ANTHONY BUTLER: Recession turns up heat on Cyril Ramaphosa
SA’s descent into a technical recession has come as a blow to President Cyril Ramaphosa’s economic hopes. Given limited fiscal space, heavily indebted parastatals and a nervous private sector, Ramaphosa will now need to make good on his promises with regard to foreign direct investment.
He will come under heavy pressure to conjure up some good news at the investment conference scheduled for October. Ramaphosa initially claimed the tidy sum of about $100bn in new investment would be raised over five years.
The investment drive has become the signature theme of Ramaphosa’s tenure in the Union Buildings. He has sought out investment partners on the African continent, in the Middle East, across the global South, and among the countries of the Organisation of Economic Co-operation and Development.
This week he has been in China, where opaque energy sector loans have already been promised for the ailing Eskom. SA is now also pursuing Chinese funds for infrastructure investment and for the creation of special economic zones.
Earlier in the year the president celebrated investment accords in the Middle East, including two ostensible $10bn commitments from the United Arab Emirates (UAE) and Saudi Arabia. These deals were controversial, not least because little detail was provided about their substance.
It seems likely the key area for collaboration is defence and security. A February 2017 memorandum of understanding between umbrella organisations in SA and the UAE suggests that troubled state-owned enterprise Denel, and Paramount Group, Africa’s largest private sector defence contractor, are SA’s coveted players.
Paramount sells not just weapons systems but also “solutions”. Yet SA pledged in the aftermath of apartheid not to supply weapons to foreign parties that might use them systematically to violate human rights. It is difficult to see the current behaviour of Saudi Arabia and UAE in Yemen as conforming to this promise.
Bellingcat, an international non-profit organisation, has noted that the Hodeidah hospital attack in Yemen on August 2, which claimed the lives of dozens of civilians, was probably the result of a mortar strike from Saudi or UAE forces. According to Bellingcat, the munition fragments “appear to share characteristics with munitions manufactured by Rheinmetall Denel Munition”, a German-SA consortium-of-convenience that came to prominence last week as a result of a devastating explosion in its Somerset West plant.
In some eyes, even such unsavoury business partners are less unpalatable than the former colonial power, which inconveniently remains SA’s largest foreign investor. The UK is oozing fake humility as a result of the Brexit disaster: SA is a key pillar in the Conservative government’s strategy to forge ostensible post-European Union trading and investment relationships through a largely imaginary Commonwealth portal.
The residual EU is even more important for SA’s prospects. The eurozone – not China — is SA’s largest trading partner by far. It also contains major investors such as Germany, whose Mercedes-Benz confirmed in June that it would invest €600m in expanding its SA operations.
The commitments of international carmakers are precarious, however, dependent as they are on our costly motor industry support programme and on the Great Satan’s African Growth and Opportunity Act, which allows tariff-free export of cars assembled in SA to the US.
These are difficult times indeed. Ramaphosa needs to seek out partners wherever they can be found. Pride, anticolonial sentiment and moral scruples will all have to wait for better days.
• Butler teaches public policy at the University of Cape Town.
Bellingcat analysis can be found at
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