Question NW2034 to the Minister of Finance
13 July 2023 - NW2034
George, Dr DT to ask the Minister of Finance
Whether, following his remarks at a media briefing on 13 May 2023 which was hosted by Dr Sydney Mufamadi (details furnished) where he mentioned that the National Treasury had conducted calculations regarding the potential fallout from the incident involving the Lady R Russian vessel in Simon's Town, as brought to light by USA Ambassador to South Africa, Ambassador R E Brigety, who stated that the ship was loaded with weapons, which is an incident which could risk the benefits of the Republic under the African Growth and Opportunity Act (AGOA) and potentially invite secondary sanctions, he will elaborate on the specific calculations made by the National Treasury regarding the potential economic impact if the Republic were to lose the benefits under AGOA due to the specified incident involving the docking and alleged loading of weapons onto the specified vessel in Simon's Town; if not, why not; if so, what are the relevant details regarding the extent of the secondary sanctions' impact on the financial flows of the Republic as calculated by the National Treasury?
Reply:
The calculations referred to relate to the potential financial and macroeconomic impact of the market response following the comments by US Ambassador R E Brigety on 11 May 2023. The National Treasury conducted a preliminary analysis of the possible macro-fiscal impact of South Africa’s geopolitical tensions related to SA-US relations, focusing primarily on the impact on the current fiscal framework. The analysis considered that there was a significant depreciation in the rand against the US dollar in May 2023, in part due to the pronouncements of the US Ambassador to South Africa regarding the Lady R vessel. The analysis considered the possible negative consequences of this on key macroeconomic variables including higher inflation rates, borrowing costs and, subsequently, bond yields – all of which weaken the fiscal position. A protracted materialization of the events assessed in this analysis will require the Minister and the National Treasury to consider possible measures in mitigation. An analysis of a potential loss of benefits under AGOA and/or the risk of secondary sanctions is being considered; however, given this work’s nature and required detail, this is expected to take some time.