GNU teeters on the brink

7 April 2025 — This week, we ask: - ⁠Is this the end of the GNU? Will the US impose sanctions on SA? Is Trump reshaping global trade? ⁠Can SA survive Trump's tariffs?

GNU teeters on the brink

Conflict between the African National Congress (ANC) and the Democratic Alliance (DA) escalated last week as the National Assembly adopted the fiscal framework — the first step in the legislative process of passing the budget — without the votes of the DA, a government party.

While the trigger for the conflict was a proposed tax hike which the ANC supported and the DA opposed, the underlying tension is about the balance of forces within the Government of National Unity (GNU). The ANC wishes to maintain the status quo, where the DA plays a subservient role, while the DA is keen to upgrade its status to that of an engaged partner fully sharing in the responsibilities of government.

The conflict further exposed a fundamental fault line running through government, hinging on the question of whether the government’s priority should be growth or redistribution. The ANC’s stance on the budget shows that it prefers to reduce the budget deficit by increasing revenue — in other words, higher taxes for more redistribution — while the DA wants to reduce the budget deficit by cutting government spending and giving the economy more space to grow.

At the time of writing, it is still uncertain whether the GNU will hold or break this week. The two major parties are engaged in manoeuvres to shift the responsibility for a break-up to their counterpart, should it come to that. The necessity of doing so was bolstered by the results of a large opinion survey released last week, which showed continued high support levels for the GNU. This means that neither party wants to be saddled with the blame for having killed off the GNU.

Polling backs the GNU

The Brenthurst Foundation last week released the findings of a survey conducted between 24 February and 11 March 2025, before the intensification of the conflict over the budget.

On party political support, modelled for a 58% turnout, the poll has the ANC on 43% (up from 40% in the election), the DA on 27% (up from 22%), the uMkhonto weSizwe Party on 11% (down from 15%), and the Economic Freedom Fighters on 7% (down from 10%). The margin of error was 2%.

On coalitions, 57% of respondents thought the GNU was performing well and 60% thought it was performing better than the last ANC government. The DA was considered the most effective party at governing by 29% of respondents, while 24% of respondents thought the ANC was most effective. When measuring the favourability of parties, the GNU had a higher net favourability than any single party. Some 78% of voters would approve of their municipality being governed by a coalition, with the preferred combination centering on the ANC, DA and Inkatha Freedom Party (IFP).

The US keeps up the pressure

The United States (US) administration continues to ratchet up the pressure on South Africa. A further high-ranking diplomat was asked to leave the US last week when South Africa’s consul general in Los Angeles, Thandile Babalwa Sunduza, was given her marching orders. She follows in the footsteps of Ambassador Ebrahim Rasool and South Africa’s military attaché to Washington, Brigadier General Richard Maponyane.

Adding to the pressure, Texan Congressman Ronny Jackson (R) introduced the US-South Africa Bilateral Relations Review Act of 2025. The purpose of the legislation is to “mandate a full review of the bilateral relationship between the United States and South Africa and help advance President Trump’s foreign policy agenda by giving him the tools necessary to impose sanctions on corrupt South African government officials who choose to support America’s adversaries like China, Russia, and Iran.” It requires the US president, working with the Secretary of State and the Secretary of the Treasury, to produce a list of senior South African government officials and ANC leaders suspected of corruption or human rights abuses sufficiently serious to warrant sanctions being imposed on them.

The sanctions would be imposed under the 2016 Global Magnitsky Act. They could include freezes on assets within US jurisdiction, travel bans to the US, and prohibitions on Americans doing business with the sanctioned individuals. Examples of actions that could fall under the purview of the Magnitsky Act include involvement in state capture, irregular procurement deals, looting of state-owned enterprises, or violent suppression of protests and whistleblowers. The Act allows the US to use evidence submitted by NGOs, journalists, whistleblowers and foreign governments.

For the targeted individuals, the consequences could include financial isolation, as major global banks cut ties to avoid secondary sanctions; reputational damage for being included on a list of corrupt officials; a travel ban to the US and potentially to allied countries; and local pressure resulting from the stigma of being targeted under the Magnitsky Act.

Reshaping global trade

Last week, US President Donald Trump delivered a significant salvo in his goal of reshaping global trade to correct perceived trade distortions disadvantaging the US.

On 2 April, he announced a 10% baseline tariff applying universally to all imports entering the US, with a few exemptions, to come into effect on 5 April.

Over and above, higher “reciprocal” tariffs were introduced for 60 trading partners with which the US has trade deficits or perceives unfair trade practices. These are to come into effect on 9 April and will include tariffs of 20% on European Union imports, 24% on Japanese imports, 30% on South African imports and 34% on Chinese imports. The rates are based on a simple calculation that divides the US trade deficit with a country by the value of imports from that country, times a half. In other words, it punishes countries with which the US has a trade deficit, no matter how restrictive that country’s trade rules might be.

The tariffs are expected to affect over $2.5 trillion of imports, raising the average US tariff rate from 2.5% to 16.5% — the highest since 1937. With many countries still weighing their responses, US Treasury Secretary Scott Bessent said: “My advice to every country right now is: Do not retaliate. Sit back, take it in, let’s see how it goes. Because if you retaliate, there will be escalation. If you don’t retaliate, this is the high-water mark”. China announced on Friday it would impose reciprocal 34% tariffs on all imports from the US, starting 10 April.

The announcement led to an immediate pullback in global equities, while bond markets benefitted. The long-term consequences for individual countries and industry sectors are uncertain at this point but likely to be significant, in what could turn out to be the largest reset of the global trading system since the Bretton Woods conference of 1944.

Tariff impact on South Africa

We assess that the new tariffs override the Africa Growth and Opportunity Act, although this is not certain at this point. If correct, the new tariffs will affect South Africa’s labour-intensive agricultural sector. In 2024, around 4% of South Africa’s total agricultural exports were destined for the US. Citrus and wine exports to the US are particularly exposed.

Other sectors of export importance have been given a reprieve, including mining commodities — which account for over half of South Africa’s exports to the US — and automotive parts. An exemption list published by the White House after Mr Trump’s initial Rose Garden address includes platinum group metals and base metals such as copper, zinc, and manganese. Gold is also on the list, along with coal products.

The tariff status of “autos” and “auto parts” is disputed. The fact sheet that accompanied Mr Trump’s address states: “Some goods will not be subject to the Reciprocal Tariff. These include...steel/aluminum articles and autos/auto parts already subject to Section 232 tariffs...” At present, the accepted interpretation amongst trade policy analysts is that this means South Africa’s automotive exports to the US are not yet subjected to the new tariff rate.

We caution that the new US tariffs and trade rules, as well as their interpretation, can change at short notice.