Hosting Putin for Brics would be ‘disastrous’ for SA trade

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JEREMY MAGGS: Tensions between the United States and Russia over alleged arm sales could have a significant impact on trade relations between Pretoria and Washington. Listen to the numbers, our total trade with the United States last year was in the region of R260 billion but says Donald MacKay, CEO of XA Global Trade Advisors, it’s really our exports, he says, of R178 billion or thereabouts that we need to worry about. He joins us now, Donald, a very warm welcome. These tensions, how potentially could they impact trade relations between Pretoria and Washington? Negative, I imagine.

DONALD MACKAY: Ja, quite strongly negative if we can’t find a way to resolve this.

So certainly, I don’t believe all of our trade with the US would be at risk.

But in the short term particularly I believe our agricultural exports, which would all benefit from the African Growth and Opportunities Act (Agoa) would certainly be the lowest hanging fruit if the US wanted to penalise us in some way. I think that that appears to be quite likely if we don’t have a change in stance fairly soon.

JEREMY MAGGS: So how might we be penalised then?

DONALD MACKAY: Well, we currently receive duty benefits. Duties are not paid on the fruit, for example, that we send to the US, which is about R4 billion a year. That would suddenly find itself having to pay duties when it entered the US and … there’s a variety but certainly the preferential position we’ve had relative to Europe, for example, would immediately disappear and we’d be less competitive. So that would be the short-term impact.

Then if you take a sector like citrus, which already has a problem getting its products into Europe, if citrus also lost its preferential access to the US, then suddenly you’re looking at a very substantial portion of our exports that just don’t happen any longer and with all kinds of consequences for that whole sector.

JEREMY MAGGS: And this has an impact, I imagine, right up the value chain because the moment the impact is felt indirectly, and I guess directly, it will also have an impact on jobs. You cite the citrus industry, for instance, that could be catastrophic, couldn’t it?

DONALD MACKAY: Yes, absolutely. So it would mean that we would have too much citrus, certainly for the kind of consumption that we currently have. That means we’re either going to have to get rid of that citrus at a lower price into other markets. That has implications on the disruption it causes in those markets. The potential for anti-dumping cases getting brought.

The knock-on effect of all of this is way bigger than just the US.

If we lost the US market, we would not simply replace it with another market at an equal value. So absolutely, the implications are extremely severe.

JEREMY MAGGS: So it’s important then to try and put a break on this process. You referred to finding new ways, new strategies of getting this right. What are they?

DONALD MACKAY: We have to be clearer on what our stance is. So, if we’re going be non-aligned, we can’t say that we’re non-aligned and then behave as if we’re strongly aligned. I think it would be disastrous if we actually physically hosted [President Vladimir] Putin in South Africa for the Brics (Brazil, Russia, India, China, and South Africa) summit. I think those things are avoidable problems and we need to avoid them.

We’ve made some missteps up till now and we can’t undo those but I do think we have an ability to stop making more of those mistakes. So it certainly wasn’t a good idea to have the military manoeuvres off the coast of KwaZulu-Natal a little while ago.

It’s not good to have the head of our army sitting in Moscow at the moment, having discussions on how to prepare for battle and these sorts of things.

All of those would appear to be a terrible idea right now and yet they’re also quite easy to fix. So I think if we firmed up a non-aligned stance, I don’t think we have to come out swinging in favour of one side or the other. But if we simply did that, I think it would go a long way to taking down the tensions.

JEREMY MAGGS: Donald MacKay, the people that you’re talking to, within your realm, within your sector, people who are actively involved in exports, are they at the point now where they’re starting to make contingency plans, if you can make plans to try and mitigate the crisis that you outline?

DONALD MACKAY: Yes, I don’t think [this is] asked enough. I think there’s still a sense that this will sort itself out and we don’t need to worry.

My experience at the moment is people don’t really want to confront the reality of what happens if the US takes action.

Where we are seeing interest in understanding this position better is coming out of the financial markets. So the people that have a physical exposure in the form of a farm, for example, would be I think not interested enough but the bankers and the bond holders, these are the people that absolutely are sensitive to the fact that this could go horribly wrong.

JEREMY MAGGS: Donald MacKay, thank you very much.

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