These past few years have been tumultuous. There have been global health scares, lockdowns and wars, we’ve seen poverty, economic collapse and political conflict. And yet 2024 may be the most significant year for determining the trajectory of the global economy.
here are many matters that affect your rands, but many people wonder what impact events in the states will have on their nest eggs. A question we’re frequently asked is how the U.S. elections could impact South Africa (and economy).
Fin Select takes a closer look.
Correlation v causation: the reasoning trap
The problem with calculating the impact of global events and political discourse on SA is that it’s nearly impossible to link two separate events with 100% certainty. Moreover, two events don’t occur in isolation but with a myriad of preceding and concurrent events. We can’t determine that on event has any impact on a different system, even less what a series of events or their peripheral impacts may be.
Consider the survivorship bias, for instance. This logical error only uses data that passed a selection process (or checklist) while not looking at data/entities that didn’t. As an example, many scientists believe that most of ancient humans lived in caves because most human remains have been found in caves. Well, the survivorship bias argues that the remains of those humans who did not live in caves would be harder to find. Scientists firstly don’t have such a specific marker for where to start searching, and remains left out to the elements would likely not be preserved to the same extent as those in caves. This means we must always be aware of factors that may not have been considered.
Nevertheless, we can use some economic and sociopolitical models and make assumptions about possible outcomes or repercussions using past data and existing models.
The rule of thumb is to look at predictive models that have been tested over time and either yield a similar outcome each time, or produce a sequence of events that are similar in nature, magnitude or trajectory. While this doesn’t entirely eliminate logical errors, it significantly mitigates flawed predictions.
With that covered, let’s dig into some U.S. factors and political occurences that affect South Africa’s economy.
U.S. presidential elections
There have been numerous presidential and governmental elections this year, with even more to come.
Some results have been rather surprising, such Keir Starmer of the UK’s Labour Party gnabbing a landslide victory. His results are second only to Tony Blair’s results in 1997. Moreover, his win ended 14 years of conservative rule for the kingdom. The results indicated widespread disdain with the status quo. Voter turnout was paltry at a 100-year low, while smaller parties saw their combined share-of-vote soar to levels last seen in 1918.
France is also in some turmoil as Emmanuel Macron called for two rounds of elections in June and July. National Assembly elections weren’t required for another three years, so Macron’s decision came a shock to one and all. As with SA’s elections, Emmanuel Macron’s party formed a last-minute alliance with right-leaning lawmakers to snatch the throne once more. Before these unconventional elections it was widely assumed that the far-right’s Marine le Pen would take the victory.
If one looks at political affairs throughout the rest of the world, it’s clear that the U.S. is not the only region stirring the pot right now. And yet, it is the focus today.
What do the polls say?
The rest of the world has been watching the run-up to the U.S. elections with perplexed fascination. While many Americans have expressed the same stupefaction at unfolding events, the polarity between the only two parties allowed to compete for the throne has reignited animosity. Social media and tabloid news are awash with outrageous claims from both sides. From body doubles and fake assassination attempts, to strokes and human trafficking rings.
The irony of Trump’s ‘fake news’ claims touted so frequently during his previous campaigns is not lost on the public. This ‘slogan’ essentially unlocked a Pandora’s box of farfetched news to disseminate, germinate and sprout new farfetched narratives quite prolifically.
And yet, voters with more centrist views maintained that neither of the previous candidates – Joe Biden and Donald Trump – were suitable leaders for their country. Many democrats called for Joe Biden to step down long before he finally conceded due to perceived cognitive decline. The same holds true for republicans who are peeved with their leader’s moral trajectory and legal blunders. With Biden out of the running, voter sentiments seem to be shifting somewhat. While Harris is viewed as more competent than her forerunner in many respects, her gender and ethnicity has thrown a new spanner in the works.
Overview of ideological sentiments and alignment
The Chart below shows a broad overview of the different views held by Donald Trump, Kamala Harris and Cyril Ramaphosa comparatively:
*While we mention Cyril Ramaphosa and Benjamin Netanyahu respectively – neither of them represent their nations exclusively. Ramaphosa’s coalition government adds many new nuances to SA’s views, while Netanyahu as Prime Minister does not represent Israel as President (that title belongs to Isaac Hertzog)
**The views on Israel below are entirely focused on current Israel-Hamas conflict, and not relevant to any views of Israeli people or governance in any other context.
***As with Israel, the perception of the ‘Middle East’ as zone is only in context of global conflict and trade. It’s a generalised view of the region and not to be seen as a national stance for or against nations in the region.
Many factions on the right who considered a Biden vote over Trump have retreated back to their previous position. Conversely, many left-aligned voters who were dismayed by a second Biden term have now reengaged with their party and retreated from more extremist notions.
It’s not that Americans are inherently racist or opposed to female leadership. It’s simply that voters across the world (especially in the global north) are statistically less inclined to vote for female candidates or racially diverse leaders.
The graph below – collated from fivethirtyeight.com – shows U.S. voter sentiments from 8 January to 8 August 2024. This shows that the current presidential race is one of the closest in U.S. history.
This tight race has a definite effect on the world economies as investors are playing it safe given the uncertainty of the outcome. Irrespective of the outcome, there are bound to be a few disgruntled voters on the ‘losing’ side – whichever side that may be. Given the insurrection that followed the previous elections, fears of social unrest also abound.
According to 270 to win, the current map of U.S. voter alignment across states is as follows:
<a href="https://www.270towin.com/maps/harris-trump-2024-map-based-on-polls"><img src="https://www.270towin.com/map-images/harris-trump-2024-map-based-on-polls.png" width="800"></a>Maps like these, while accurate, may present a flawed perception since readers/viewers tend to assume that all states have equal votes. The predominant red or blue may therefore give the false perception of a majority vote. The important thing is to consider the number of electoral votes assigned for each state. With that in mind, a visual representation would look more like this:
While we can’t predict the outcome of the elections, let’s delve into possible repercussions for SA under a U.S. democratic or republican leaderhip.
Harris vs Trump: Key factors that will impact South Africa
There’s significant media coverage around the U.S. election, so we won’t regurgitate things that are common knowledge. The focus of this article is on how America’s vote will impact South Africa.
Immigration: a clamp-down on immigration (but weighted under Trump)
Both the Grand Old Party (GOP) and Democratic National Congress (DNC) have concerns over immigration. For the most part, however, those concerns are centred on illegal immigration – especially across the Mexican border.
While this matter is not an issue for South Africans, it should be noted that a Trump presidency is likely to see far stricter immigration rules across the board. Saffas who plan on immigrating to the U.S. as well as those who are already abroad are likely to see vetting criteria amped up. These measures may also affect travel and visa regulations.
Temporary work abroad may become more ‘taxing’ in may respects.
Foreign policy: neither candidate are likely boost ties with Africa
The Australian Institute of International Affairs reckons neither Harris nor Trump will improve U.S. relations with Africa. The nation is likely to continue offering humanitarian aid to African nations, but we shouldn’t hold a collective breath for drastic improvements in foreign relations.
And yet the South Africa may be a top priority among African nations. SA recently surpassed Nigeria to become the most industralised country in Africa, with the IMF placing our GDP at $373-bn. But any favourable trade deals or other pros are bound to come with many caveats.
SA-US relations under the Biden administration
Our relationship with the U.S. has had ups and downs under the Biden administration. On the one hand, he has a soft spot for our nation given his own ties to the country. His daughter-in-law, Melissa Cohen, is a South African, after all. Cohen’s parents still reside in South Africa.
But his tolerance for South African foreign policy has worn thin during his tenure. Most notably: he’s criticised South Africa for our stance on Russia and Hamas* respectively. Yet his stance on these two conflicts has been quite contradictory.
Politicians tend to focus on militant foes in rhetoric around conflict. This PR strategy presents on all sides of the political spectrum and is used as risk strategy. It mitigates outrage over civilian impact and focuses public attention on aggressors. The state and fate of communities in these conflict zones are generally only mentioned in critique towards others.
Political PR will always frame narratives to justify actions. Such PR can never be unbiased since each side needs to present their leadership (and decisions) as benevolent, just, powerful and resilient. Political communication is first-and-foremost aimed at influence. Propaganda is at the heart of most commentary around political events. Be weary of opinions based on any singular article, analysis or news.
While harshly criticising Russia’s president Vladimir Putin for the Ukraine invasion, he has held an entirely antithetical stance on the Gaza conflict. Most believe it’s due to Biden’s own claim as Zionist. In a meeting with Prime Minister Benjamin Netanyahu, Biden stated that he was a Zionist and that one needn’t be a Jew to be a Zionist, as reported by Reuters.
South Africa’s view has been similar albeit contrarian to Biden’s views in both instances.
SA has been lax to criticise Russia (though offering to arbitrate peace talks between the two nations), while our leaders have been highly critical of Israel. This has placed us at odds with the strongest economy in the world.
Harris or Trump: Gaza & Ukrain matters
It’s hard to say which of the two incumbents will improve (or in the very least plateau) relations between our two nations.
Like South Africa, Trump has been eager for a ceasefire between Russia and Ukraine. Unlike SA, however, his stance on the Gaza conflict is not entirely clear. Harris has been critical of Russia’s invasion of Ukraine, it’s no secret that there’s little love lost between herself and President Volodymyr Zelensky. Harris had engaged with Zelensky shortly before the invasion and noted that the attack was unavoidable. Time reports that the two could not agree on an appropriate response to the Russian tyrant.
And yet the cold but amicable cooperation between the two is nothing compared to the disdain that Donald Trump has shown Zelensky. The rift between the two leaders emerged in the wake of a whistleblower report which indicated that Trump had asked Zelensky to investigate Joe and Hunter Biden in a 2019 phone call.
Of the two parties, Harris is likely to be more critical of South Africa’s relationship with Russia, while also more aligned to Ramaphosa’s stance on Gaza. Although her criticism of Israel has been lacklustre, she stated that the nation will need to face consequences of their actions. It remains to be seen whether her stance will slacken or be bolstered as presidential candidate.
While Harris is more aligned with SA in this regard, many have criticised her for pandering and are uncertain of her actual views and clout in such global affairs.
SA’s BRICS+ alliance in the balance
South Africa’s membership in BRICS+ is also bound to ruffle feathers with either presidential candidate. In addition to conflicts noted above, South Africa’s economic alliances with BRICS+ nations could place us in a tight spot.
Donald Trump has painted China with a tainted brush for numerous years and our alliance with the nation will not win us any favours under his leadership. What western economists and leaders fail to mention in their criticism is that China had written off 94 interest-free loans (cumulative) for African nations between 2000 and 2019. BRICS+ also made it possible for nations to reduce debt repayment costs since there’s no longer the requirement for loan disbursement/repayment in USD or EU currencies.
The Development Watch Centre notes that Kamala Harris’ visits to various African nations in recent months/years poin towards a shift in U.S.-Africa relations. Such shift is more favourable for African nations, including South Africa. Moreover, Kamala Hariss’ foreign roots in Thulasendrapuram (Tamil) also makes her more favourable in terms of SA’s trade partnership with India. But the issue is not entirely straightforward as Harris is far less lenient on policies that diverge from U.S. legislation.
Race, gender & human rights
Another contentious point is that of socio-political matters. Given South Africa’s past our leaders are predominantly in favour of freedom/autonomy of person. Racial fairness and equality are key considerations for most parties in the coalition government. Our government as a whole is therefore more likely to align with the Harris administration in this regard.
But there are other issues which aren’t so clear-cut.
Many conservative factions (whether to the left or right of SA’s political pendulum), are more in agreement with Trump’s Republican view on gender and reproductive rights. His running mate, JD Vance, has labeled himself ‘100% ‘pro-life‘ and lamented declining birth rates for quite some time. Vance has also suggested offering weighted ‘voting rights’ to parents who should be able to cast votes on behalf of their offspring.
The flaw in Vance’s rationale is that his party’s clampdown on reproductive rights may see a rise in birth rates of his ‘opposition’. These communities are predominantly comprised of minority racial groups in impoverished areas. Should the Republicans win the race and push through more legislation that restricts birth control, the greatest uptick in U.S. birth rates is may occur within communities which are more liberally aligned.
Research by the National Center for Education Statistics in the U.S. indicated the following breakdown of poverty per racial classification for children under 19 in the USA:
- Black and Indian/Alaskan Native: 34%
- Hispanic: 28%
- Pacific Islander: 23%
- Bi-/Multiracial: 19%
- White/Asian: 11%
Peer reviewed research published in the journal of Paediatric Child Health shows that poverty drastically increase fertility rates, with females living in poverty showing a 5x higher risk of pregnancy.
Both Vance and Trump have expressed beliefs in pseudo-scientific racist ideas around the ‘biological roots of intelligence’, and both have ridiculed non-white individuals and groups.
SA-U.S. TRADE: AGOA will nosedive under Trump
The previous issues present a mixed-bag of outcomces and affiliations, with both U.S. presidential candidates offering pros and cons for SA.
One matter which is not far more clear-cut is SA’s trade agreements with the U.S. Donald Trump has reiterated that the African Growth and Opportunity Act (AGOA) should should not be renewed in 2025. He’s been a staunch proponent of U.S.-first trade conservatism. Trump has cited trade disagreements between nations like South Africa as a clear indicator that AGOA is a waste.
Ironically, U.S. goods exports to sub-Saharan Africa grew by 10,4% from 2021, while imports grew by a meagre 3,8%. The African Union notes that the bulk of U.S. imports from Africa are in the form of Crude Oil (Mostly from Nigeria, Angola, Ghana and Republic of the Congo). And yet South Africa remains the USA’s top trading partner, accounting for $14-billion of the total $29.3-billion imported from the region in 2023.
Looming U.S. recession – trouble ahead
Another crucial consideration is a looming U.S. recession – as predicted by recent U.S. job statistics and other factors.
That’s a subject for another day, however. We’ll dedicate an article exclusively to this topic in the next few weeks, so keep an eye on our blog.
The Verdict: how the U.S. will affect your Rands
It’s quite impossible to touch on all factors at play. A Harris Administration seems more favourable for trade relations between SA and USA for various reasons.
NEITHER HARRIS NOR TRUMP WILL IMPROVE SA’S ECONOMY IN THE SHORT TERM. THE EXTREME POLARITY AT PLAY WILL SEE INVESTORS TAKE THEIR MONEY TO SAFER SHORES, IRRESPECTIVE OF THE U.S. ELECTION OUTCOME.
No matter the outcome of U.S. elections, most analysts are quite certain that emerging economies such as South Africa will bear the brunt of uncertainty. South Africa may be fairing far better after our own elections, but we are reliant on trade and investment from abroad.
SOUTH AFRICANS SHOULD EXPECT TURBULENT MARKETS FOR COMING MONTHS.
PUBLIC SENTIMENT WAS FAR MORE IN FAVOUR OF BIDEN THAN TRUMP IN THE RUN-UP TO THE ELECTIONS COMPARED TO THE HARRIS-TRUMP POLLS. AND YET THE OPPOSITION LAUNCHED AN ATTACK ON THE CAPITOL LESS THAN 2 MONTHS AFTER ELECTIONS.
INVESTORS ARE PLAYING IT SAFE TO PREVENT LOSSES IN THE EVENT OF ANOTHER INSURGENCY. ‘
Move your Rands to safer shores
Given the uncertain times ahead, it makes sense to move your Rands abroad. Talk to Fin Select about your options for tax emigration, investment, forex, imports/exports transactions and moving your policies to safer shores.
The US elections will most definitely impact South Africa in numerous ways, and it will take some time for markets to stabilise.
Leave your details below to book an obligation-free consultation, or REGISTER HERE.
Sources
- Institute for Security Studies
- BBC
- U.S. Government
- The FW de Klerk Foundation
- Politico
- Rand Merchant Bank
- Government of South Africa
- IMF
- World Bank
- Rutgers
- Reuters
- 270 To Win
- University of the Witwatersrand
- Brookings
- NBC News
- Telegraph.UK
- Science Direct
- The New Yorker
- Al Jazeera
- The Atlantic
- Australian Institute of International Affairs
- Freepik
- Southern African Freight News
- Midjourney
- Ballotpeida
- NDTv
- ACLU
- Real Instituto Elcano
- AGOA.info
- U.S. Mission to the African Union
- National Educational Statistics
- U.S. Bank Wealth Management
- Fitch Ratings
- BizCommunity
- Investec
