The president and the illusion of leadership

7 July 2025 — Why is President Cyril Ramaphosa so upset by the DA’s withdrawal from the National Dialogue? Why is the ANC adopting a laager mentality? How much economic growth does the African Development Bank expect from SA? Will South Africa escape higher US tariffs? What factors are contributing to the stress felt by automakers in SA? How is the international relations department undermining efforts to repair SA’s relationship with the US?

The president and the illusion of leadership

Since leading his party to a 17-point drop in election support from 2019 to 2024, President Cyril Ramaphosa has laboured to shore up confidence in his leadership — and in his party.

Guiding his party into a coalition under the “Government of National Unity” (GNU) moniker, riding the initial wave of optimism, and placing the African National Congress (ANC) in a position of dominance over the Democratic Alliance (DA) were measures designed to buttress the ANC’s claim to legitimate authority, as well as to strengthen Mr Ramaphosa’s assertion of leadership within his party.

More recently, enthusiasm for the GNU has begun waning. The DA kicked up a fuss over a tax increase, the United States (US) has been increasingly confrontational towards South Africa, and Afrikaner delegations have been more successful in Washington than the president’s own emissaries. All this is eroding the illusion of the president’s strength and leadership — a risky development.

To refresh his authority and place the ANC and himself back at the centre, the president announced a National Dialogue and flexed his muscles by dismissing Andrew Whitfield, a deputy minister from the DA. However, these actions are not having the desired effect. Instead of submitting quietly, the DA protested, creating the threat of a GNU walkout, announcing its boycott of the National Dialogue, and raising the possibility of a motion of no confidence in the president.

This helps explain Mr Ramaphosa’s vexed and vehement responses to criticism of his dismissal of Mr Whitfield as well as — last week — the DA’s rejection of the National Dialogue. Mr Ramaphosa faces the risk of being revealed as an emperor without clothes, making him vulnerable to opponents within his party, as well as to disgruntled voters in upcoming elections. If he does not find a way to counter these developments, both his fate and that of his party hang in the balance.

Policy paralysis

While the growing pressure on the president presents an opportunity for him to lead from the front by promoting pro-growth reforms and uniting his party around a positive vision of the future, where improvements in material living conditions hold the promise of rising support in future elections, the opposite seems to be happening. The ANC appears to be adopting a laager mentality, marked by growing risk aversion, defensiveness and navel gazing — as in the form of the National Dialogue — while internal groupings vie for support ahead of the party’s 2027 elective conference.

This represents a significant risk to South Africa’s businesses in the form of worsening business conditions and growing social discontent. It is a risk that business leaders should be aware of and act on. As political analyst Peter Attard Montalto wrote last week in Business Day: “It would be better if the top strata of society didn’t sit relatively comfortably waiting for another window to drive change, and instead militated against a dangerous holding pattern emerging with a rallying call to action.”

Growth down

The latest institution to downgrade its growth forecast for South Africa is the African Development Bank (AfDB), which halved its earlier estimate of 1.6% growth in South Africa in 2025 to 0.8%. This brought it closer in line with CRA projections in 2024 and early 2025.

While the AfDB report correctly identifies domestic risks to economic growth as “infrastructure gaps, electricity shortages, logistical bottlenecks, and fiscal vulnerabilities arising from the bailout of state-owned enterprises”, the analysis does not go far enough to include the consistent anti-growth and anti-investment effects of policies such as race-based laws, expropriation without compensation, and localisation.

Reflective of the darkening outlook, the latest S&P Global SA Purchasing Managers’ Index (PMI), released last week, fell to its lowest level in nearly four years. It was recorded at 50.1 in June, down from a 50.8 reading in May. Readings below 50 signify worsening business conditions.

US tariffs back on the menu

The 90-day pause on US reciprocal tariffs, in place since April, will expire this Wednesday, 9 July. Last week US President Donald Trump said that US trading partners would be “fully covered” by that date, ranging “from maybe 60% or 70% tariffs to 10% and 20% tariffs”. However, thus far the US has reached a deal only with the United Kingdom and Vietnam, and achieved a pause on a previously ever-escalating tariff war with China.

South Africa faces a 31% reciprocal tariff rate. While the “final” rate will never be truly final — given that the threat of higher reciprocal tariffs is a useful tool for the US administration in its various trade shake-ups and geopolitical manoeuvres — South Africa’s new reality will very likely be the 10% universal US baseline tariff, with a reciprocal rate on top of that. Those two variables could be added to the 25% US tariff on automobiles and parts. This would create an existential threat to South Africa’s automotive manufacturing sector.

It is unlikely that South Africa has done enough substantive work to avoid an above 10% reciprocal tariff rate. Easing phytosanitary requirements on US pork imports is not enough for a Trump administration that is focused on trade wins while seeking substantive acknowledgement by the South African government of its concerns around property rights, race-based laws, and crime and safety.

While South Africa’s trade ministry appears to be placing its hopes on an extension of the pause on high tariffs — as a new “trade framework” for US engagements with sub-Saharan African countries is developed — South African exporters should not be caught by surprise if the US tariff rate is higher than 10% after 9 July.

Tariffs expose carmakers’ weaknesses

Last week Mercedes-Benz South Africa (MBSA) announced it was suspending vehicle manufacturing at its East London assembly plant until the end of July in the context of a “planned operational shutdown”. The announcement roughly coincides with the expiry of the 9 July pause on US reciprocal tariffs. The secretary general of the National Union of Metalworkers of South Africa, Irvin Jim, downplayed the significance of the Mercedes production pause, pointing out that Volkswagen and Nissan had also previously suspended production for a month.

However, other car manufacturers have shown signs of distress, including Audi, which called for more regulatory clarity and government subsidies in April, and Nissan, which was considering closing down its Rosslyn plant as part of a global turnaround strategy, as reported in May.

While high US reciprocal tariffs have hastened the South African automotive patient’s transfer to intensive care, the tariffs are not why the patient was in the hospital in the first place. The automotive sector’s viability is being threatened by home-made factors including lower domestic demand resulting from anaemic economic growth and declining real incomes, with the premium vehicle segment contracting to just a third of its size a decade ago. High rates of crime, unreliable ports and railways, inconsistent electricity supply, and race-based laws affecting ownership, procurement, and hiring, are further hurdles to automotive manufacturing in South Africa.

The strategy of doping the patient with government subsidies is becoming increasingly unsustainable because of weak government finances and because of the growing impact of self-imposed domestic obstacles as well as rising external threats, such as US tariffs and competition from Chinese manufacturers.

DIRCO counters DTIC efforts

While South Africa’s trade department was still trying to negotiate a deal with the US last week, an action by the international relations department was undoing its efforts. Social media posts from the international relations department highlighted a visit by its deputy minister, Thandi Moraka, to the Iranian embassy in Pretoria, where Ms Moraka signed a book of condolence. The US is highly critical of the South African government’s friendliness towards Iran, which it considers a state sponsor of terror, as well as its hostility towards Israel, which it considers an important ally.

On 17 June, US Congressman Greg Steube introduced a Bill aimed at “addressing hostile and antisemitic conduct by the Republic of South Africa”. The Bill calls for imposing sanctions under the Magnitsky Act against current or former South African government officials who promote antisemitic policies or rhetoric, who use public office to unjustly target the state of Israel or Jewish individuals, or who engage in gross corruption, including the misuse of foreign aid or public funds. The Bill has been referred to the Committee on Foreign Affairs and the Committee on the Judiciary for further deliberations.

Soon, South Africa might no longer have the luxury of preserving a strong diplomatic and trading relationship with the US while repeatedly alienating it on the international stage.