Rand battered by SA's stance on Russia
The drama surrounding South Africa’s alleged supply of weapons to Russia has now spread from the diplomatic arena to the likely impact on the economy.
Despite South Africa’s professed neutrality regarding the war in Ukraine, one of its top army generals is currently visiting Moscow to discuss military cooperation with his Russian counterpart – an explicit disregard for the condemnation of Russia’s invasion of Ukraine by the United Nations.
Following the accusation by the US ambassador to South Africa, Reuben Brigety, that South Africa provided ammunition to a Russian ship that docked at the Simon's Town naval base in Cape Town in December last year, the rand exchange rate hit an all-time low of R19.45 against the US dollar on 12 May.
South Africans that are committed to the ideals of peace and freedom, as expounded in the country’s constitution and the UN declaration on Human Rights, will be most alarmed by the ANC’s stance on Russia’s war in Ukraine. Towards the end of February 2023, the United Nations General Assembly voted overwhelmingly in favour of a resolution calling for an end to the war and demanding that Russia leave Ukrainian territory. A similar resolution was adopted a year ago, shortly after the invasion began.
The extent of global opposition to Russia’s invasion of Ukraine is also illustrated by the fact that only one country in the Middle East block of 16 countries voted against the resolution (Syria), whilst only one abstained (Iran). Furthermore, of the 32 countries that abstained from voting, only two countries, Namibia and South Africa, have Global Freedom Index scores of above 70. The rest, including the only six countries to vote against the resolution, all find themselves in or very close to “failed state” status, due to oppressive and authoritarian regimes.
In March, Russian President Vladimir Putin announced that his country would station tactical nuclear arms in Belarus, whilst the International Criminal Court (ICC) issued a warrant of arrest in the same month for Russian President Vladimir Putin for alleged war crimes related to the unlawful deportation of children.
In the words of Tim Cohen, business editor at Daily Maverick, the Russian invasion of Ukraine is a despicable, shameful war, for which its perpetrators should be - and probably will be - tried for crimes against humanity at some point.
Regarding the rationale for Russia’s invasion of Ukraine, several respected commentators on international affairs agree with the views of Mikhail Shishkin, a multiple award-winning Russian author who has just written a book called “Mr Russia: War or Peace”. The underlying motivation for this brutal act by an authoritative and undemocratic regime was simply the fact that Ukraine was able to escape from the terrible cycle of flagrant human rights violations and restrictions on human freedom that characterised the erstwhile Soviet Union and other communist states in Eastern Europe.
After the demise of the Soviet Union, a free and democratic Ukraine had served as an example for the Russian population, which, according to Shishkin, is why it is so important for Putin to destroy the country.
Regarding South Africa’s refusal to condemn Russia’s invasion, there cannot be any justification for the bloodshed that has cost an estimated 350,000 lives, many of whom are Ukrainian children and civilians. In two separate treaties, Russia has confirmed the integrity of Ukraine’s border.
Unfortunately for South Africa’s image as a country that managed to free itself from the shackles of an undemocratic political dispensation, the ANC continues to regard Russia as a “friend”. It is incomprehensible that the policy document released after the ANC’s 55th National Conference stated that the war in Ukraine is actually one between the US and its NATO allies and Russia, citing the so-called Wolfowitz theory.
The latter is based on a draft document prepared in February 1992 by then US Under-Secretary for Defence, Paul Wolfowitz. The document outlined suggestions for US security policy that contained elements of unilateralism, including pre-emptive military action to supress potential threats from undemocratic nations.
The document was edited and substantially amended two months later by US Secretary of Defence Dick Cheney and Chairman of the Joint Chiefs of Staff Colin Powell, emphasising security arrangements built on cooperative relationships that bind democratic and like-minded nations together in common defence against aggression. It specified that the US has a significant stake in promoting democratic consolidation and peaceful relations between Russia, Ukraine and the other republics of the former Soviet Union.
The rand was always going to recover quite soon from the hit caused by adverse international reaction to South Africa’s apparent ignorance of the nature and extent of Russia’s war-mongering. This is due to the self-correcting balance of payments mechanisms inherent in an emerging market that enjoys a critical mass of fundamental macroeconomic stability.
In South Africa’s case, this phenomenon is strengthened by the fact that the rand is one of the top-20 traded currencies in the world and one of the leaders of the pack amongst emerging markets. South Africa has also avoided the Argentine fiscal trap of excessive borrowing in foreign-denominated bonds.
What is more concerning than a temporary exchange rate depreciation is the possibility of sanctions by the US and the European Union. Although unlikely at this stage, this could exert a debilitating effect on an economy that is already fragile as a result of the long-standing mismanagement of the country’s state-owned enterprises and excessive regulation of private sector economic activity by a government that has a militant trade union federation and the SA Communist Party as its alliance partners.
Unless government starts to involve the private sector and research by independent experts in decisions that materially affect the economy, the quest for higher growth and employment creation will remain elusive.