London - How times have changed!
As Finance Minister Enoch Godongwana reminded visiting US Secretary of Treasury Janet Yellen in their first bilateral meeting last Thursday in Pretoria, “the last time that a US Secretary of the Treasury visited South Africa was in 2014, eight years ago!
“This is therefore, indeed, a momentous occasion,” he quipped.
Was he taking a tongue-in-cheek dig at Washington’s neglect of its relationship with Africa in general, and South Africa per se for more than a decade?
Or was he simply stating the obvious? Behind the diplomatic niceties and the photo shoot opportunities, there is little doubt that the main push factor for the visit was from the Biden administration’s seemingly new foreign policy objective of re-engaging with Africa and reinforcing its “valued” rapprochement with South Africa, for reasons of economic and security self-interest, but also a sincere effort to co-operate in bilateral trade, investment, renewable energy transition, anti-money-laundering (AML) and sovereign debt forgiveness under the Common Framework for Debt Treatment.
Despite the largely positive vibes generated by the septuagenarian Yellen’s visit, clear ideological fault lines are also emerging, especially in areas such as foreign policy, security and a just transition to clean energy.
Washington’s chagrin at Pretoria’s refusal to denounce Russian military action in Ukraine, and its close ties with Beijing, is no secret.
While Secretary Yellen was coy on commenting on this during her four-day stay in South Africa, it seems that both parties were engaged in a desperate balancing act or strutting their stuff to influence or push back on their desired policy options.
There was no way that Russian Foreign Minister Sergey Lavrov’s visit to South Africa a day before Yellen’s arrival was lost in translation.
Its timing was endorsed by President Cyril Ramaphosa and his Minister for International Affairs, Naledi Pandor – a defiant act flexing their “neutral” muscle. To add insult to injury South Africa is also planning to host controversial joint naval drills with Russia and China off the coast of Durban next month.
The timing and rationale do not make sense. South Africa at peace does not face any existential invasion threat, especially from the vast Indian and Atlantic Oceans that grace its entire coastline.
For an economy faced with manifold economic pressures, it seems that the Ramaphosa administration has got its priorities all wrong, allocating scarce resources to a misplaced joint naval drill, unless of course Beijing and/or Moscow are footing the bill.
The danger of this foreign policy brinkmanship is that it could backfire.
The US remains the world’s most powerful economy, while the South African economy is defined by stubborn subdued GDP growth, low inward FDI, high inflation, a cost-of-living crisis, rising fuel and food prices, high unemployment, rising public debt and the vexed issues of entrenched corruption, money laundering and even cases of terrorism financing.
The US Treasury has in fact sanctioned senior officials of several countries over the years extraterritorially – the latest one is Paraguay’s vice-president – for “their involvement in rampant corruption that undermines democratic institutions”.
In December, Godongwana fast tracked amendments to two key catchall laws in Parliament relating to AML and Combating the Financing of Terrorism to close 20 serious deficiencies in South Africa’s AML measures identified by the Financial Action Task Force (FATF) and the US Treasury’s Office of Foreign Assets Control (Ofac), precisely to avoid being grey listed as a country not doing enough to combat AML and terrorism financing.
The lines between American re-engagement and disengagement with South Africa are potentially blurred, but fraught with serious implications for the future.
The ideological factions in the ANC government have to decide whether the country’s relations with the Big Powers are a zero-sum game pitting Washington against Moscow and Beijing.
More importantly they need to be honest about the consequences of any alternative policy and how it may affect the next generations of cyber and social media savvy South Africans.
So, who was that last US Secretary of Treasury to visit South Africa in October 2014? It was Jacob J Lew serving in then President Barack Obama’s administration.
His host then was controversial Finance Minister Nhlanhla Nene, serving the disgraced administration of President Jacob Zuma defined by a decade of state capture, only to be sacked in 2015 reportedly for refusing to fund Zuma’s “ludicrous rent-seeking projects”.
He was appointed as finance minister under President Cyril Ramaphosa in 2018 only to resign a few months later following his admission that he had clandestinely met the Gupta brothers several times between 2010 and 2014 (they are currently awaiting extradition from Dubai to South Africa for alleged state capture charges), and that he had refused to sign off a nuclear deal with Russia.
The Treasury statements on Secretaries Lew and Yellen’s visits could not be starker. Treasury-speak on economic and investment co-operation aside, in 2014 the banality of the statement was surpassed only by the immorality of the absence of any reference to tackling state capture, corruption, money laundering and strengthening transparency and good governance.
In 2023, the mood music has changed markedly.
AML, countering financing of terrorism, climate finance, sovereign debt resolution in Africa, just transition to clean energy, and combating the financing of wildlife trafficking, dared speak their names in the National Treasury statement.
The US, UK and the EU are members of the International Partners Group (IPG) of developed economies committed to South Africa’s Just Energy Transition Partnership (JETP) aimed at weaning the country away from its reliance on coal and promoting new opportunities in renewable energy projects.
The IPG in 2021 pledged US$8.5 billion to JETP, including US$1bn from US government agencies.
Energy sector reforms, however, are above Godongwana’s pay grade. What I would have given to be a fly-on-the-wall when Yellen met President Ramaphosa and Energy Minister Gwede Mantashe for talks, which according to US ambassador to South Africa,
Reuben Brigety, were “very frank”. Mantashe is a supporter of fossil fuel, particularly coal because his political power base is in a coal mining constituency.
He is sceptical about the cost and timeline for transition to renewable energy, and the integrity of the IPG in honouring their pledges.
To many the real cost of transition is more than US$100bn, and the timeline is much longer – all legitimate if not short-sighted concerns.
Energy transition is a long-term phenomenon, but energy access and reliability have immediate impacts.
South Africans know the socio-economic devastation caused by ongoing load shedding.
The priority is to get the balance right through pragmatically transitioning existing coal plants into renewable ones, thus minimising mass job losses in the coal belt, which could affect the ANC in the 2024 general election.
The good news is that according to the International Energy Agency there are now more people employed in the global renewable energy sector than in the fossil fuel industry.
Yellen’s hope that the JETP would “alleviate the deep fiscal strain the energy sector is putting on South Africa’s economy” and stimulate gender empowerment and job creation must be tempered with even greater resolve by the IPG in the context of South Africa’s “Special Needs and Circumstances”, in funding commitments and embedded oversights as to fund drawdowns, contracts and procurement, transition delivery, private sector participation through IPPs, and impact measurement to ensure transition is just and does not leave anyone behind.
President Biden’s additional $45 million (roughly R774m) to JETP pledged in December, though welcomed, is hardly any succour to fossil fuel diehards and transition tantrums.
Parker is an economist and writer based in London
Cape Times