BLSA’s objective is to help create a positive environment for business.
For the most part, we focus on how economic and industrial policy can support our efforts to grow the economy and create jobs.
Very rarely do we have to consider the role of international diplomacy. But last week international diplomatic issues had a very serious impact on the business environment.
We don’t know what happened at Simon’s Town last December when a sanctioned Russian ship docked there, turning off its transponder while doing so.
The US ambassador has made a serious allegation that arms were loaded, destined for Russia and its war with Ukraine.
There was then an ambiguous response from the government, promising an independent enquiry to be led by a retired judge.
We then had an ambiguous apology from the ambassador (the government said he had apologised, but nothing published by the ambassador amounted to that).
After BLSA called on Friday for government to make clear whether an export permit had been granted to supply arms to Russia, the Department of International Relations and Cooperation said that the National Conventional Arms Control Committee has “no record” of an approved arms sale to Russia.
This means that if arms were loaded that day in Simon’s Town, it was done illegally.
The relevant legislation allows for a fine and imprisonment for up to 25 years for exporting arms without a permit.
There is also confusion about the evidence that underpinned the ambassador’s remarks.
It seems like this issue was discussed when an envoy headed by Sydney Mufamadi visited the US a month ago in an effort to repair the already strained relationship.
Promises were apparently made by the South Africans that there would be an investigation and the US would share intelligence on the matter.
But a month later there seems, judging by the lack of information the government was able to provide, to have been little investigation.
Government has also said the evidence has not been shared.
All of this had a serious impact on financial markets.
The rand hit its weakest-ever level against the dollar.
Bond yields spiked, pushing up the cost to government of borrowing. This reflects market concerns that South Africa’s economy is going to be damaged by the saga.
It is obvious how it might be – South Africa is the largest beneficiary of the US’s Africa Growth and Opportunity Act, exporting $15bn of goods and services in terms of that act.
One of the conditions for a country to qualify under AGOA is that it is not a threat to American national security interests.
Supplying arms to Russia is obviously going to leave us afoul of that requirement.
It probably wouldn’t stop there – we also have a free trade agreement with the European Union that could be at risk and trade relations would be affected with the United Kingdom.
Of course, there are many countries we trade with and the East, particularly China and India, are rapidly growing consumers of our exports.
But the nature of trade is quite different – we predominantly export commodities to the East, while our exports to Europe and the US tend to be manufactured goods.
For instance, over 70% of our vehicles exports are to Europe.
High-value-added goods have a much bigger impact on our economy, supporting supply chains through to components and ultimately the raw materials we produce.
Those supply chains support vastly more jobs than the commodities end of it only.
If we care about the industrialisation of our economy, western markets are critical.
The Simon’s Town episode has needed explanation since it took place.
Even if arms were not loaded onto the ship, the fact that it docked at all, particularly in a military facility with its transponder turned off, was ill advised.
It is now imperative that government clear up this mess. We need a clear explanation of who authorised the docking and what was offloaded and loaded.
We need to understand the full chain of command. If laws were broken, there should be arrests and prosecutions.
This needs to happen immediately, before irreversible damage is done, and not months down the line when an enquiry concludes.
The harm to US bilateral relations was considerable even before last week’s debacle.
Joint military operations with Russia, the visit last year of Russian foreign affairs minister Sergey Lavrov, the prospect of a visit by Vladimir Putin in August, and our voting on UN resolutions related to Ukraine, have all served to make our stance appear decidedly in favour of Russia.
More salt was rubbed into the wound by a call between President Cyril Ramaphosa and Putin last week too.
BLSA has called on government to take a clear position on arms trades with Russia, as other non-aligned countries like China have done (it will supply neither Russia nor Ukraine).
But there now also needs to be a concerted effort to restore positive relations with the US. Our economy is already damaged by so much, from load shedding to crime.
Adding a loss of critical trading relationships would further set back the effort to create an environment conducive to building businesses and growing the economy.
It could be the final straw that breaks the back of our fragile economy.
*This column was first published in the Business Leadership South Africa (BLSA) weekly newsletter. The author Busisiwe “Busi” Mavuso, is the CEO of BLSA.
*The views Mavuso expresses in this column are not necessarily those of The Bulrushes