Page 10 - SA Chamber UK - September Newsletter- eBook

Forums for engagement

In response to the nature of the present global order, the diplomatic calendar has
intensified as major powers undertake high-level bilateral visits and revive and host
numerous summits. Military alliances, such as the North Atlantic Treaty Organisation
(NATO) have been strengthened, and regional groupings and trade blocs like the

European Union (EU) have grown as their influence increases. Minilateral or small
groupings based on common interests have emerged, such as the Quadrilateral Security
Dialogue (QUAD) or expanded like BRICS plus. Organisations like the G20 have become

important forums for engagement on foreign affairs.

While geopolitical tensions were already prevalent, the war in Ukraine which can be

regarded as a ‘Black Swan’ event, turbo-charged the prevailing geopolitical tensions
and concomitant geoeconomic risks. The Black Swan theory is a term introduced by
the author Nassim Taleb, to describe an event that has severe global implications and
unintended consequences.

As a result of the present uncertain state of global affairs, economic tools are used
as weapons to advance geopolitical objectives by exploiting economic dependencies.
National economic interest has become the main imperative as countries impose

measures and countermeasures to either force geopolitical objectives or to protect
their economies and industries. Relevant international strategies are developed, and
legislation is imposed to anticipate and manage economic threats.

Trade strategies such as nearshoring, friendshoring, derisking, decoupling and supply
chain agreements, with the purpose of responding to geoeconomic threats caused by
geopolitical tensions are introduced in order to build economic resilience.

“According to the International Monetary Fund blog in 2023, greater international
trade restrictions could reduce global economic output by as much as 7 percent

over the long term, or about $7.4 trillion in today’s dollars - three times sub-
Saharan Africa’s annual output”.

Severe risks

In this present global order, governments, corporates and investors have come to
the realisation that in today’s world, a lack of geopolitical understanding in decision-
making carries severe risks. For governments, the risk is global instability, war, supply-

chain disruptions, restrictions on rare earth minerals, energy and food insecurity,
macro-economic instability with inflation and interest rates rising, and protests by
citizens as a result of the rise in cost of living. For corporates and investors, it is a loss

of billions in revenue, due to sanctions, supply issues, blockades, reputational issues
and the need to place security above cost and efficiency. Investors have to consider

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SA CHAMBER UK NEWSLETTER SEPTEMBER 2023