President Cyril Ramaphosa emphasised the need for a "rules-based order" during his address at the country's first G20 finance ministers and central bank governors' meeting on Wednesday, warning that increasing global uncertainty, escalating tension and the erosion of multilateralism would present a direct threat to global economic growth and stability.
In his opening address at the Cape Town International Convention Centre, Ramaphosa said multilateral cooperation was the only hope of overcoming unprecedented challenges, including slow and uneven growth, rising debt burdens, persistent poverty and inequality, and the existential threat of climate crisis.
Ramaphosa's impassioned remarks can be seen in response to US President Donald Trump's recent actions, including the US's withdrawal from UN institutions, the removal of climate change mentions from government websites and more specifically for South Africa, the executive order he gave on 7 February of what he calls addressing the egregious actions of the Republic of South Africa.
Trump not only cut aid to South Africa and promoted the resettlement of Afrikaner refugees in the US, he also accused the South African government of undermining US foreign policy.
READ: Ramaphosa rallies G20 on climate funding, rising debt, and critical minerals
He said this posed national security threats to the US, their allies, their African partners and their interests.
For Trump, South Africa has taken aggressive positions towards the US and its allies, including accusing Israel, not Hamas, of genocide in the International Court of Justice and reinvigorating its relations with Iran to develop commercial, military and nuclear arrangements.
In retaliation to South Africa, Trump's officials indicated that they will not participate in the G20 meetings.
This is the backdrop that Ramaphosa called for stronger global collaboration.
He said:
At this time of global uncertainty and escalating tension, it is now more important than ever that the members of the G20 work together. The erosion of multilateralism presents a threat to global growth and stability.
READ: G20 finance ministers, central bankers to meet amid fractious geopolitics
"At this time of heightened geopolitical contestation, a rules-based order is particularly important as a mechanism for managing disputes and resolving conflict."
Given the size of the US economy, Trump's threats can move the global needle, affecting some economies more than others. For emerging markets like South Africa, increased uncertainty surrounding the US's trade policy may delay investment decisions, something S&P Global Chief Economist Paul F Gruenwald called a hostage situation for the global macroeconomic outlook.
Gruenwald added:
[The world] is a hostage to the policy implementation of the new US administration. It is unclear to what extent campaign promises will translate into policy, and when.
In a recent interview [with Bloomberg TV], Reserve Bank governor Lesetja Kganyago warned that the increased uncertainty brought the issue of inflation resurgence to the fore.
"There is uncertainty, and there is a question mark about whether inflation could be resurging and whether central banks are complacent about the re-emergence of inflation, and added to that are the geopolitical risks that are adding to the uncertainty, whether it is in the form of tariffs that are not only trade-related but also politically motivated," he said.
"From the textbooks, it tells us when tariffs rise, you have inflation rising. We are expecting inflation to be creeping up."
Chief economist at Momentum Investments Sanisha Packirisamy said investor confidence is likely to remain rattled in the context of ongoing market volatility in response to US President Donald Trump's policy announcements and tariff threats.
Packirisamy said:
The threat of increased tariffs could mean that the South African Reserve Bank will now be more likely to adopt a cautious approach to monetary policy normalisation than previously expected.
But this is not the first time the G20, whose Finance Track has been playing a vital role in global economics and development for 25 years, faces a crisis.
The G20 played an important part in responding to the Eurozone crisis, a result and consequence of the 2008 financial crisis, which was a global economic disaster. The 2008 financial crisis was famously caused by a housing market bubble, while the Eurozone crisis was caused by a sudden stop to cross-border capital inflows.
Ramaphosa said:
The G20 [also] played an important part in maintaining global financial support and stability during and in the aftermath of the Covid-19 pandemic. This meeting of G20 finance ministers and central bank governors, like those that have come before, carries a weighty responsibility.
Ramaphosa said South Africa has placed solidarity, equality and sustainability at the centre of its G20 presidency.
Listing the priorities, he said the first is to take action to strengthen disaster resilience and response. The second priority under the SA leadership is to ensure debt sustainability for developing economies.
Research shows the total external debt stock of Sub-Saharan Africa grew from $425.8 billion in 2012 to $815.7 billion in 2021. The total public debt of African countries in 2022 was $1.8 trillion, an increase of 183% since 2010, with 23 countries paying more for debt costs than critical development enablers like healthcare and education.
In 2023, the UNDP calculated that global credit rating agencies' subjective assessments cost Africa $75 billion in excessive interest and lost lending volumes, thus compounding the debt crisis. Borrowing from capital markets has also cost African governments 500% more than if they accessed financing at rates from the International Bank for Reconstruction and Development.
The South African president added:
Our G20 Presidency will be addressing the high cost of capital faced by developing economies as one of the main barriers to sustainable growth.
He mentioned the African Leaders' Debt Relief Initiative, a unified effort to push for a comprehensive debt solution that will be launched this week. The Cape Town Declaration will be unveiled on the sidelines of the G20 Finance Ministers in Cape Town, where South Africa's G20 Presidency has placed debt sustainability and debt relief at the heart of the global economic agenda.
It also aligns with the African Union agenda 2063, reinforcing Africa's long-term vision for sustainable development.
The third priority of the South African G20 leadership is mobilising finance for a just energy transition. The fourth priority is to harness critical minerals for inclusive growth and sustainable development.
