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United States Secretary of State Mike Pompeo’s criticism of the South African government's proposed policy of Expropriation without Compensation suggests that the US-SA commercial and diplomatic relationship could be under significant strain.
Speaking at the headquarters of the African Union in Addis Ababa on 18 February, Pompeo said: "South Africa is debating an amendment to permit the expropriation of private property without compensation. That would be disastrous for that economy, and most importantly for the South African people."
In his remarks, Pompeo spoke of the importance of the basic rule of law, respect for property rights and regulation that encourages investment.
His statement came at the end of a three-nation tour of the continent, taking in Senegal, Angola and Ethiopia, fast-growing African markets which are also considered important for strategic and military reasons. Considering SA’s size and its strong commercial ties with the US, it is notable that SA did not feature on his travel itinerary.
US-SA relationship under strain
SA’s relationship with the US has come under sharp scrutiny in Washington of late. This follows frustrations with SA’s intransigence and outright provocations on various diplomatic issues. SA’s voting record at the United Nations, where it routinely sides with despotic regimes and US opponents, has not gone unnoticed. Recent examples include SA backing China on the Huawei matter, and Tripartite Alliance protests at the US Embassy in Pretoria in support of Iran.
Trade disputes over US chicken imports in recent years have also caused consternation in Washington, given SA’s preferential access to US markets. Pompeo’s latest remarks may presage a longer-term move by the US to revoke SA’s preferential trade access to the US.
The US is currently conducting two reviews of SA’s trade status. The first relates to intellectual property (IP) rights protections and the second to SA’s status as a developing nation under the Generalised System of Preferences (GSP).
At stake are vast trade flows that to date have been skewed heavily in favour of SA. As the chart below shows, R89.5 billion worth of exports went to the US in 2019. The US accounts for 6.9% of SA’s total exports.
Selected SA export categories to the US, 2019. Source: SARS cumulative bilateral trade for 2019
AGOA in jeopardy?
Respect for private property rights and the rule of law are conditions for SA’s ongoing participation in the African Growth and Opportunity Act (AGOA). AGOA is a piece of US trade legislation which runs to 2025, but inclusion in AGOA is at the discretion of the US president.
Verbal pledges from President Cyril Ramaphosa that EWC will be done in a manner that does not affect food security or foreign investment are not legally binding, and may not be enough reassurance that SA is serious in its commitment to private property rights and investor protection. The ANC government’s determination to amend the Constitution to give effect to EWC puts it on a collision course with US commercial interests.
David Ansara is the Chief Operating Officer of the Centre For Risk Analysis, a think tank in Johannesburg. Views expressed are his own.
