The world braces for Trump 2.0

6 January 2025 - How will Trump 2.0 reshape global trade and South Africa’s AGOA access? Can the ANC survive municipal woes and internal divisions? Will Transnet reforms get economic growth back on track? Are African debt burdens driving new risks for businesses? Is the US solidifying its lead over China economically?

The world braces for Trump 2.0

Donald Trump will be inaugurated as the 47^th president of the United States (US) on 20 January. His election has engendered much nervousness abroad regarding his potential disruptive impact on global trade and geopolitics, with swathes of commentary focusing on “heightened uncertainty”. However, some cornerstones can be regarded as certain: they include a more transactional US diplomatic and trade stance, a predisposition towards domestic concerns and interests, and more strident action against countries perceived to be acting directly or indirectly against US interests.

Furthermore, where bilateral relations between the US and some nations are positive, these will be strengthened. Where the US can extract concessions, it will do so. Should Mr Trump feel he and his country are not afforded what he considers the adequate level of respect and benefits, he will not shy from conflict – or the threat of conflict – to rectify matters. The prospect of increased US tariffs on some imports is also highly likely for 2025, as are other forms of trade pressure on countries that are used to circumvent tariffs on Chinese-manufactured goods and components.

South Africa is at particular risk in the second Trump era because it has already attracted the unfavourable bipartisan attention of Congress. With the Republicans in firm control of the government and both houses of Congress, leading members of the party are already exerting pressure on the incoming administration to expel South Africa from beneficial trade arrangements such as the African Growth and Opportunity Act (AGOA) if Pretoria does not adjust its stance on China, Iran, Israel and Russia. Jobs in South Africa’s car manufacturing and citrus industries would be particularly at risk if AGOA access were revoked.

Although South Africa’s diplomatic representatives have sought to downplay tensions and assure the US of their desire for a stable and mutually beneficial relationship, the incoming Trump administration is likely to be less indulgent of countries like South Africa that work actively to expand their relationships with nations the US considers hostile actors while at the same time working actively to undermine important US allies such as Israel.

We flag the risk that the Trump administration could go so far as to redefine its strategic relationship with South Africa to view the country as an adversary rather than as an uncertain ally. This would force South Africa to choose sides in the geopolitical power struggle between states that are broadly open and democratic versus those that are closed and autocratic, contrary to its stated intention to maintain a non-aligned posture. However, a risk for the US is that it alienates so many nations it historically regards as friendly that it drives them into the waiting embrace of China and its BRICS satellites, weakening the US position rather than strengthening it.

The ANC keeps a wary eye on the municipalities

Its decline in performance from the 2019 to 2024 general elections notwithstanding, the African National Congress (ANC) remains the largest single political party in South Africa. Whether most party members decide to support the ANC’s continued participation in the Government of National Unity (GNU) – or prefer the radical populist path that the MK Party (MKP) or the Economic Freedom Fighters (EFF) offer – will determine South Africa’s future growth prospects.

Conflict within the ANC will be brought into focus by the 2026 local government elections which precede the party’s 2027 leadership election. The service delivery issues that blight those metros and municipalities which the ANC governs, often as part of a coalition, threaten to become a millstone around the party’s neck and a risk to incumbent party officials. However, our assessment is that in most cases, local government service delivery will not improve significantly in the run-up to the elections because party officials will be distracted by internal jostling while also lacking the ability to effect meaningful improvements. Families and businesses living in those towns will see their problems being lost in the noise and dust of the ANC’s 2027 party leadership race.

Current South African deputy president Paul Mashatile, party chairperson Gwede Mantashe, Gauteng premier Panyaza Lesufi, and party secretary general Fikile Mbalula are those most likely to contest to succeed Cyril Ramaphosa as party leader. To counter Jacob Zuma’s MKP, especially in the KwaZulu-Natal (KZN) province, police minister Senzo Mchunu’s name has also come to the fore. So far, Mr Mchunu has performed well in his latest portfolio. He did an adequate job as water and sanitation minister and previously served as KZN premier from August 2013 to May 2016.

The Transnet outlook

One of the major problem areas afflicting the South African economy, logistics, will occupy most of the GNU’s focus and resources in 2025. State-owned company Transnet, which enjoys an effective monopoly on the country’s ports and railways, severely inhibits the potential of sectors such as mining, agriculture, manufacturing, and construction to expand. Given the country’s ample supply of minerals crucial to green energy technology and electric vehicles, the shortcomings of South Africa’s logistics sector continue to limit the country’s opportunities for job creation and revenue.

Instead of futureproofing and taking advantage of South Africa’s natural resources, Transnet’s ongoing struggles act as a brake on economic activity. For the six months through September (in 2024) Transnet recorded a R2.2 billion loss. For the same period in 2023 a R1.6 billion loss was racked up.

However, this year we expect some progress in Transnet’s operational performance. In December, the government published a blueprint for opening access for private operators to the country’s rail networks. In the best case these private operations will kick off in April. Despite its debt burden and underinvestment in infrastructure, for the six months through September Transnet managed to increase rail volumes 3.2% year-on-year. The massive backlogs experienced at the ports of Cape Town and Durban, especially at the end of 2023 have not been repeated – the consequence of the acquisition of more cranes and truck brackets. Presuming the current course of maintenance can be maintained, security strengthened, and the board is not subjected to political inference as previous executives were, 2025/26 will see a slow but steady upward trajectory for the company.

Regional risks in 2025

According to the United Nations (UN), African governments’ debt servicing costs reached the $90 billion mark in 2024. The organisation has also established that over 60% of governments on the continent spend more on debt servicing than they do on healthcare. The difficult balance between providing services on the one hand, and getting a handle on large debt burdens, will come into sharper focus in 2025 for many African governments.

In 2024 an attempt by the Kenyan government to increase taxes triggered widespread protests. The protests were driven largely by the country’s youth. While sub-Saharan Africa will be one of the global regions with the largest, and youngest, population over the coming century, younger citizens will have less patience with liberation movements-turned-governing parties.

Should governments be unable to unlock higher GDP growth rates and a general improvement in the quality of living, more unrest, protests, and coups will take place in Africa in the coming years. The combination of these will pose clear risks to South African and international business interests and operations on the continent.

Economically, has the US got China beat?

China’s domestic economic growth headaches are likely to persist in 2025. Long-range forecasts by the Centre for Economic and Business Research have gradually shifted the date when the Chinese economy is expected to overtake that of the US into the future. A 2015 forecast projected that this would occur around 2025; a 2019 forecast pushed the date out to the early 2030s; and the 2024 forecast expects that it will take until mid-century to happen, if it happens at all. This is a result both of stronger than expected growth in the US and slower than expected growth in China. If China’s weakening persists, this adds impetus to the case for South Africa to ensure it preserves preferential trade access to US markets, improves it diplomatic relations with that country, and takes advantage of other nations’ needs for South African exports.