SA plays down US trade tensions at Davos, insists investment momentum remains intact

TeamSA in Davos has brushed aside concerns that the country's ongoing trade tension with the United States could potentially cloud the investment climate and thwart the country's mandate at the World Economic Forum (WEF) Annual Meeting.

This comes as the US President Donald Trump is set to deliver a special address at the WEF on Wednesday, his first time in Davos since his 2018 landmark speech, during which he openly rejected the WEF’s climate agenda as a tool for control.

Diplomatic and trade relations have deteriorated between the two countries since Trump retook the White House a year ago, with his administration accusing South Africa of implementing racist laws, persecuting the minority Afrikaner community and aligning itself with enemies such as Russia and Iran.

The US is one of South Africa’s most important trade and investment partners, and questions around evolving US trade policy, protectionist pressures and geopolitical alignments continue to surface in Davos conversations.

While US–South Africa trade relations continue face political or policy headwinds, chairperson of the Development Bank of Southern Africa (DBSA), David Makhura, on Tuesday said that from a development finance perspective, these dynamics have not derailed cooperation or capital flows.

"From the point of view of development finance institutions, we're doing what we have to do. We mobilise capital and deploy that capital to our infrastructure priorities. The work we have been doing as the DBSA is going extremely well. We don't have any major worries at the moment," Makhura said on the sidelines of the WEF meetings.

"Whether it's our partners in Europe, or in the US, or in Asia, we are working extremely well with our partners here, our partners in the continent on this area of infrastructure development and mobilising and deploying capital to unlock economic inclusive growth in our South African economy, but also in our continent.

"Of course, the global environment, big issues of uncertainty for a financing institution, the issues of risk will always arise. We deal with risk. Investment is about managing risk. From that point of view, yes, there will be huge questions all of us are facing. But the DBSA is doing extremely well."

Makhura said investors are increasingly focused on execution, whether reforms translate into growth, whether infrastructure is delivered, and whether trade relationships can support industrial development.

On that score, he said he believes South Africa believes is turning a corner.

"The South African story at this World Economic Forum is very convincing now because of the reforms that we have undertaken. Those structural reforms are showing that the economy is turning," Makhura said.

He said a major inflection point has been South Africa’s removal from the Financial Action Task Force (FATF) grey list, a development that has materially altered investor sentiment in both Europe and the United States.

"A year ago, investors generally were saying that you are a problem as a country. You are a big risk. Those key issues from an investment point of view that would have been worrying the investors at this World Economic Forum," Makhura said.

"There's lots of positive news about South Africa but it is also because the world is going through a very rapid change that has created significant uncertainty everywhere. In major capitals of the developing countries, there's huge uncertainty. So the way people and investors look at what's happening, we as South Africa have a very convincing story."

Meanwhile, Frederick Mitchell, the chief economist at Aluma Capital, said deteriorating relationships with key international partners highlighted the importance of recalibrating diplomatic strategies.

Mitchell said the military exercises between South Africa, China, and Russia—amidst ongoing US tensions—pause serious re-evaluation of the country’s position in the global trade landscape.

He said the BRICS naval exercises in Simon’s Town, while strengthening ties with these nations, could trigger concerns in Washington, impacting trade agreements pivotal to South Africa’s economy.

"A persistent threat looms in the form of an economic slowdown in China, which could devastate South Africa’s recovery trajectory. As a nation heavily reliant on trade, particularly with the global shift in commodity prices and demands, any downturn in the Chinese economy will resonate back home, risking another setback in growth rates and investment levels," Mitchell said.

"Amidst these challenges, it remains imperative for South Africa to solidify its economic foundations through structural reforms and enhanced international trade negotiations. By fostering a harmonised approach to policy reform and international relations, particularly with the US, South Africa can strive towards sustainable growth."

BUSINESS REPORT