[News] South Africa’s G20 Presidency: What it means for global trade and investment

In his address to the World Economic Forum meeting in January President Cyril Ramaphosa captured South Africa’s opportunity as follows: “As a leading forum for international economic cooperation, the G20 plays an important role in shaping and strengthening global architecture and governance on major international economic issues. For the first time in its history, the G20 is being hosted on the African continent following the admission of the African Union as a member of the G20.”

South Africa’s G20 Presidency and its impact on global trade

South Africa is now afforded these G20 opportunities, with a special focus on the new US administration that has undertaken its work with great speed. By drilling into the areas of the economic growth (investment) as well as security interests, South Africa can find overlap with what will likely be a more pragmatic, deal-making focused, America First foreign-and-trade policy on the part of the Trump administration.

Economic growth and investment under South Africa’s G20 Presidency

The economic context in which South Africa hosts the G20 is as follows. Gross fixed capital formation as a percentage of GDP is a useful leading indicator of future growth rates. The National Development Plan set SA’s target at 30%. The highest point reached (since 1994) was 21.6%, in 2008/09. Apart from that, the yearly performance hovers between 12% and 15%. With lower rates of capital formation come lower rates of growth – and fewer business and job opportunities. Between 2013 and 2023 annual GDP growth averaged only 0.8%; to increase real GDP per capita (and the average citizen’s quality of life) growth rates nearer 5% are needed.

How South Africa’s G20 Presidency can attract foreign investment

With the national fiscus under constant debt servicing obligations, it is unlikely that South Africa can domestically spend the amounts needed for more and larger infrastructure and other capital-intensive projects. Foreign investment is an avenue that should be explored at every opportunity. Building on the positive work done over the last 7 months by the Department of Home Affairs, South Africa can show it is open to highly-skilled businesspeople. A subdued but aspirant domestic consumer market is available to international goods. And by speeding up reforms on the railway networks and ports the government can communicate its seriousness (in deed, not merely in action).

South Africa’s well-developed links with the sub-Saharan African region plays to its geostrategic advantages – coupled of course the built-in global trade route that the Cape of Good Hope provides.

On the political front the ideological and policy differences within the Government of National Unity (GNU) could yet undermine South Africa’s investment case, if these differences result in the GNU’s fracturing. For the time being, though, South Africa presents a relatively more stable political offering than countries such as Germany, France, and South Korea, that can play to its global advantage.

A more pragmatic US foreign policy and trade footing will be more volatile and countries seeking opportunities should expect curveballs. But ‘volatile’ is not the same as ‘uncertain’ and ‘unpredictable.’ With the necessary data and objective, dispassionate analysis countries will be able to identify the key trends and driving forces behind seemingly irregular US foreign policy moves.

With all the above factors taken into consideration South Africa can formulate its positioning towards the US as follows: A relationship that is economically to the benefit of the US, coupled with no or relatively few geopolitical downsides for the US. Of potential investment and trade partners for the US on the African continent – and the US will always seek such opportunities, regardless of the more charged rhetoric of the day or which party holds the administration – South Africa has within its ability the choices to make a very compelling economic, security, and trade case.

Article originally appeared here.