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What Trump as US president means for us in South Africa

| Economic factors

Market reactions to the surprise victory by Donald Trump in the US presidential race has been volatile while the prospect of a Trump administration for the next four years raises numerous questions.What implications does a Trump presidency hold for South Africa?

According to Professor André Heymans from the School of Economic and Business Sciences at the North-West University, the consequences may be dire.

“When the news broke, the rand lost approximately 3.7% of its worth, but since then it has stabilised a bit. Although Trump has mentioned speech that the USA want to do business with other countries, his focus will be on his country’s fledgling middle class by bringing jobs back to the US and keeping them there,” said Heymans.

“That means that the US will want to be more self-sustaining, resulting in less manufactured goods being imported to the US from other countries – including South Africa.  The main concern is that Trump will want to accomplish this by raising import costs as to make it cheaper for Americans to buy locally produced goods in comparisons to imported ones. The USA is one of South Africa’s single biggest export destinations and to implement such a hike in import costs will severely hurt South Africa’s economy,” he said.

There is, however, a flip-side to the coin should government decide to exploit it, said Professor Melville Saayman, director of the research unit TREES (Tourism Research in Economic Environs and Society). He said that the former reality television star’s abrasive attitude may hold a benefit for South Africa’s tourism sector.

“When one looks at what Trump has proposed during his campaign, then it seems that traveling to the United States will become a lot more difficult now that he is president. He is a proponent of stricter measures of control and in the past South Africa has been able to exploit such situations. I think with some creative marketing we will be able to do so again because we are still one of the best value for money destinations.

“I think that until he does some positive things over an extended period of time the country’s reputation and image will suffer. He will need to foster a sense of trust and confidence and that will be hard to do seeing that a lot of the mainstream media will focus on the more negative aspects of his speeches and his actions,” Saayman said.

NWU business and governance professor, Raymond Parsons said that the economic impact on an emerging economy like South Africa of a Trump Presidency will ultimately generate cross currents the strength of which which cannot yet be predicted with accuracy.

“We must also take into account the new composition of the US Congress in assessing which parts of Trump’s agenda will indeed be implemented.”

In the short term the uncertainty arising from a Trump victory is good for the gold price, Parsons said, adding that the rand is expected to endure a period of renewed high volatility which will feature in the MPC’s next decision on interest rates when it meets again later this month.

“The course of US economic data and interest rates over the next few months will be significant for both global economic trends and for SA’s growth prospects,” Parsons said.

In the longer term what becomes important is whether Donald Trump’s strongly protectionist and inward looking attitudes will be damaging to world trade growth and hence to a small open economy like South Africa, the analyst said.

It is however likely that the specific trade preferences which SA enjoys in the U.S. market under AGOA (African Growth and Opportunity Act) will remain intact until their sunset date in 2025, as they are enshrined in legislation and not under threat, Parsons said.

“Given the heightened uncertainties in the global economic outlook strengthens the need for SA to reduce domestic policy uncertainty by urgently implementing the necessary structural reforms and improving its growth prospects as soon as possible,” the professor said.

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