Finance Minister Enoch Godongwana has cautioned that an escalating global trade war could pose a serious threat to South Africa’s economy, even as the country steps up efforts to position itself as a leading destination for investment.
Speaking to business leaders and stakeholders at the South Africa Night Reception on the sidelines of the World Economic Forum (WEF) Annual Meeting on Tuesday night in Davos, Godongwana reiterated that government’s central message to the international community remains unchanged: South Africa is open for investment.
This is the narrative that TeamSA is reinforcing in meetings with global partners, some of whom are already engaging directly with the delegation.
But alongside this optimism, Godongwana acknowledged that mounting geopolitical tensions – which could result in the disruption to global commerce, supply chains or capital flows – is likely to spill over into the domestic economy, with potentially severe consequences for growth, jobs and fiscal stability.
“Of course, there are headlines. We can’t deny that. If indeed a trade war emerges as a result of this geopolitical situation, it’s going to be a challenge for us. It’s a headwind we can’t ignore,” he said.
“South Africa’s economy is embedded in the global economy. Any disturbance in that economy, we are likely to see spillovers into the South African economy. That’s a risk we face as a nation. But we also face a risk as a nation.”
Godongwana described this exposure as a national risk, one that could undermine the gains achieved through years of economic reform and consolidation.
US President Donald Trump, who celebrated one year in office on Tuesday, will deliver a special address at the WEF on Wednesday. Diplomatic and trade relations between South Africa and the US have deteriorated since Trump retook the White House.
The US is one of South Africa’s most important trade and investment partners, and questions around evolving US trade policy, protectionist pressures and geopolitical alignments continue to surface in Davos conversations.
Meanwhile, chairperson of the Development Bank of Southern Africa (DBSA), David Makhura, had earlier said these dynamics have not derailed cooperation or capital flows.
“From the point of view of development finance institutions, we’re doing what we have to do. We mobilise capital and deploy that capital to our infrastructure priorities,” Makhura said.
“Of course, the global environment, big issues of uncertainty for a financing institution, the issues of risk will always arise. We deal with risk. Investment is about managing risk. From that point of view, yes, there will be huge questions all of us are facing.”
Godongwana, meanwhile, stressed that South Africa’s reform agenda has been built on cooperation rather than unilateral action.
Structural reforms, including those involving key State-Owned Enterprises, have progressed through collaboration between government and the private sector.
This partnership, he suggested, will be even more critical if South Africa is forced to navigate a harsher global economic environment shaped by trade disputes and protectionism.
The looming prospect of a trade war is also sharpening the focus on fiscal policy.
Godongwana conceded that government is grappling with difficult questions about how to contain fiscal pressures while maintaining sustainability and certainty.
Political considerations are expected to play a role in how these issues are addressed and communicated.
While Godongwana stopped short of outlining specific measures, he indicated that government is actively thinking about how to respond, both economically and politically, to the risks posed by global instability.
“So the key issue we’re grappling with, what are we going to be saying about containing from the fiscal side? We need to see how to bring sustainability, certainty, on the fiscal side,” he said.
“We are thinking about dealing with that question. But we’ll say something on the political side and make sure that there’s fiscal prudence. And that fiscal prudence is good.”
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