Johannesburg - The Russian-Ukraine conflict has confounded political analysts and sparked furious global debate. In an environment where theories abound, the difficult truth is that no simplistic conclusions can be drawn from what is a very complex issue.
For South Africa, much rests on the decision of China’s President Xi Jinping, which will undoubtedly be a watershed for the conflict and global economy, as developing nations come under increasing pressure from rising commodity prices and supply shortages.
This was one of the key insights that emerged from the most recent Think Big webinar hosted by leading financial services group, PSG.
Daniel Silke, a prominent South African political analyst, keynote speaker and the Director of the Political Futures Consultancy based in Cape Town, said China’s future actions will play a crucial role in the unfolding of the conflict
“While the world’s eye is fixed on western Europe, we need to bear in mind that a possible encroachment on Taiwan is bubbling under the surface. China will be watching the geopolitical landscape carefully, ascertaining what the medium- to long-term effect of global sanctions will be on the Russian economy. Ultimately, it is not in China’s best interests to subscribe to Russia’s isolationist political philosophy. I, therefore, believe that it will be prudent in its direct involvement with the conflict, but again, its future designs on Taiwan will be a key deciding factor.”
He added that South Africans should buckle down and brace for rising commodity prices.
Honing in on the effect that this war will have on South Africa, Silke pointed to President Ramaphosa’s “draadsitter” (fence-sitter) position of neutrality as a product of our country’s legacy of support from the Soviet Union and the linkages between Moscow and Pretoria.
“This interconnectedness puts the country in a difficult position. Within the broader global community, however, the West is currently less concerned with the position of developing nations like South Africa and more focused on the immediate effects of the conflict’s escalation and the ripple effect that it will have on Europe. ”
Silke said South Africans were faced with a double whammy.
“The post-Covid period has been characterised by supply shortages. Currently, this is compounded by the ban on Russian oil imports and sanctions on its supply chain to South Africa. In the long-term, the most significant effect that South Africa will feel is related to rising fuel and transportation costs.
“Fortunately, we are relatively more food secure than other countries. As such we are in a marginally better position than countries like Tunisia and Turkey, for example. This reality, however, certainly does not absolve us from the long-term effects of the conflict on our fragile economy and the added pressures that come with those effects.”
But he said there were tough decisions to be made for the SA government.
“South Africa is also in a unique position in that; given its turbulent socio-political history, it cannot be seen to be on the wrong side of history. While Russia may be able to withstand the consequences of sanctions for longer, in the medium-term the threat of internal dissent and conflict is a very real possibility. During the riots that occurred in July 2021 across a number of cities in South Africa, we witnessed first-hand how big of an impact civil unrest can make on the broader social environment and economic landscape.”
Silke said the projections for the year ahead would be greatly affected by the impact of the war.
“Given the effect of our fragile political environment, and the fragility of the disposable income of the majority of South Africans, what we have is a powder keg that can be set off by rising poverty levels, exacerbated by record-high unemployment. The state’s decisions over the next few months will play a crucial role in determining South Africa’s long-term economic future,” he said.
Adriaan Pask, Chief Investment Officer for PSG Wealth, said conflict will inevitably impact on the future of investing.
“If anything, he argues, the current geopolitical climate has shown us the importance of thinking and planning for the long-term while navigating the risks that exist within the present.
“We advise investors to prioritise diversification and to partner with specialists who are able to share valuable insights and have experience in navigating the risks that emerge during political crises,” said Pask.