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No winners in SA, US spat over Russia-Ukraine conflict

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Picture: GCIS/Taken on September 16, 2022 – President Cyril Ramaphosa meets with his US counterpart, President Joseph Biden, at the White House Oval Office in Washington DC, during Ramaphosa’s working visit to the US on September 16, last year. While the US is unlikely to impose formal sanctions on South Africa on account of its pro-Russian foreign policy, the arsenal of other punitive measures it has at its disposal will be no less devastating, says the writer.

By Sizo Nkala

The past few weeks have seen increasing talk of the possibility of the US imposing sanctions or other punitive measures on South Africa. This follows US ambassador to South Africa, Reuben Brigety’s shocking claims South Africa loaded weapons onto a sanctioned Russian cargo ship when it docked at the Simon’s Town naval base last December.

The anticipation has even reached the South African Reserve Bank (SARB) which included sanctions against South Africa by the US as one of the risks to the stability of the country’s financial system in its latest Financial Stability Review. The central bank opined that the government’s neutral position amid the unfolding geopolitical developments may be perceived as support to Russia and thus may attract secondary sanctions from the US.

With the country relying on the US-controlled Society for Worldwide Interbank Financial Telecommunication system (SWIFT) to make 90 percent of its international payments, sanctions would spell disaster for South Africa’s financial system. Much will depend on the outcome of the independent panel investigating the claims, appointed by President Cyril Ramaphosa, that South Africa sent arms to Russia. The panel is expected to conclude its investigation in the next three weeks and submit its findings within two weeks thereafter.

It is almost certain that if the findings corroborate Brigety’s claims South Africa will be slapped with sanctions or other forms of punitive measures. In that case, South Africa would join the ranks of countries such as North Korea and Iran, which have also been accused of supplying arms to Russia. Both countries are under heavy US sanctions. It should worry South Africa that the US government seems to be confident in its intelligence that the transfer of weapons took place in Simon’s Town.

Recently, a bipartisan group of US Senators from the powerful Foreign Affairs Committee wrote to the Joe Biden administration requesting it to move the US-Africa Trade Summit that is scheduled to be held in South Africa in November to another country in response to Pretoria’s alleged support for Russia.

The senators argue that moving the meeting will send a clear message the US will not take kindly to its partners supporting Russia’s actions in Ukraine. The letter shows the senators believe Brigety’s claims that South Africa has supplied weapons to Russia. Should the ongoing investigation find against the South African government, the most likely and easiest punitive action the US can take will be to suspend South Africa from the Africa Growth and Opportunity Act (Agoa).

AGOA is a piece of legislation passed by the US Congress in 2000 that enables selected African countries to export a wide range of products to the US market duty-free. Among the factors taken into consideration to determine if a country qualifies for the AGOA scheme is the extent to which its policies (domestic and foreign) represent a threat to US interests.

Supplying arms to one of the US’s biggest rivals to be probably used in a war against a US ally is by any definition a grave assault on US interests. Thus, it is safe to say that South Africa’s AGOA status depends on the outcome of the independent panel’s investigation. The AGOA programme is due for review soon as it will expire in 2025. South Africa is likely to be disqualified if the programme is extended further should it be founded that it is undermining US interests. South Africa has benefited immensely from AGOA having exported products worth over $3 billion to the US under the arrangement in 2022.

The agricultural and manufacturing sectors will be especially hard hit as they have been the major beneficiaries of the scheme. South Africa’s loss of its AGOA status will have a significant negative impact on an economy that is already struggling with high levels of unemployment and slow foreign direct investment inflows.

Ramaphosa has deployed a high-level delegation to the US to lobby for South Africa’s continued inclusion in the scheme. Another high-level delegation will be sent to Washington again in the next few weeks to try and defend South Africa’s AGOA status.

However, the current mood in Washington as indicated by the bi-partisan letter the senators wrote to the Biden administration suggests that this will be a difficult task. South Africa could also be disqualified from the US Generalised System of Preferences (GSP) which also enables duty-free access to the US market for a more limited range of products compared to AGOA. The country last year exported almost $600million worth of goods to the US under the GSP arrangement.

Its discontinuation will be another significant blow to the South African economy. Other unilateral US programmes from which South Africa draws immense benefits particularly the US President’s Emergency Fund for AIDS Relief (PEPFAR) may also be reviewed. The US may also drag its feet on the Just Energy Transition Partnership (JETP) deal worth $8billion it struck with South Africa together with other developed countries and also withdraw support for South Africa’s funding applications in institutions such as the International Monetary Fund (IMF) where it holds a veto power.

Thus, while the US is unlikely to impose formal sanctions on South Africa on account of its pro-Russian foreign policy because of the cumbersome process involved, the arsenal of other punitive measures it has at its disposal will be no less devastating.

Dr Sizo Nkala is a Research Fellow at the University of Johannesburg’s Centre for Africa-China Studies