South Africa cozies up to Iran for investment, trade

Apr 25, 2016, 6:30 PM EDT
Presidents Jacob Zuma of South Africa (L) and Hassan Rouhani of Iran (R).
(Source: GovernmentZA/flickr)

South African President Jacob Zuma wrapped up a state visit to Iran on Monday, with eight signed agreements and a pledge to vastly increase trade. Meeting with his Iranian counterpart Hassan Rouhani, the two leaders promised to restore their relations to the level before sanctions were imposed on Iran, and go far beyond that. From a paltry $25 million in bilateral trade last year, they want to reach $1 billion in non-oil trade by 2020, and up to $8 billion in total trade. Pre-sanctions Iran used to supply 40% of South Africa’s crude oil, and Tehran is keen to restore that relationship.

Meanwhile, Pretoria is eager to get newly-freed Iranian assets invested in South Africa. Thus, some cozying up to Tehran was in store. "South Africans were inspired by the 1979 revolution, which showed that emancipation is possible, whatever the odds," Zuma said. He added, "Iran occupies a special place in our struggle against apartheid." This was not total flattery; Nelson Mandela did indeed make two visits to Iran as president after 1994, when Tehran lifted sanctions and re-established relations with the former apartheid state.

Zuma led a 180-member delegation, including six ministers of the government, in the first official visit to Tehran by an African nation since Western sanctions were lifted in January.  Besides signing agreements in fields like industry, energy, mining, agriculture, and water resources, the two countries also reached deals to cooperate in intelligence gathering and anti-money laundering initiatives. They now have an economic roadmap of their future ties and how to strengthen them in the near future. Likewise, Zuma endorsed formalizing a South Africa-Iran Business Council.

He also pointed out areas in South Africa ripe for investment, including the agriculture and agro-processing value chain, small and medium enterprises, and joint cooperation in energy projects. Pretoria is considering building a refinery for Iranian crude in a bid to boost its domestic gasoline supply.

Iran could also play a meaningful role in accelerating Operation Phakisa, South Africa’s strategy to unlock the economic growth potential of its extensive ocean coastline. In 2014 Zuma said that the contribution of the oceans to the country’s GDP could rise from $3.7 billion that year to $12.2 billion by 2033. The plan aims to be big, while providing inclusive growth. So in addition to upgrading ports and creating ocean-related jobs, it also includes building local health clinics as a key component. So far Pretoria has invested about $1.17 billion in Operation Phakisa, creating over 4,500 jobs and hundreds of clinics, while significantly increasing the National Youth Development Agency's budget. The potential rewards are worthwhile, but this is a costly endeavor, which could use foreign investment.

And for Iran, this is another step towards rebuilding its global clout.