Donald Trump's threat to cut off funding to South Africa because of the Expropriation Act, which Cyril Ramaphosa signed into law last week, could have significant implications for the nation's economic growth.
The latest threat follows an announcement by the new Republican-led administration that the US would halt all future funding to South Africa, which amounted to nearly $440 million in 2023, primarily supporting health programmes and economic development initiatives.
It includes millions in financial aid as part of the President’s Emergency Fund for AIDS Relief, also known as Pepfar funding, the loss of which could lead to reduced public services and impact social service programmes.
Following Trump's most recent announcement, which erroneously stated that the government wants to “annexe” the land of minorities, the South African rand experienced a nearly 2% decline against the US dollar.
Posting on his Truth Social website, Trump said: “South Africa is confiscating land and treating certain classes of people very badly. The United States won’t stand for it, we will act.
“Also, I will be cutting off all future funding to South Africa until a full investigation of this situation has been completed!”
The South Africa Chamber of Commerce in the United States expressed concerns that cutting US funding could destabilise businesses in South Africa, potentially leading to job losses.
A reduction in investor confidence may deter foreign investment, which is crucial for economic growth.
Trump's threat may also jeopardise trade benefits under the African Growth and Opportunity Act (Agoa), which allows duty-free exports to the US.
Losing these benefits could further strain South African industries reliant on exports, thereby affecting job creation and economic expansion.
However, the ANC-led Government of National Unity maintains that the Expropriation Act aims to address historical land ownership imbalances but has been criticised for its potential implications for property rights.
If international relations deteriorate due to Trump's stance, it may complicate South Africa's efforts to implement land reforms while maintaining investor confidence.
The combination of reduced financial aid, currency depreciation, diminished business confidence, potential trade penalties, and political tensions could collectively hinder South Africa's economic growth trajectory.
The government's response and ability to engage diplomatically with the US will be crucial in mitigating these impacts.
