South Africa’s stalled reform drive, the implications of Hakainde Hichilema’s re-election for SA-Zambia trade, and the country’s uneven exposure to a possible record El Niño feature in this latest edition of monthly highlights from research by the Centre for Risk Analysis (CRA) on political, economic, trade and climate risks affecting South African businesses.
CRA clients receive a range of weekly and monthly reports, including Client Notes. Published on an ad hoc basis, Client Notes provide real-time analysis of topical current events.
South Africa’s reform engine: stalled, straining or coasting?
According to Chris Hattingh, executive director of the CRA, South Africa’s reform programme is still struggling to gain momentum. He argues that progress is uneven. Energy supply and freight performance have improved, but deeper reforms in areas such as the power grid, municipal finances, water and private sector involvement remain weak. Hattingh writes that “the state talks tougher than it acts on reforms”, especially after Treasury released funds to municipalities that had not fully met its conditions.
The second main issue is the tougher external environment facing South Africa, including higher oil prices, a weaker rand, inflation pressure and renewed global conflict. Hattingh places the country in the “Rolling Backward” scenario, where reforms stall while economic pressure rises. He warns that without stronger reform action, “the bad terrain” will hit “an economy weakened by the lack of pro-growth reforms”.
SA-Zambia trade relations after Hichilema’s re-election
CRA research associate Ofentse Donald Davhie maintains that Zambia’s reform path is more stable after Hakainde Hichilema’s re-election, but South African firms should not assume the opportunity will last indefinitely. The first main issue is Zambia’s push for growth through mining, energy and infrastructure, especially its goal to lift copper output to three million tonnes. However, Davhie warns that this growth drive comes with stronger local-content rules, which could hurt South African exporters unless they move from simply exporting to “producing in-country”.
The second main issue is the risk to South Africa’s trade position. Zambia is an important market for South African machinery, chemicals, trucks and fertiliser, but new local procurement rules could reduce that advantage over time. Davhie says the “commercial window opened by this election result is meaningful but time-limited”, and South African companies should act before “Zambian local-content rules harden”.
South Africa’s buffered exposure to a record El Niño
Hattingh and Davhie maintain that South Africa is better prepared for a possible record El Niño than many headlines suggest. The first main issue is that agriculture has a strong national buffer. A record maize crop, high dam levels and low food inflation mean the country is not in the same position as it was during the 2015 drought. As the authors write, “the credible forecast is serious enough,” but claims of a “once-in-500-years event” overstate the risk.
The second main issue is that the real danger lies in weak points that are not protected by this buffer. These include the dry Western Cape, Johannesburg’s failing water network, and conditions in the wider SADC region, where food and water security are more fragile.
Hattingh and Davhie warn that businesses should treat the coming summer as “a stress test of infrastructure and contingency plans”, especially where water systems are already under pressure.
For more on the CRA’s products and services, which include Risk Alerts and Strategic Intelligence Briefings, contact Chris Hattingh: chris@cra-sa.com
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