Economy, Domestic Economy

Iran-S. Africa Relations Since Rouhani

Iran-S. Africa Relations Since RouhaniIran-S. Africa Relations Since Rouhani

Despite the good and extensive political ties between Iran and South Africa, economic relations between the two countries have kept a low profile over the past years. Decimated over a decade due to sanctions against Iran, South African investment has remained under the radar of many news outlets.

However, since the coming to power of the Rouhani administration, renewed efforts have been put in implementing a sanction-resistant framework that could both attract South African investment and strengthen Iranian exports to the country.

Since the creation of modern South Africa twenty years ago, the two countries have been on very good political terms. Not only was Iran vehemently against the apartheid regime, it also immediately recognized the National African Congress and its electoral victory in 1994 post-apartheid era. Very shortly afterwards, Tehran cancelled all outstanding trade boycotts.

South Africa has since responded in kind, notably when Iran’s nuclear program led to its own economy being sanctioned by western countries. Maite Nkoana-Mashabane, the South African Minister of International Relations and Cooperation recently wrote that “South Africa has always stood fastidiously against unilateral  sanctions imposed on the Islamic Republic of Iran and has consistently encouraged negotiations to resolve the issue of Iran’s right to peaceful nuclear development,” according to The New Age.

Sanctions did have an important impact on South African exports to Iran and Iran’s capability to export oil to the country. While South African exports amounted to R1.5 billion ($137 million) in 2007, this figure declined almost ten-fold to R162.8 million ($14.8 million) in 2013. Sifisio Dabengwa, CEO of South Africa’s MTN Group, which has a 49 percent stake in the Iranian mobile operator MTN-Irancell, confirmed the influence of sanctions on mutual trade during the Iran-European forum held last October in London. He said that repatriating profits from Tehran has been difficult .

In contrast, Iranian exports to Pretoria remained stable, even growing from $37.7 million the Iranian year ending March 2008, to $39 million the year ending March 2014. In 2011, Iran was still South Africa’s main crude oil supplier, accounting for 27 percent of its domestic oil needs from Iran, or in May 2012 about 68,000  barrels a day, which was already well down of its peak purchases in 2011, Reuters reported. However, the  US has been pressuring the country to look for other sellers and Saudi Arabia, Nigeria and Angola have since completely substituted Iranian crude, according to US Energy Information Administration.

However, trade between South Africa and Iran may have weathered the storm. Since the Rouhani government came to power last year an initiative has been taken and bilateral trade and investment may soon take off.

The Rouhani government realizes that South Africa’s large financial sector, its advanced telecommunications industry and its expertise in mining could all help develop Iran. In turn, Iran’s own expertise in electricity and power generation has also been attractive to Pretoria.

Maryam Soltani, a member of the Iran-South Africa Joint Trade Council, said in September that relations witnessed a downturn during the Mahmoud Ahmadinejad presidency but is “improving” under Rouhani’s government .

The Joint Trade Council has been an important platform for networking and the extension of ties. According to Nkoana-Mashabane, this council “is one of the longest running structured bilateral mechanisms that South Africa has with any country and focuses on cooperation in trade and investment, health, education, and science and technology, amongst others.” The Joint Trade Council can in the future, function as an important step-up from which sanctions-deduced trade restrictions are neutralized to a large extent.

The last meeting, which was held in early September, was particularly productive and optimistic, resulting in a further meeting in Pretoria between Iranian Deputy Foreign Minister Hossein Amir Abdollahian and his South African counterpart Nomaindiya Mfeketo. According to a report by Reuters, Mfeketo afterwards announced that South Africa would resume oil imports from Iran, stating that “Definitely  we have an agreement, of course with the sanctions issue it slowed down, but definitely that is something we are doing.” However, it remained unclear how exactly the sanctions could affect the oil import.

Abdollahian  also stated that Iran is ready to cooperate with Pretoria on renewable energy resources.

South Africa has also looked at cooperating with Tehran on  developing and exploiting the country’s mining infrastructure, which is currently ranked as the 15th largest in the  world.

Tehran had scored another goal by keeping Sasol, a South African petrochemical company, on board. Sasol, which was repeatedly pressured by the US into divesting its operations in Iran, is participating in a $900 million joint venture with Iranian state-owned Pars Petrochemical Company. Eric Roper, managing director of Aryasasol Polymer Company , told Fars news agency in late 2012 , that the company “is satisfied with investment in Iran, and does not have any intention of leaving.”

South Africa has also been optimistic about the efforts to expand free trade zones in Iran. William Max Whitehead, South Africa’s ambassador  to Tehran, recently expressed his country’s interest in the Aras Free Trade Zone, which is located in northwestern Iran, according to Iran Daily.

South Africa remains, after Russia, Tehran’s largest trade partner in the BRICS group. In the first seven months of the current Iranian year, ending March 2015, Iran exports were worth $11.5 million to the country, more than double the number of the third BRICS partner, Brazil.  

Iran is also an observing member of the African Union and has shown an active presence in previous AU summit meetings. According to reports, South African President Jacob Zuma will visit Iran before the end of 2014, although an exact date remains to be announced.