Russia-South Africa arms deal could weaken economic trade with US

JOHANNESBURG – Traders and economists have been swift in their reaction – with general agreement that any withdrawal of US investment would be one step too far for South Africa.

This come after US ambassador to South Africa Reuben Brigety claimed that a Russian cargo ship left the Simon’s Town navy base camp in Cape Town last December with arms on board.

Brigety said the weapons were to support Russia’s ongoing invasion of Ukraine.

In his response, presidential spokesperson Vincent Magwenya accused Brigety of poor diplomatic skills.

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In a statement, Magwenya said it was true that a Russian vessel known as Lady R docked at Simons Town last year, however there was no evidence yet that it left with South African weapons.

In reaction, there have been concerns this may damage trade.

Investment expert Graeme Korner of the Korner Perspective weighed in: “You know really, about 50% of our exports go to US, Europe and countries that have a strong position against the occupation of Ukraine.”

He added that this was an own goal by government: “You just sort of feel that our economic and our political polices are really not aligned.”

President Cyril Ramaphosa said he would establish an independent inquiry to investigate the allegations.

THE ECONOMIC RELATIONS BETWEEN US AND SOUTH AFRICA

This all comes as the rand was still trading at weak levels.

South Africa has preferential trade benefits with the US under the African Growth and Opportunity Act.

This permits South Africa to export more than 7,000 goods to the US duty-free.

Apart from this, recent estimates state that the US has directed hundreds of billions of rands in investment over the past few decades – and there are fears that some of this could be put in jeopardy if relations were to deteriorate further.

Economist Dale McKinley noted that the economy was already under pressure: “The general feeling, I think among many in the private sector of a depressed investment environment.”

The South African Reserve Bank governor Lesetja Kganyago last week said that load shedding had already knocked off at least 2% points from the country’s growth – which is estimated to be just above zero this year.

Therefore, economists were hoping that any threat to investment would be resolved.