A SENSIBLE SONA AS TRUMP TANGOES WITH TARIFFS AND TARGETS SA

This is an extract from the Weekly Review of 7 February 2025. The full Weekly can be found here (for free, but sign up if you want to receive notifications of new editions and other BER publications)

The Week in Perspective written by Tracey-Lee Solomon

It was a week filled with geopolitical upheavals. The fallout from President Ramaphosa’s ill-timed signing of the Expropriation Bill (covered in this Weekly) continued to unfold. Just as tensions between the ANC and DA within the GNU appeared to be shifting toward constructive dialogue, US President Donald Trump chimed in on Sunday on social media. Trump announced that the US would cut all aid to SA due to SA’s confiscation of land and the poor treatment of “certain classes of people”. SA President Ramaphosa was quick to respond to Trump. While SA is not reliant on US aid, America’s President's Emergency Plan for AIDS Relief (Pepfar) initiative supplies 17% of the funds for SA’s HIV/Aids programme. ?Relations between the US and SA remained strained with the US Secretary of State Marco Rubio announcing that he would not be attending the G20 summit in SA later this month. Rubio has, among other problems, taken issue with SA “using the G20 to promote solidarity, equality and sustainability”.

Beyond SA, Trump had a busy week. After imposing a 25% tariff on Canadian and Mexican imports last week – set to take effect on the 4th of February – he delayed implementation by 30 days. This followed discussions with Mexican President Claudia Sheinbaum and Canadian Prime Minister Trudeau and them pledging to address US concerns, particularly regarding border security. Trump did implement a 10% tariff on Chinese imports. In response, China imposed tariffs of 10 - 15% on US goods, including liquefied natural gas, coal, and crude oil, and announced export restrictions on key minerals used in high-tech industries. Additionally, Beijing launched an antitrust investigation into Google. Trump is expected to speak with Chinese President Xi Jinping in the coming days.

Adding to global tensions, Trump proposed that the US “take over” the war-torn Gaza Strip after permanently resettling its two million Palestinian inhabitants in neighbouring countries. Speaking alongside Israeli Prime Minister Benjamin Netanyahu, he suggested transforming Gaza into the “Riviera of the Middle East.” However, he did not clarify under what authority the US would occupy the territory. The proposal sparked immediate backlash. UN Secretary-General António Guterres urged Trump to “avoid any form of ethnic cleansing,” while key global powers, including Saudi Arabia, rejected the plan.

Shifting the focus back to domestic soil, President Ramaphosa delivered his State of the Nation Address (SONA) on Thursday. President Ramaphosa’s speech focused on key economic and governance reforms while indirectly reaffirming SA’s sovereignty in response to US President Trump’s comments. A key focus of the speech was the Medium-Term Development Plan, which aims to boost economic growth to over 3% through large-scale infrastructure investment. The government plans to spend R940 billion over the next three years on roads, bridges, dams, and waterways. Water infrastructure is set to receive R23 billion for seven major projects. Other encouraging details from the speech include the mention of the review of a funding model for municipalities to improve service delivery on a local level and the implementation of a digital identity system. The Impumelelo Growth Lab recently published a note on the critical reforms required to enhance municipal performance. There was also much talk of leveraging private capital for railway and logistics. The President also confirmed that the Social Relief of Distress (SRD) grant would be used as the basis for the introduction of a grant to support unemployed people. He reaffirmed his commitment to National Health Insurance (NHI) despite opposition, stating that it would reduce healthcare inequality. It should be noted that in his speech, the President referred to preparatory work for the NHI and not its imminent implementation. Considering this, it is unlikely that Treasury will make room for the NHI in its February budget.??

In other domestic news, steel producer ArcelorMittal South Africa (AMSA) has extended the shutdown of its long steel business by a month to allow further discussions with the government on potential solutions to prevent closure and to maintain supply for downstream customers with no immediate alternatives. The delay was made possible by a R380 million loan from the state-owned Industrial Development Corporation (IDC), a shareholder in AMSA, which also extended the repayment deadline of a previous R950 million loan from June 2025 to September 2026.

Much of the market's movement this week stemmed from US President Trump’s tariff announcements. As risk sentiment surged, safe-haven assets like the US dollar and gold rose sharply, with gold bullion closing at a record $2,869 per ounce on Wednesday. Both later retreated as the initial shock subsided but still ended the week stronger.

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Editor: Lisette IJssel de Schepper Email: [email protected]

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