S’Africa markets slump after Trump suspends US aid
South Africa’s rand, stocks and government bonds nosedived on Monday after tough-talking President Donald Trump said he would cut off aid to the country, citing allegations that the government was seizing land and treating certain classes of people “very badly”.
News Band reported that Mr. Trump in a statement said, “It is a bad situation… A massive human rights violation, at a minimum, is happening for all to see.
“The United States won’t stand for it, we will act. I will be cutting all future funding to South Africa until a full investigation of this situation has been completed.!”.
He further described the South African leadership’s actions as “terrible” and “horrible,” though he did not provide evidence to support his claims.
The outburst by President Trump comes after South African President Cyril Ramaphosa signed a law facilitating state land expropriation, including provisions for equitable compensation.
Under the controversial Expropriation Bill, state organs may expropriate land in the public interest along with strict guidelines for fair compensation.
The Bill repeals the apartheid-era Expropriation Act of 1975.
Thousands of families were forcibly evicted from their land to benefit people classified as white during the apartheid regime.
On Monday, the rand according to Reuters traded at 18.8450 against the U.S. dollar, 0.7% weaker than its closing level on Friday. Earlier in the day it was down almost 2%.
Also, on the Johannesburg Stock Exchange, the Top-40 index was 0.5% lower, while the benchmark 2030 government bond price slid and the cost of insuring South African debt against default rose to its highest since early August.
Meanwhile, U.S. funding to South Africa mainly involves supporting its HIV/AIDS programme, but Trump’s comments caused investor unease about the potential for a broad review of diplomatic and economic ties.
Related Posts
Casey Sprake, an investment analyst at Anchor Capital, said the autos and agriculture sectors were especially vulnerable as South Africa currently enjoys duty-free access to the U.S. market under a Clinton-era trade initiative.
Annabel Bishop, an Investec economist, said the rand was also under pressure due to Trump’s tariffs on Canada, Mexico and China, which sent global currencies to multi-year lows.
South African manufacturers, meanwhile, posted a deterioration in business conditions for a third month in a row.
But Ramaphosa said in a statement that South Africa is a constitutional democracy deeply rooted in the rule of law, justice, and equality, adding that the government has not confiscated any land.
“The recently adopted Expropriation Act is not a confiscation instrument, but a constitutionally mandated legal process that ensures public access to land in an equitable and just manner as guided by the constitution. South Africa, like the United States of America and other countries, has always had expropriation laws that balance the need for public usage of land and the protection of rights of property owners…”
Ramaphosa also said except for PEPFAR aid, which constitutes 17% of South Africa’s HIV/Aids programme, there was no other significant funding provided by the United States.
“We look forward to engaging with the Trump administration over our land reform policy and issues of bilateral interest. We are certain that out of those engagements, we will share a better and common understanding over these matters,” he said.
Also, South Africa’s foreign minister defended the new law, which he said is similar to eminent domain principles in the US and the UK.
“We trust that President Trump’s advisers will utilize the investigative period to gain a comprehensive understanding of South Africa’s policies as a constitutional democracy,” International Relations and Cooperation Minister Ronald Lamola said by phone.
“This will ensure a well-informed perspective that respects and acknowledges our nation’s commitment to democratic principles and governance.”
