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Finance ministers and central bank governors from the G twenty countries met in South Africa this week, but despite the US Treasury Secretary Scott Bessett again skipping the summit, US tariffs are still driving the agenda.
You know, we've taken in hundreds of billions of dollars in tariffs, hundreds of billions, and we haven't even started yet. And it's going to be a great thing for our country. I think it's going to be a fair thing for the world. And we really haven't had too many complaints.
While South Africa wanted to focus on debt relief, climate and reform of global institutions, attention is instead firmly focused on the fallout of a global trade war.
We, of course, meeting at a moment of ongoing uncertainty in the global economy, uneven growth trajectories, elevated debt levels, persistent inflationary pressures, and the complex implications of tightening financial conditions. The multilateral system is being tested, and our collective ability to respond will shape the pace of our recovery.
On today's episode of The Next Africa podcast, we'll look at why there's only one topic dominating the agenda, and whether, as the US continues to ignore the G twenty, President Zero Ramaposa has any chance to make an impact with this year's presidency. I'm Jennifer Zabisajap and this is the Next Africa Podcast, bringing you one story each week from the continent driving the future of global growth with the
context only Bloomberg can provide. I'm in Zimbali on the Indian Ocean coast of South Africa for what was hoped to be one of the flagship events for South Africa's presidency of the G twenty. President Ramaposa had hoped he could be the voice of the global South and push war agreement on issues such as debt relief and also climate finance. But instead, all of the talk this year has been about global trade and the impact of President
Trump's tariff policy. In a moment, we're going to be speaking to Bloomberg's Africa economist Von Mango, but first let's hear from some of the key figures on the fringes of the G twenty. I spoke with Lascia Kenyajo, the Central Bank Governor of South Africa. How much do you think tariffs and tariff threats really are are sort of clouding any of these priorities that South Africa actually set out for in this two twenty presidency.
Well, the term ifs remember get imposts on the economy that is planting that it would like to have test it is a cost on the consumers of that country in terms of pricing and the loot. But for all of us are exporting to the country that imposes terriffs, there is an impact on output and in the case of South Africa, the biggest impacts that come through the
automative industry and the agricultural sector. The issue about also there is these important issues with having to grapple with what would this mean for the outlook of the USA economy and the poster that the FED might take in terms of monetary policy, and what did you mean to global financing conditions. Then the problem is that there are so many moving paths which is not clear where we
would end up. Uncertainty abound and every way we talk about where unsettin about this, we are unsetting about that, and many central bandst resorts to just presenting a forecast and also have to do a scenario because we do not know how these things will open up.
Is the absence of Scott person and your counterpart in the US, does that then set back the progress?
But counterpart, my counterpart was here in February. My counterpart was in Washington, and he did indicate right at the beginning of the year that he will do the fact Amalary meeting, and he will do the April meeting, but that he will not do his meeting. He will be the FAT will be represented by a vice Chairlenge. And at the US flag, both the treasure inside and the fat side, there will be people. They're representing the US.
What matters is is there some way behind the flat is able to articulate the position of profit country.
That is important. Okay, so the absence of Scott Paston, then it is not necessarily a snub. You don't see it as a snub for US.
This is not an absence of the US. See.
I want to ask too about monetary policy, because we have seen inflation here in South Africa at least at or near or below the target for the central Bank for about eight consecutive ones I believe it's been and yet you still say the outlook is clouded. I think the term that you use, yes, the outlook is cloud Are you confident though, that inflation is moderating and moderating lower as the forecast did suggest over the past few months.
We are confident the deity to moderated and we actually our basine is that we think that it really remain throughout our focus over the next twenty four months, that tally remain within targeting. But we do questions that the
outlook is clouded. There is uncertainty out there in the global space in the main and I'm nott the international confidence I had attended about by the central bands over the past three months keeps on tammaring on the issue of uncertainties, monetary policy in uncertain times, financial stability, implications of the uncertain environment. Uncertainty is the word that is feminine.
To stick with me. When we come back, we'll hear from von Mango about what's at stake in this global trade We'll be right back. Welcome back today on the podcast, we're discussing the G twenty finance leader's summit in South Africa that was this week, as the world continues to focus on growing trade tensions. Bloomberg's Africa economist von Mango is joining me now, Yvon. We spoke with you earlier
in the year when the original tariffs were introduced. Of course, there has been quite a number of changes that have happened since then. Talk to us about the impact of some of those changes over the past few months on Sub Saharan Africa.
So the last time we spoke, the tariffs, the reciprocal tariffs have just been imposed by the Trump administration. Since then, there was that ninety day pause that they announced in about mid April and that expired last week. Essentially, what was meant to happen during this ninety day pause is the US, since Trade partners was supposed to approach the US and negotiate lower tariffs by offering some sort of concessions.
We saw a president from Apausa of South Africa be the delegation to the United States and part of the reason for that visit was to try and reach a favorable agreement when it comes to trade. As you're well aware, several African countries are part of what was known as the Africa Growth Opportunity Act. Basically that offered duty free access for several African countries into the United States. So you can imagine coming from that duty free access to
a high levee has significant implications. The country hardest hit we touched upon this last time we spoke is Lusutu, which was slapped for fifty percent tariff even within the ninety day pause period, which gave the country an opportunity to negotiate. We've already seen factories closed down. These factories were producing garments that they exported to the United States and already seen jobs lost as a result. In terms of South Africa, the most industrialized country on the continent.
What we heard about ten days ago from the United States is that the thirty percent reciprocal tariff would be reinstated on the first of August. It did suggest that there was scope in the three weeks until that date for the country to still have talks with the United States, but we haven't heard anything as yet, and I think several countries are preparing themselves to have the original high levees imposed.
Would you say South Africa is the hardest hit in Sub Saharan Africa, I mean we talked about a few of the other smaller economies that are being maybe unjustly targeted, is what i'd call it. But would you say South Africa is maybe going to take the hardest brunt short answer.
To that is no. I think a small, open economy like this to be harder hit. And the main reason is because their export to the United States accounts for ten percent of GDP. That's quite a big hit. We've modeled the impact on South Africa's economy, so yes, the US is an important trade partner. Ten percent of the country's exports end up in the United States, a court of which she used to enjoy duty free access. That's your like of your citrus products from the agriculture industry,
as well as the automotive industry. However, when we look at the actual impact on GDP, it's less than a one percent hit. To be exactly, it's zero point three percent of GDP that's at risk as a result of these tariffs. So the impact, particularly compare to the Asian economies, is relatively small for Africa in general, but of course for the smaller economies such as Lisutu, they're going to see a much more significant repercussions as a result of this trade policy.
And ivon at the G twenty summit, as we've talked about South Africa was really hoping this would be a year where they can focus on a lot of the Global South priorities. It has really become a year that has been focused on these tariffs and towarding what many people see as a bigger and broader trade war. Is there anything that maybe central bank governors, finance ministers can do.
Are there any policies in place or discussions that maybe you're hearing to support or to offset some of the policies of the tariffs and from the Trump administration.
So yes, you're right. In terms of the original objectives that South Africa had as the leading the presidency of the G twenty, this year a lot of those ideas, such as addressing climate change, putting debts, the issue of the developing world's high indebtedness as a core issue to be addressed, particularly by our developer partners, those issues now have been sidelined, which is unfortunate. And as you're right, many people are just reacting to the tariffs and how
they can respond to that. In terms of how policymakers can react, I guess on the Monty policy side to banks, if they have the room to do so, can put in place accommodative policy PUS as you can imagine the hits that the impact of tips will be a slow down in growth generally, and that's globally, So it's a slower demand for our commodities and our exports, not just from the United States but from the rest of the world,
which is also being hurt by these levees. So in countries where inflation is benign and in South Africa, were fortunate enough to say that that is the case at this point in time. That means that cent to banks can look at easy moneted policy to create a more accommodative environment that will support growth and consumption in their
particular economies. On the fiscal side, what can finance ministers do? Unfortunately, the room for expansionary policy is very limited because we're just it's been five years since the pandemic, and then two years after the pandemic we experienced the impact of commodity prices, but again the grain sides spike and that led to inflation and high inflation globally, but that also impacted several African countries on the fiscal side, So what
your face with the countries that are actually trying to reduce their budget deficits and to restore their debt positions to more sustainable levels. So our debt was meant to be such an important issue at these G twenty meetings. So the point I'm trying to make is there's very limited scope for finance ministers to put in place expansionary policies that would stimulate growth.
And we heard from lesa Ya Kanyaho actually saying that it's it's difficult to say, is what he said, if risks are actually materializing based on the data, would you agree with that?
Well, yes, I think it's term the wash. He spoke something about high to nightmare to forecast anything, and it's absolutely right. I mean, as a central bank governor when they're providing their rate decisions, which this African Reserve Bank will do later this month, they're forward looking, they're looking at the inflation and in this environment, it's highly uncertain, as you know, policy announced on such a high frequency basis and there's no guarantee that those policies that are
being announced will be sustained. So yes, it is quite challenging in which environment in which to make policy. But that said, what we are seeing which is quite interesting is that for now, at least outside of the United States and in some emerging markets, we are seeing some softening of inflation, and that's we think as a consequence of the currencies doing well in emerging markets under a
week dollar. So of course if your currency strengthy against a week dollar, what it means is that it reduces your important inflation. So we are seeing currencies soften on the back of that. It's also helping soften energy prices, which we've seen in South Africa. So inflation is actually cooler than many anticipated in many of our emerging markets,
allowing for accommodated policy. So this is some of the trends we're already be seeing which could help particularly intents of trying to lick to growth if on Mango.
Thank you as always for joining us and for your insights, and you can read all of our coverage on the G twenty on Bloomberg platforms now, including the Next African Newsletter. We'll put a link to that in the show notes. This program was produced by Adrian Bradley and tiwa Adebayo. Don't forget to follow and review the show wherever you usually get your podcasts. I'm Jennifer's Abasaja, thanks as always for listening.