Apr 11

Business and South Africa’s International Relations

An article by Ian Kilbride and published on News24

Business’s frustration with government is growing. This is unsurprising. What is more surprising is that its exasperation has been expressed most recently on a foreign policy matter, rather than the myriad of domestic challenges confronting the country. South Africa’s relations with Russia constitute their own riddle, wrapped in a mystery, inside and enigma (to borrow from Winston Churchill) and will probably only be fully understood by those steeped in liberation movement history, or by those with a material interest in nuclear power plants. Irrespective of the source, purpose, rationale or justification of Pretoria’s variegated position towards Russia, this has international and domestic consequences. It is the anticipation of these consequences, rather than a particular nationalist or ideological predisposition, that forms the basis of business’s legitimate concerns. These consequences will become more apparent in the coming months. The International Criminal Court’s warrant of arrest for Russian President Vladimir Putin confronts South Africa as a signatory of the Rome Statute with a clear legal obligation and a diplomatic minefield as the host of the forthcoming BRICs summit in August. Pretoria’s handling of this poisoned chalice will provide a clear signal of its future foreign policy direction.

It is conceivable that South Africa’s position toward Russia is, in fact, strategic and forms part of a global realignment of power away from US hegemony and towards a post-Cold War configuration led by China and supported by its BRICs partners. Global power relations are already shifting. Not since the 1950s have Russian Chinese relations been as close. During his recent Moscow visit Chinese President, Xi Xi Ping, declared relations between the two countries as a strategic partnership of co-ordination. Concluding the meetings with Vladimir Putin his “dear friend” Xi observed, “Right now there are changes the likes of which we haven’t seen for 100 years. And we are the ones driving these changes together”.

China’s emerging confidence as a diplomatic power broker is evidenced not only in its peace plan for a settlement in Ukraine, but more impressively, in forging the re-establishment of diplomatic relations between Iran and Saudi Arabia. 

Notably too, Russian Foreign Minister, Sergei Lavrov, has claimed that more than a dozen countries have expressed a desire to join the BRICS club. G20 members Indonesia and Saudi Arabia are viewed as likely newcomers, with Argentina, Turkey and Iran reportedly also expressing interest. It is inconceivable to that South Africa would not wish to punch above its weight by hosting a BRICS summit leading to an expansion of the emerging global power bloc. Adding economic weight to the pro-BRICS argument, China is South Africa’s single largest trading partner (both import and export), but heavily in favour of the Chinese. Compared with the R480 billion of trade between South Africa and China, South Africa’s trade with Russia is just R15 billion and constitutes just 2% of its trade relations with its BRICS partners. By contrast, South Africa’s trade with its largest trading bloc, the European Union, stands at R699 billion and with the US at R289 billion.

So, what’s businesses problem? Discounting any moral and ideological considerations, disquiet among the South African business community centres on three concerns. Firstly, sanctions. Many local companies either operate internationally, or conduct business in South Africa as local affiliates or subsidiaries of western multinational corporations. Over 30 countries have imposed sanctions on Russia, including the US, the EU and the UK, resulting in more than 1,000 companies divesting or curtailing their Russian operations. South African corporations operating in western jurisdictions are subject to the same sanctions obligations as their local counterparts. Conversely, western multinationals operating in South Africa are themselves subject to sanction should they be found to be indirectly trading with or supporting Moscow, for example, though the supply of fuel to Russian aircraft or shipping vessels. South African business is acutely aware of the impact western sanctions, as was the case for MTN in its Iranian operations.

The second and related business concern is the impact of South Africa’s Russia stance on preferential access to US and EU markets. Despite its middle-income status, South Africa benefits from the US African Growth and Opportunity Act, as well as enjoying a preferential trade agreement with the European Union. Both may come under threat as a result of Pretoria’s Russian proclivities.

The third concern goes to the heart of government and business relations. Since the dawn of democracy, South African business has used the opening up of global markets not just to expand their corporate interests, but have also played an increasingly important role in the country’s economic and public diplomacy. With few exceptions, South African business has carried the nation’s flag with pride and in effect served to strengthen the country’s soft power. This alone provides sufficient justification for organised business to have a seat at the table with government when the country’s foreign policy interests are defined or redefined and particularly when such a shift portents significant consequences.

If President Ramaphosa is serious about forging a social compact, then business’s role in South Africa’s international relations must be acknowledged and embraced.

Ian Kilbride is the Chairman and CEO of The Spirit Group and an Honorary Professor at Stellenbosch Business School