The US presidential election is finally upon us and South Africans should be hoping desperately for a Hillary Clinton victory. Following the FBI’s irresponsible last-minute intervention, the polls in the past week were again running alarmingly close, with Republican candidate Donald Trump gaining the advantage in some “battleground states”.
But polling is not very good at predicting outcomes. The leading statistical models at the weekend were showing a high chance that Clinton will win — with Nate Silver’s 538 model putting the probability at 66% and the New York Times’ putting it at 84%. Crucially, more than 40-million Americans have already cast their votes in the states that allow early voting and indications are that there has been a huge turnout by Hispanic voters in states such as Florida and Nevada who came to vote against Trump’s racism.
Even so, it will be a close-run contest after a bitter battle that will leave deep scars on the US social fabric and political landscape, given the way in which Trump’s campaign challenged the legitimacy of the election process and gave legitimacy to some virulent racist and fascist rhetoric.
This should matter to SA with its deep commitment to democratic and human rights values. But the outcome is also material to SA’s economy and its prospects. The US is one of SA’s largest trading partners, with $21bn a year in two-way goods and services trade. SA has a balanced profile of trade with the US — it does not just export raw materials to the US as it does to many other large trade partners, but exports a range of manufactured and agricultural products and has a slight net trade surplus with the US.
The US is also one of the largest sources of foreign direct investment in SA, with 600 American companies invested in this country representing about 10% of GDP.
That means anything that dents the US economy and US investment potentially dents SA and other emerging markets — and a Trump victory would certainly be seen by markets and investors as a big negative and a source of huge uncertainty.
More than a third of SA’s exports to the US are in terms of the African Growth and Opportunity Act (Agoa), which was recently extended for 10 years, but SA will need to work with the US over the next three to five years on what kind of trade regime will succeed Agoa.
A Clinton administration is unlikely to derail that, and her administration could even push for expanded trade deals — but a Trump administration is more likely to do the opposite, given his vehement antitrade and antiglobalisation bias and his commitment to pulling back on the US trade deals.
While the US Senate and Congress, which are also being elected this week, have much power in economic policy, the president has broad authority on trade. The closing of the US borders to trade and new trade agreements that could follow a Trump victory would have global consequences.
However, it is the indirect effect of the outcome of the Clinton-Trump battle that could be felt most immediately by SA and other emerging markets. Citi’s global political analyst Tina Fordham cited a forecast that a Trump victory would reduce the value of the S&P 500 and lead to a 25% decline in the Mexican peso, as well as pricing in future volatility. If the peso is hit, you can be sure the rand will be too.
Fordham’s sobering point is that investors face political risk whoever wins the US election, with the fortunes of advanced markets becoming as unpredictable as those of emerging markets. Trump will not be the last of the “nonmainstream” political candidates in a world of low trust, identity politics and demographic divides, she argues.
SA should brace itself for an even more risky and volatile environment.