Global leadership and the Nation-State

Jacques de Villiers
September 24, 2018

The leadership question in South Africa and upcoming 2019 general election

The ANC recently allowed an amendment to the country’s constitution making it easier to seize land without compensation in order to redress skewed ownership patterns. This has raised concerns about a potential erosion of property rights. Both equity investors and bond investors are likely to be unnerved by the African National Congress’s expropriation of land without compensation. This policy uncertainty will persist until land reform laws are finalised. Since this is not expected to occur until after the 2019 election, the South African leader may be left with little or no choice to balance populism with pragmatism in the run-up.

The last general election occurred on 7 May 2014 and the term of the National Assembly ends on 6th May 2019. The National Assembly remains competent to function from the time it is dissolved, or its term expires, until the day before the first day of polling. If the National Assembly is not dissolved before 6th May 2019, the election must be held by 4 August 2019. A proclamation calling and setting dates for an election may be issued before or after the expiry of the term of the National Assembly

International trends and leadership styles

In what now seems like the ordinary, president Trump recently announced a further round of tariffs in the form of a 10% tax on $200bn worth of Chinese imports into the US, rising to 25% at the end of the year. The President’s rationale for a number of trade-related tariffs on steel, aluminium and automobiles have been national security related. This seldom-used provision of the trade law has raised a few eyebrows, with most describing it as a flimsy justification for what is, essentially, a means of protecting domestic industries. However, the Commerce Department’s investigation concluded that imports of particular metals posed a national security risk and the administration subsequently applied tariffs and quotas to these products.

President Trump’s actions have linked tariffs to national security, making it almost essential to have these tariffs imposed on a heavily subsidised Chinese steel industry, propped up by Chinese government subsidies, policies and assistance that created a highly fragmented domestic steel sector, made up of many inefficient and heavily polluting companies. Trump is attempting to eliminate the huge excess steel capacity throughout the world with these measures.

The US’s dependence on international trade is still relatively low in comparison to its European counterparts and China, but especially the Eurozone. The Eurozone derives approximately 44% of its Gross Domestic Product (GDP) from exports, whilst China relies on exports to generate approximately 19% of its GDP. Japan’s exports are approximately 15% of GDP and the US sits at around 11%.  We can thus conclude that most nations, and especially European nations, are more export-oriented than these are and as such run a greater risk of losing business in a trade skirmish involving the US.

The UK, Brexit and the rest of the world

With Brexit bringing certain long-standing issues to the fore, such as the recent agreement to end the so-called ‘scallop wars’ between the UK and France, how will the UK be affected by Brexit?  Is it unreasonable to expect a country that is densely populated and tied historically to its old colonies, to subscribe to the rules of the EU on immigration? After all, it is an island state for the most part. We will soon learn what the Brexit deal will bring, if anything is agreed.

Disclaimer: The views thoughts and opinions expressed within this article are those of the author, and not those of any company within the Capital International Group (CIG) and as such are neither given nor endorsed by CIG. Information in this article does not constitute investment advice or an offer or an invitation by or on behalf of any company within the Capital International Group of companies to buy or sell any product or security.

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