South Africa, the government of President Cyril Ramaphosa and the Rand have hit a significant obstacle to economic recovery and growth since inflation: United States President Donald Trump. Trump threatened to cut funding to the country due to his concerns over the recently legislated Land Expropriation Bill. The threat to severe all ties with South Africa due to the Bill has raised concerns over trade, investment, and aid that supported key industries and public services. While Pretoria does not rely on Washington financial assistance for survival, the broader economic ties between South Africa and the US are far more significant than direct aid alone. If these ties weaken, the effects could be felt across multiple sectors, potentially leading to job losses, export declines, and financial instability.
According to the United States Agency for International Development, South Africa received $439,899,509 (R8.225 billion) in aid in 2023 and $323,415,440 (R6,047 billion) in 2024. One of the biggest beneficiaries of this funding ($220 million in 2023) was the President’s Emergency Plan for AIDS Relief (PEPFAR), which provides life-saving HIV/AIDS treatment to millions of South Africans. If this funding were to be cut, public health programs – particularly in rural and underprivileged communities – would face severe challenges. Reduced funding could limit access to medication, disrupt treatment centres, and undermine healthcare support systems that millions rely on. Yet, while the potential loss of aid is concerning, the real economic risk lies in trade and investment. The US is one of South Africa’s largest export markets, purchasing billions of rands’ worth of minerals, wine, fruit, and manufactured goods each year.
If Ramaphosa presses ahead with the Land Expropriation Bill, he will find himself stuck in a complex position. South Africa is still deeply dependent on the United States for financial aid to develop its medical sector. Ramaphosa is all to aware of that. Trump at the moment is blackmailing Pretoria over enforcing the bill. His agenda is curry favour with his right-wing supporters back home. Cutting off much needed medical aid to South Africa’s clinics and hospitals could lead to the spread of disease in the form of another pandemic worse than covid. Ramaphosa needs to consider if this bill is worth enforcing. Expropriating land even with compensation is not going to be accepted with good wishes. Land reform concerning the utilization of resources should come first. Ramaphosa and his administration in Pretoria’s main concern should be to conserve the economy and consider what its best interests will be in these changing times.
Challenging Trump right now could see sever repercussions in terms of job losses and business lose opportunities.
In 2022, South Africa exported R292 billion worth of goods to the US, accounting for roughly 6% of the country’s GDP. Major exports include platinum group metals (PGMs), gold, diamonds, chromium, manganese, wine, and citrus fruits. A disruption in trade relations could severely impact these industries, leading to decreased demand, falling revenues, and potential job losses. One of the biggest concerns in the ongoing US-South Africa economic relationship is the African Growth and Opportunity Act (AGOA), a trade agreement that allows South African exports to enter the US duty-free. South Africa is the largest beneficiary of AGOA, exporting goods worth around R65 billion, making it the largest US trade partner in Africa.
AGOA has been a lifeline for key sectors, including automotive manufacturing, agriculture, and mining. The South African automotive industry, for instance, benefits from duty-free exports of vehicles to the US, supporting thousands of jobs at manufacturers like Ford and BMW.
South Africa is heavily reliant on the US for the progress in its manufacturing sector and overall investments. The US commands a great expanse of influence due to its economic size and command of both the Pacific and Atlantic coasts. This has worked to Trump’s advantage. Pretoria will find it challenging to extricate itself from Washington’s global reach and influence. The African Growth and Opportunity Act (AGOA) has been of huge benefit to South Africa’s position on the African continent in relation to the US and to the African Continental Free Trade Agreement (AfCFTA). South Africa as the gate way to the continent has used AGOA to its advantage to build bridges between the US, itself, the Southern African Developmental Community (SADC) and the African Union (AU). Coming full circle South Africa’s manufacturing sector has flourished and created employment under AGOA in ways the Land Expropriation Bill could amount in less of a fraction too.
The foundation of duty-free exports created by AGOA with South Africa in mind could slowly place the country on a path to solving its inflation. Ramaphosa like Trump is a former businessman and knows the importance of creating jobs. The Land Expropriation Bill is hardly worth turning down an opportunity that can see the growth of manufacturing, agriculture and mineral extraction. AGOA if amended or annulled altogether could see South Africa’s unemployment and inflation rise.
The imposition of steep tariffs in the place of AGOA and the weaponization of the dollar could see the governing African National Congress and South Africa hit hard.
Professor Bonke Dumisa, an independent economic analyst, says Trump’s message unleashed the worst of the current weaponisation of the US dollar, as the rand opened significantly weaker against all the three major foreign currencies. The rand opened at R18.97/US$, occasionally straying above the R19 psychological barrier levels, compared to Friday’s opening rate of R18.56. It also opened relatively weaker at R23.32 against the UK pound sterling compared to Friday’s opening rate of R23.06 and significantly weaker at R19.39 against the euro compared to Friday’s opening rate of R19.28.
Dumisa says he is irritated to see that people who want all their exclusive racial privileges of the past under apartheid now use Trump to pursue their opposition to any reasonable redress of the past racial imbalances. “It is very irritating to read Trump’s message where he claims that there will be land grabs against certain racial groups in South Africa. This is nonsense. Any proper reading of the recently signed Expropriation Act is very clear that there will be no such land grabs.
As can be seen from the above extract, Trump’s reaction and fears are unfounded and irrational. Whereases there will still be compensation for the land or property being expropriated from the white minority farmers, Trump is possibly looking at the matter from the wrong angle. Land seizures are not taking place and farmers who have worked the land for decades are not being forced off. On the other hand, large tracts of land some of it not properly managed remain in the ownership of a few. This is true of commercial farming.
Meanwhile a large part of the indigenous population, the black Africans, eke out a meagre living on subsistence farms. Trump should respect the decision by Ramaphosa to reform agricultural land on South Africa’s own soil. Weaponizing the US Dollar to weaken the South African Rand and threatening to amend or abolish AGOA and cut off funding and investment is black mail of the highest order. Trump and his supporters need to relax their iron clad tariffs as they need to recognize that Ramaphosa is the lesser of a more uncompromising evil: the Economic Freedom Fighters and Julius Malema.
Ramaphosa for his part needs to be more diplomatic to the new Trump Administration. He needs to explain to Trump his position on the Bill, while arguing why South Africa needs it. Ramaphosa also needs to look at the success neighbouring Botswana has had with its own Land reform legislation. Foreign blackmail should not compel South African lawmakers to bend over double when its, trying to clean out its own backyard.
Article written by:
Yacoob Cassim
Journalist at Radio Al Ansaar
