[News] South Africa’s geopolitical dance

Constant recalibration is taking place, with allies and adversaries engaging with Washington publicly and behind the scenes as they try to navigate a more transactional, deal-making geopolitical and foreign policy space.

It is in this space that the low-growth South African economy finds itself. The latest GDP data from Stats SA indicate the economy grew by a mere 0,6% in 2024. This was less than the population growth rate for last year, meaning GDP per capita once again declined. The positive sentiment afforded by the formation of the Government of National Unity (GNU) has been seen in markets, but not in the areas of real foreign direct investment and Gross Fixed Capital Formation (GFCF).

The National Development Plan sets a 30% GFCF as a percentage of GDP by 2030. The only year the country was anywhere near that target was 2007/08. A higher GFCF level indicates real and meaningful investor (domestic and foreign) confidence in an economy and country. It measures investment in roads and bridges, heavy plant equipment and machinery, as well as assets that can be moved out of a country relatively quickly. Should this measure trend upwards it will be a reliable indicator of future higher growth rates for South Africa.

It is fully within the GNU’s purview and control to speed up the reforms and implement the policies necessary to increase real investment in the country. Even in the current period of heightened geopolitical tensions and uncertainty, markets and investors are looking for jurisdictions where the basics of governance, from trade infrastructure to the rule of law, to crime and security, are taken care of. The weaknesses in South Africa in these areas are not contingent on any other government to fix.

Additionally, South Africa’s geostrategic position and value, the naval base at Simon’s Town, and the country’s role in the implementation of the Africa Continental Free Trade Area, make it ideally situated to take advantage of increased interest from all manner of international trading and investment partners. From the European Union especially, having to deal with its own challenges emanating from Washington, South Africa can build on already established and strong trade, skills, and human capital ties.

Amidst the uncertainty and whiplash continually coming from the US, and likely to continue for the next four years, South Africa has the ingredients to make a compelling growth and investment case not only in Washington, but also to other current and potential trading and investment partners. For Washington specifically, the wins will be easiest attained not from the position of supplicant or going to ‘explain oneself’; rather, to go with clear, actionable plans and steps around reforms of labour markets and BEE, strengthening property rights, and where the investment cases are for US businesses.

The new geopolitical reality cannot be wished away. It is for the GNU, policymakers and lawmakers to acknowledge this reality as it is – not as they might wish it to be – and make sure, working with business and civil society, that they equip South Africa to navigate the risks and take advantage of the opportunities that lie ahead.

Article originally appeared here.