MBABANE (4 FEBRUARY 2025:) US President Donald Trump’s threat to cut funding to South Africa, and more likely, also trade benefits, has worrisome spillover implications on. This is because whatever ripple effects in the Republic quickly also reach the Kingdom due to its close economic links. Uncertainties from the tensions can be expected to drive the cost of foreign currencies against the Rand, and fuel price inflation.
Immediately after the Trumo statement, the Rand jumped nervously in subservience to the USA dollar when trading opened yesterday morning. Though it subsequently eased, nervousness remains.
Trump fired a salvo against South Africa with a post on his Truth Social before speaking to journalists at Joint Base Andrews on Sunday: “South Africa is confiscating land, and treating certain classes of people VERY BADLY. It is a bad situation that the Radical Left Media doesn’t want to so much as mention. A massive Human Rights VIOLATION, at a minimum, is happening for all to see. The United States won’t stand for it, we will act. Also, I will be cutting off all future funding to South Africa until a full investigation of this situation has been completed!”
A few hours later, the Rand weakened to over R19 to the US dollar in early Monday morning trade, but regained some losses, trading around R18.80 by 7pm last night.
The clash with the USA was anticipated in South Africa as part of the tensions between the ANC and its coalition partner, the DA following approval of a number of policies that the DA disapproves. Alluding to these disagreements earlier last week, South African billionaire and one of the respected commentators on SA politics, Rob Hersov reported a frosty telephone call between Trump and South Africa president Cyril Ramaphosa and hinted the two had not even greeted at the recent Davos World Economic Forum conference.
An important stimulant of potential tensions is seen as South Africa’s role in the development of the BRICS trade block with Brazil and rival world powers Russia and China. BRICS has established an economic architecture that creates a parallel financial and monetary system complete with a global payment arrangement –
BRICS Pay, which enables members to completely by-pass the USA controlled SWIFT (Society for Worldwide Interbank Financial Telecommunication) network that until now, was the exclusive system for financial institutions worldwide to securely exchange information and electronic messages about financial transactions.
This parallel financial system has significantly undermined the USA’s power to apply effective economic sanctions to control global influence. It has also reduced the dominance of the USA dollar in the world economy – which militates against Trump’s vow to make America Great Again.
The tensions are not expected to reduce anytime soon. In South Africa, the government has indicated it is not backing down. Ramaphosa recalled Robert Mugabe’s retort against the UK’s Tony Blair and targeted it at the USA saying: “Trump, keep your America and I will keep my South Africa.”
ANC chairman Gwede Mantashe subsequently also weighed in on the debate with a suggestion that if USA withholds financial support, Africa should leverage on its minerals wealth and withhold key minerals from the USA.
The fallout with the USA is bad news for Eswatini whose economy is extensively integrated with that of its neighbour. The first potential shock on Eswatini will be from the cost of fuel. Already, South Africa is bracing for a fuel price escalation by as much as E1.00 that is expected to be announced tomorrow.
Jm/today/4.02.2025
