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South Africa’s economic choice between Washington and Moscow is clear

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Grapes, citrus, berries, nuts, apples and pears, sugar, avocados and wool were some of South Africa’s top exported products last year. Russia is a small market for these, accounting for just 2% of South Africa’s agricultural exports over the past five years. Image credit: Jose Alfonso Sierra

South Africa’s economic choice between Washington and Moscow is clear

The US’s accusation that South Africa supplied military equipment to Russia has raised diplomatic tensions between the two countries, leaving much uncertainty over future political and trade relations.

By Wandile Sihlobo

Geopolitical risks are back on the South African agricultural agenda. Over the past year the country has felt the effects of Russia’s invasion of Ukraine indirectly through the disruption caused to various commodity supply chains and the consequent surge in prices. This was especially so with grains, vegetable oils, fertiliser, liquid fuels and natural gas.

The matter is likely to be ventilated through diplomatic channels over the coming days and weeks, and it remains unclear where things will settle. But while this unfolds it is worth looking at South Africa’s economic ties with the rest of the world.

South Africa benefits far more from trade with the US than with Russia. Therefore, from a purely economic standpoint the obvious approach in an increasingly uncertain world is to nurture relationships with countries with which the country already has strong economic ties.

The US was South Africa’s second-largest export market in 2022, accounting for 9% of the total, according to data from Trade Map. China was the leading export market, accounting for 10% of our exports. Other important markets include Germany, Japan, the UK, the Netherlands, Mozambique, India, Botswana, Belgium, Namibia and Zimbabwe.

Russia is one of the least important export markets for South Africa’s exports, accounting for a mere 0.2% in 2022. Over the past five years South Africa’s total exports to Russia averaged 0.4% of the total per annum.

Economic interests (South Africa’s economic choice between Washington and Moscow is clear)

In the current environment of global geopolitical uncertainty South Africa should ideally be seeking to deepen relationships with countries that serve the country’s economic interests and, by extension, support domestic employment. Tensions with the US present significant economic red flags for South Africa.

The first risk is that of negative sentiment rising among critical trading partners against a country allegedly arming an invader, and the loss of credibility regarding South Africa’s claim to be nonaligned in the Russia-Ukraine conflict.

There are already anecdotal stories about companies delaying investments in South Africa over fear of rising geopolitical tension and South Africa’s position on the war. The country’s political leadership should be building on the work of the president’s annual investment conferences in attracting foreign direct investment to drive manufacturing and other sectors and job creation.

Trade is critical from an agricultural perspective. South Africa exports about half of its agricultural production in value terms, totalling a record USD12.8-billion in 2022. Maize, wine, grapes, citrus, berries, nuts, apples and pears, sugar, avocados and wool were some of the top exported products last year. Russia is a small market for these, accounting for just 2% of South Africa’s agricultural exports over the past five years.

The African continent remains an important market for South African produce, accounting for 37% of the country’s agricultural exports in 2022. Asia was the second-largest at 27% of exports, followed by the EU at 19% and the Americas in fourth place, accounting for 7%.

Within the Americas the US is an important agricultural trading partner, accounting for an average of 4% of South Africa’s annual agricultural exports over the past five years.

Fruits, nuts, processed vegetables, wine, dairy products, industrial alcohol, and fruit and vegetable juices are some of the agricultural products South Africa exports to the US. These products benefit from duty-free access to the US under the African Growth & Opportunity Act (Agoa).

South Africa is a small, open economy that is highly integrated with the global economy through numerous complex channels. This means the political leadership should primarily position the country in an attractive way for investment, and to gain market access to the world’s fastest-growing economies.

Wandile Sihlobo is Chief Economist at the Agricultural Business Chamber and a Senior Fellow at the Department of Agricultural Economics at Stellenbosch University

Follow Wandile on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za

You can also view this article on the following link: https://wandilesihlobo.com/2023/05/20/south-africas-economic-choice-between-washington-and-moscow-is-clear/

South Africa’s economic choice between Washington and Moscow is clear

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South Africa’s economic choice between Washington and Moscow is clear

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