Trump’s presidency: How small business will be affected

MOST of the arguments over the impact of the incoming Donald Trump administration are made (rightfully so) under the narrative represented by the publication in which they appear. The prevailing sentiment is that Trump's victory will be to the detriment, not only of South Africa, but the whole of Africa and even Europe.

The sentiments arise mainly from the narrative that the Democratic Party (Kamala Harris) is representative of classical liberal democracy and that the Republican Party (Donald Trump) is set to destroy democracy in the US. The big media houses are also leading this narrative in the US.

First, the issue of immigrants (especially illegal immigrants) has been underplayed and still is simply addressed as intolerance. This also happened in European states such as the Netherlands, where conservatives were elected into a ruling party coalition against all expectations.

We tend to refer to the “voice of the people", the glue of democracy. The indications of severe dissatisfaction over immigration, especially with illegal immigrants, were visible and only ignored by some. Possibly a wake-up call to the world?

The economic aspect played a significant role especially the “protection of America" ​​against unnecessary competition from foreign markets and specifically the Chinese “threat". From a South African perspective, the entire Agoa agreement is being looked at, and producers from Africa and South Africa soon may no longer be able to exploit the current tariff waivers.

This will adversely affect smaller family farmers. Unlike our competitors, South Africa's agricultural industry is not subsidised by the government. Agoa, therefore, in effect served as a subsidy for our agriculture, which made it more competitive in the US.

If we have to switch to other markets such as the Middle East and China, we lose that anticompetitive component. The larger corporate farmers can address the shortfalls through volumes, but smaller businesses (family farmers) will struggle to increase volumes to such an extent.

There is a significant possibility that the more inward policy of the US will strengthen the dollar (it is already happening) which could then lead to better incomes and possibly better competition against other currencies that are not as liquid and vulnerable as the rand as a currency in the developing world. The question is how sustainable such a “positive" strengthening of the dollar will be.

The opposite pole are the smaller businesses that import cheaper goods mainly from the Far East (China, etc). The more expensive money can hurt those. Although not directly related to the US election, the desire to turn South Africa into a manufacturer is another “threat" to smaller businesses that import cheaper products. These businesses do not have the skills or financial capacity to switch to manufacturing, and will, at best, develop serious problems.

So the election results in the US will not have a significant direct impact on South Africa – and maybe only on the agricultural industry. But the effects on the global economic environment can be significant and certainly to the detriment of the South African economy.

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Trade wars

The possibility that a trade war between the US and China in particular will gain traction again is great. The insistence of the US that its allies in Europe and Nato gradually make greater contributions to defence and co-operation agreements can also have adverse economic implications.

The more limited role the US wants to play in international forums and events (with an inward-looking economic policy) can also have economic consequences. That there may again be Christian moral considerations in involvements with states, especially those Muslim-oriented ones like Iran, which are therefore driven from a more ideological point of view, is a distinct possibility.

This could lead to limited world war, especially in the Middle East. On the other hand, the Republican government's positions (right or wrong) will show greater clarity than the Democratic government's foreign policy. So the world will know better where the US positions itself, which can limit the feared escalation in trade confrontations.

Ultimately, the US election result should not have that many direct negative implications for the South African economy (unless Agoa were to be significantly changed or even cancelled). However, the US's intended inward-looking and protectionist policies may have a significant influence internationally, and so also eventually on the South African economy.

• Fanie Cronje is a political risk analyst and business development manager.

♦ VWB ♦

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