otherwise expected to be an improvement. Sanctions against corrupt individuals in SA or against those with terrorist financing connections are if anything a positive rather than a negative shock. Markets have likely got ahead of themselves in terms of expectations of ANC sanctions or similar.
More generally, some expectation management is needed domestically. The US is going to extract a pound of flesh, and it will be what it will be. The question then is if that will be an isolated one-off, or whether SA will keep antagonising the US, with people turning up in Tehran for no good reason, for instance, or trying to travel to Gaza for photo ops.
If SA is not going to offer much beyond rhetoric on the International Court of Justice or changing the Expropriation Act or BEE, it must at least try to build trust around its balanced stance on foreign policy and offer up more on the business environment in general.
Doing this, even if SA is excluded from Agoa, can be relatively low cost to SA (in fact, attracting more investment from the US and elsewhere in the process, not to mention how it can support local sentiment).
Today’s budget seems minor in comparison with these far larger and existential questions, but they are deeply rooted in the same things. Is there pragmatism? Does the political space understand what is performative and what is real? Is there a clear pathway to a better place that everyone can latch on to and communicate with one voice?
If anything, the budget will show how important pragmatism is when you have your back against the wall, with debt service costs so high, such a steep yield curve and no room for tax hikes to offer any real get-out-of-jail-free card. Only the difficult choices are left.
• Peter Attard Montalto leads on political economy, markets and the just energy transition at Krutham, a SA research-led consulting company.
This article first appeared in Business Day.
