The Economist: South Africa's economic reforms - navigating Trump's storm

Key topics:Trump halts aid, citing land seizures and attacks on white farmersAGOA trade pact at risk, affecting 300,000 South African jobsUS pressure may push reforms to Black Economic Empowerment laws.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here.The auditorium doors will open for BNIC#2 on 10 September 2025 in Hermanus. For more information and tickets, click here..From The Economist, published under licence. The original article can be found on www.economist.com© 2025 The Economist Newspaper Limited. All rights reserved..The Economist.No Sailor likes a hurricane. But if the alternative is drifting in the doldrums without hope, even vicious gales have their uses. As South Africa is buffeted by criticism from President Donald Trump and other American conservatives—some of it unfair and pushed by bad-faith actors—centrist business and political leaders dream of riding that storm to hasten reforms.In February Mr Trump issued an executive order suspending American aid to South Africa, including funding for HIV medications that keep millions alive. His order accused South Africa’s government of fuelling violence against the country’s white minority and condemned a new law that, on paper, allows land to be taken without compensation. It said this was an attack on white South African farmers known as Afrikaners. These whites, of mostly Dutch, French and German descent, are invited to apply for asylum in America. For good measure the order called South Africa’s foreign policies “aggressive” towards America and its allies, notably Israel, which South Africa has accused of genocide before the International Court of Justice in The Hague.On May 21st South Africa’s president, Cyril Ramaphosa, a glad-handing but paralysingly cautious stalwart of the ruling African National Congress (ANC), stepped into the tempest’s eye. Invited to the White House with government ministers, a trade union boss and Mr Trump’s golfing buddies, Mr Ramaphosa was ambushed in the Oval Office. He had hoped to lobby for his country to remain in AGOA, a trade pact that gives many African nations preferential access to American markets. After Mr Trump gave the word, video screens showed footage of a radical opposition leader chanting anti-white slogans. “Officials” in South Africa are saying “kill the farmer and take their land,” Mr Trump baselessly claimed.America’s direct leverage is not what it was. After years of deepening ties with China and the rest of Africa, South Africa sent just 13% of its exports to America in 2023, of which about a quarter were covered by AGOA. Business groups estimate that between 200,000 and 300,000 jobs depend on AGOA, mostly in carmaking and farming. AGOA is formally in the gift of America’s Congress, and long before Mr Trump’s re-election Republicans and Democrats in Washington grumbled about South Africa’s closeness to China, Iran and Russia, and its expressions of sympathy for Hamas, the Palestinian terror group..Read more:.South Africa said to prefer bilateral US trade deal over AGOA.The port city of Cape Town faces “quite concentrated AGOA risks” as a centre for exporting citrus fruit, wine and car engines, frets its mayor, Geordin Hill-Lewis. He is from the Democratic Alliance (DA), a business-friendly party and junior partner in Mr Ramaphosa’s coalition government. Mr Hill-Lewis declares that South Africa has behaved “appallingly” towards America for years. “If there were a textbook for alienating friends, we have written it,” he says in his office overlooking the bustling docks. He suggests that big American firms have long chafed at post-apartheid laws that oblige many foreign firms to set up licensed local subsidiaries then sell 30% stakes in them to black business interests, under a system known as Black Economic Empowerment (BEE).Critics charge that BEE-related equity transfers enrich a few, well connected black executives. There have already been reforms in several sectors, allowing firms to invest in community projects and employ local suppliers, rather than hand over ownership stakes. In the words of an insider, previous governments hesitated to allow such workarounds in the digital-services industry, fearing a “backlash” from ANC hardliners about the watering down of BEE. Now the government is asking regulators to allow Starlink, the satellite-internet firm owned by Elon Musk, a South African-born billionaire, to give free broadband services to 5,000 rural schools instead of sharing ownership rights. That responds to pressure from Mr Musk, who says BEE laws are racist.“Hardball” American lobbying is unhelpful. But some pressure “allows those who have pushed for reforms to say, you see, there are negative consequences” to rigid versions of BEE, says the DA leader, John Steenhuisen.Songezo Zibi leads Rise Mzansi, a small centrist party. He says fears about the expropriation law are exaggerated: it is a compromise that mirrors language in the constitution. Radicals wanted something harsher. In contrast, he worries that even old friends from the Democratic Party in Washington were confounded by South Africa’s go-it-alone Gaza campaign. Mr Zibi would like his country to act in concert with China, Brazil and others.Shining a light on home-grown problemsWeighing America’s clout in South African public debate is not simple. For one thing, its former generosity was not always noticed. Sikelela Dibela serves tasty, home-roasted coffee in his café in Khayelitsha, a black township outside Cape Town. He only learned that American aid part-funded a local HIV clinic when doctors talked of job losses over coffee. Mr Dibela credits Mr Ramaphosa with keeping his cool in the Oval Office, so that: “It was not an embarrassment like with Zelensky.” Still, he says that talk of a “white genocide” is false and inspires widespread anger. Colin Mkosi, the founder of a bicycle-delivery service in Langa, a nearby township, defends BEE rules that hand equity to black executives. Without ownership, people “can be sidelined”, he says. He objects to foreign investors trying to “dictate how we do things”.Importantly, external criticism is prompting self-reflection. Several South Africans welcomed Mr Ramaphosa’s delegation acknowledging their country’s appalling crime-rates in the Oval Office, as they tried to convince Mr Trump that white farmers are less likely to be murdered than poor blacks. American hostility will not make South Africa change course entirely. But if it puts wind in reformers’ sails, this tempest might yet do some good.

The Economist: South Africa's economic reforms - navigating Trump's storm

Key topics:

From The Economist, published under licence. The original article can be found on www.economist.com

© 2025 The Economist Newspaper Limited. All rights reserved.

The Economist

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