STUART THEOBALD: We need to take fallout of US allegations seriously

Diplomacy, any West Wing watcher will tell you, is never what it seems on the surface. The pageantry of the US ambassador telling a local media outlet (News24) that SA provided weapons to Russia would have been well rehearsed.

Teams at the US state department will have done the game theoretic analysis to plot out SA’s response: an “inquiry” to kick into the long grass, much indignation, say of apologies but non-apologies. The objective, it seems to me, was to set the cat among the domestic pigeons to try to get SA’s institutions to take seriously the country’s odd dalliance with Russia’s President Vladimir Putin. There is no doubt that something strange happened when the Lady R docked at Simon’s Town.

Why on earth would the ship have turned off its transponders, violating international law in the process, if it didn’t want to disguise a quick detour to SA’s main naval harbour? According to one report, it had told Cape Town’s Maritime Rescue Coordination Centre that it was having mechanical problems. Perhaps Russian intelligence is not what it used to be, because the idea of sneaking into that port in the dead of night unnoticed is laughable.

The good burghers of Simon’s Town, set out on their stoeps overlooking the port, with nothing else to do during load-shedding but gaze out through binoculars, recorded the visit in some detail. Amateur photographs were across social media in no time. Awash with floodlights in the dark night, containers were offloaded from that ship under armed guard. By some accounts, something was put back on.

The US believes that something was weapons. Our politicians appear to know nothing. Back in December, defence minister Thandi Modise was asked about it in a press conference but said she was still waiting for “paperwork” from her officials. That paperwork must take quite some doing, because five months later we are in the dark. This ritual of ignorance gets tired.

Someone knows, obviously. Ships do not dock at Simon’s Town without somebody knowing exactly why. The game feels like a rerun of the Guptas’ Waterkloof wedding plane debacle. Eventually some sort-of-accountable-but-not-too-important chump will be found and fired. Except that this is vastly more offensive than glitterati swanning through military facilities to piss it up at Sun City.

This is about weapons of war and death. About a bloody conflict in which we have chosen the losing side. The serious consequence of this mess is that relationships with the US have been damaged.

Social media warriors enjoy pointing to the hypocrisy of the US, to the camaraderie of the Russians during apartheid, to the apparent slight of expecting SA to do things simply because powerful people tell it too. I get all these sentiments, but we must be serious about what matters. We are trying to build a sophisticated economy that provides decent work to people.

That means we need economic activity beyond the extraction of resources from the ground to send to allies in the east. I can tell you that we will not in my lifetime export vehicles to China or India, or kettles or geysers or ball bearings. But we do export them to Europe and the US.

Let’s be serious about what kind of economy we will be left with if those markets are closed to us — one in which we sell coal, platinum, iron ore, manganese and assorted other minerals and metals to China and neighbours.

One in which we do next-to-no beneficiation of those materials because the destination markets can beneficiate far more cheaply than we do. It will be one in which the vast majority of skilled professionals who now work across supply chains for manufactured goods are forced to find jobs elsewhere.

But, I suppose, we will still have our pride, or at least whatever the resulting wave of poverty leaves us with. Of course, you are reading this column on the pages of the money section. So let me be clear about the effect of this on financial markets.

We have seen the rand demolished to its weakest level against the dollar. Foreign investors, who are overwhelmingly from western shores, will be exiting, and bond markets are showing that. There will be a short-term recovery as the messiness of the situation creates room for counter-narratives, but last week has materially weakened the SA investment case. Rand weakness obviously improves the earnings of our miners given their dollar revenues and rand costs. While their shares rallied on Friday, I think the foreign selling pressure means the earnings upside wasn’t being properly priced in.

There is opportunity there. But on a longer view, the situation particularly weakens the outlook for industrials and consumer-facing companies. Ultimately, the tertiary sectors of our economy must have access to Western markets, and that is now at risk.

So, for now the wise money will flow to resource stocks, especially when indiscriminate foreign selling creates buying opportunities.

Stuart Theobald is chair of Intellidex. This article first appeared in Business Day.