Navigating turbulent waters as South Africa's economy faces global tensions

ON APRIL 3, 2025, the Johannesburg Stock Exchange (JSE) experienced its most significant single-day decline since 2020. This decline resulted in a market value loss of nearly R1 trillion, with the all-share index dropping as much as 4.5%.

Two primary factors have been identified as driving this reaction in the markets, namely, the local political instability, with the Government of National Unity (GNU) fears being realised with the Democratic Alliance (DA), the GNU’s second largest political party within our new coalition government, opposed the fiscal framework (or what has now been referred to as the VAT-hike budget) and will be challenging its outcome in court.

The second primary factor made the headlines throughout the world. United States President Donald Trump announced a 10% baseline tariff on all imports into the US, with specific duties of up to 30% on particular countries, including South Africa.

This move can be seen as harming our key exports, including vehicles, precious metals, machinery, and citrus products. These developments have also impacted the South African Rand, which weakened to 19.1 per US dollar, its lowest level since mid-January.

As tensions escalate between the South African government and the Trump administration, our country’s vital exports may never reach US soil. President Cyril Ramaphosa signed the new Land Expropriation Act, and has drawn the attention of President Trump, who has reacted with an executive order offering asylum to Afrikaners. If this order is taken seriously by our farmers, we could face significant repercussions within our agricultural industry, especially when combined with the new tariffs imposed on all imports to the US.

Further geopolitical tensions are occurring concurrently, including South Africa’s legal action against Israel at the International Court of Justice (ICJ), our neutral stance on the Russia-Ukraine conflict, as well as criticisms from Western nations, particularly the US, and the perception of South Africa’s alignment within BRICS, namely South Africa’s role in BRICS alongside Russia, China, India and Brazil and how this alliance influences South Africa’s foreign policy decisions and its reception by western powers.

The US imposed a 34% tariff on China, a 24% tariff on Japan, and a 25% tariff on South Korea.

Meanwhile, Brazil, a direct competitor to South Africa in many export markets, received a lighter tariff of 10%.South Africa is considered one of the largest exporters under the African Growth and Opportunity Act (AGOA), a trade agreement that provides Sub-Saharan countries with preferential access to US markets through tariff-free imports.

AGOA is due for renewal at the end of September 2025, and this agreement is highly vulnerable to being discontinued by President Trump. This exposes South Africa once again to being entangled in global politics, as market experts have already recommended that South Africa consider withdrawing from AGOA in a bid to offset risks rather than wait and face the storm later this year.

The average tariff applied to US imports entering South Africa is approximately 7.5%. So, Trump’s reasoning behind the 30% tariff seems a bit misguided when analysing the tariffs South Africa imposes on US goods. The new tariffs on South Africa effectively mean the end of AGOA, which allows South Africa duty-free access to the US market for more than 1 800 products, including citrus and wine.

The South African economy has experienced a significant decline over the past decade. With our GDP projected to grow by 1.5% according to the IMF, the last quarter of 2024 saw South Africa’s GDP expand by 0.6%, primarily driven by the agricultural industry. In the previous quarter, the manufacturing and transportation sectors struggled within the economy, being the most significant negative contributors.

The mining industry also performed poorly. The expanded unemployment rate in South Africa stands at 41.9%, with a youth unemployment rate of 59.6%. Devastating statistics for a developing nation, which now faces geopolitical tensions and tariffs that will undoubtedly impact growth in the sectors South Africa needs to drive economic growth and employment.

South Africa’s exports comprise mineral products at 24.1% of total exports, base metals and articles of base metal at 9.3%, vehicles and aircraft vessels at 9.2%, machinery at 6.8%, chemicals at 6.2%, and vegetables at 5.2%. South Africa’s main export partners are China, the US, and Germany.

Figures from the United Nations Comtrade database indicate that South Africa exported approximately R150 billion to the US in 2024, with nearly half of this amount comprising platinum and vehicles. While some products will be exempt from reciprocal tariffs, according to the statement from the White House.

Vehicle producers such as BMW and Mercedes in the Eastern Cape will feel the impact of this tariff, despite the exemptions. The automotive industry accounts for 18.1% of exports and contributes 4.3% to the country's GDP, while employing over 110 000 people. Employment in agriculture is reported at just under 19%.

South Africa is the world’s second-largest exporter of citrus. Although only 9% of South Africa’s citrus goes to the US, the complete withdrawal of tariff-free access could impact thousands of jobs. South Africa’s government said it would be ill-considered and counterproductive to rush into imposing reciprocal tariffs on imports from the US. This is understandable, as the effect of Trump’s tariffs is equivalent to a trade war that will be detrimental to many countries worldwide.

A single action by a single country has thrown the world into a global economic disorder. Tariffs are imposed to either harm consumers, protect specific industries, or encourage countries to change their behaviour. South Africans are resilient and will continue to navigate unprecedented global economic challenges. Diverting products to other friendly markets will take time, but it appears to be the most strategic action for South Africa.

This should be the primary concern of the Department of Agriculture, with assistance from the Department of Trade, Industry, and Competition. The Middle East and Asia should be the primary focus for South Africa to build access, mainly in China, India, and Saudi Arabia, thereby effectively utilising our relationship within BRICS.

Jennifer Reddy is the CEO of Morar Incorporated. With over 17 years of experience across the accounting, forensic, consultancy, and financial sectors, Reddy has become a highly motivated, energised, and inspirational leader. As CEO, she is responsible for overseeing the company’s national operations, driving profitable revenue growth, and leading a team that delivers innovative business solutions. 

** The views expressed do not necessarily reflect the views of IOL or Independent Media. 

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