South Africa is at risk of losing up to £32.4 billion in export revenue, equivalent to nearly a tenth of its gross domestic product (GDP), if its major trading partners retaliate against its refusal to take a stance on Russia’s war in Ukraine. The European Union (EU) and the United States, which account for 30.4% of South Africa’s total exports, have significantly higher economic ties compared to Russia, responsible for only 0.23% of exports and 0.07% of GDP.
Ndivhuho Netshitenzhe, an economist at Stanlib Asset Management, warned that escalating geopolitical tensions and actions from the West could result in a loss of export revenue amounting to £32.4 billion.
South Africa has claimed a non-aligned stance on the Ukrainian conflict, abstaining from United Nations votes that condemn Russia’s invasion. However, this neutrality is being questioned as the country maintains regular diplomatic and military interactions with Russia. Netshitenzhe noted that South Africa’s neutrality appears “seemingly compromised.”
In February, the nation conducted naval exercises with China and Russia, drawing criticism from the US and the European Union due to their timing, taking place one year after Russia’s invasion of Ukraine.
Recently, a diplomatic dispute arose between South Africa and the United States following accusations by US ambassador Reuben Brigety that Pretoria had supplied arms to Russia. South Africa denied these allegations, and Finance Minister Enoch Godongwana confirmed that the dispute has been resolved.
The perceived increased risk and proximity to Russia are expected to drive foreign investors away from South Africa, according to Netshitenzhe. Foreign ownership of government bonds has dropped to 26% by April, compared to a high of 43% in 2018. Furthermore, the rand has performed poorly against the US dollar, ranking as the third-worst performing emerging market currency this year.
Netshitenzhe attributed the rand’s decline to the loss of investor confidence caused by South Africa’s poor policy choices, weak economic performance, and ineffective political leadership. According to him, these factors have contributed to a significant outflow of capital from the country.