Talk Of Sanctions
Worrying signs for sure especially for those living in South Africa and the full impact that will be felt in the economy. The masses do not understand how serious this is and basically think they are protected via being a member of BRICS and the US cannot harm them.
South Africa has been labelled a "unique problem" by US trade representative Jamie Greer who is happy to remove SA from the AGOA agreement. This is the trade agreement AGOA which stands for Africa Growth And Opportunity Act which benefits SA to the tune of about $120 million in free trade. The SA government is all seriousness does not really care as half of the trade to the US is precious metals which are exempt from any duties. Certain citrus exports are also exempt and there is actually very little else that has no tariffs. The extra 30% tariff has nailed most exporters and they have already been hit with lost export sales.
Even if this trade deal is approved in the House of Senate next week SA looks like it will be excluded all together and the tariffs will not change. The agreement does not protect the exports from these tariffs so the gains are minimal if any at all.
The problem with sanctions is far from the obvious for the masses and they have no idea what this would entail for the man in the street. Roughly 20% of SA's debt is held by foreign investors in government bonds with many of those investors either coming from Europe or the US. These bonds would be off loaded and sold virtually overnight seeing a mass exodus of cash which would trigger a mini crisis for the Rand which would definitely see a sharp fall in value within weeks.
The fallout will immediately impact interest rates making everything owed even more expensive. The borrowing rate for everyone will escalate which would impact the man in the street immediately. Businesses will be charged more so this will be pushed on to the consumers so every item will increase. When you are facing sanctions the world does become a lot smaller and your selections you once had in the shops diminished very quickly. Trading partners abandon the sanctioned country over night and you are left on your own. Chine would be happy with this outcome as this would represent more opportunities for them to exploit and this government is stupid enough to let this happen. I have lived through sanctions when I lived in Rhodesia (Zimbabwe) as a young kid and understood quite quickly when the choices are no longer available.
The other alternative is that the sanctions are not targeted at the economy and these are more against the individuals which I am in favor of. Imagine the government officials who have created this mess now having their overseas assets frozen overseas, travel restrictions and preventing the use of international banking which we know they all have. Hitting the corrupt in their pockets would be karma and this would not be what they would have expected. Only if the officials are hit in their pocket will change happen and this has to be the way forward first before the country is sanctioned.
The next week will be interesting to see what transpires and at least we are not getting the propaganda nonsense articles saying the relationship with the US is strong. For the last few months the articles have been stating that they expect the AGOA agreement to be resigned which it will, but failed to mention that SA will be removed from this trade deal agreement. This in itself would impact jobs which cannot be helped and is like pulling off a band aid revealing the wound which the government cannot manipulate. South Africa needs to hit rock bottom before things improve and the sooner this happens the better for the entire country.