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Illusion of security: South Africa cannot afford to ignore the new geopolitical landscape

Natale Labia
By Natale Labia
5 Mar 2025
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The past few weeks and months have made it abundantly clear that we now face a world marked by escalating geopolitical tensions and instability. The peace dividend that was created by the post-Cold War international order is over.

What are the costs of living in a more dangerous world? For decades, we had the luxury of living in an increasingly stable and less violent planet. International conflicts and war deaths famously declined from 1946 until 2016, fostering a sense of security and complacency. However, this trend has reversed. 

The past few weeks and months have made it abundantly clear that we now face a world marked by escalating geopolitical tensions and instability. The peace dividend that was created by the post-Cold War international order is over.

The illusion of security


First, and what is most notably apparent after the past two months, is that many countries became complacent about their security. Europe, for example, simply outsourced the most substantial questions of its defence to the US, believing wholeheartedly in Nato and the “West” as an indivisible entity. What was good for Europe, it was believed, was good for the US. Questions of “Atlanticism” were of a common sum, not zero-sum nature. This now looks hopelessly unrealistic.

Others, particularly such smaller non-aligned countries such as South Africa, looked largely towards the multilateral system itself for reassurance. The global system of nation states was not simply a realist game of snooker balls on a table; there were rules, systems, organisations. The UN had the final word on what was just and not just, and in the worst-case scenario there were the highest bodies of international law itself, the International Court of Justice and International Criminal Court.

Now even allies of the US such as Israel openly defy such bodies, with much of the West including the US in full support. Israel and Palestine, perhaps unsurprisingly, has been the fault line on which this system has fractured, quite possibly irreparably. A liberalist view of international relations based on security through cooperation and multilateralism in hindsight seems dangerously naïve.

The end of globalisation’s protective shield


But there was another reason countries could at least pretend to hope that we were entering into a new era of ever less conflict. Globalisation and greater trade flows created a level of interdependency that had never been experienced and scarcely imagined. Surely, in an age of ever-deeper trade ties, it was both economically and politically counterproductive to wage wars? Famously, two countries that sold McDonald’s had supposedly never fought a war. Even if that was always a dubious claim, it was definitively proved wrong when Putin sent his tanks rolling into Ukraine.

This illusion of security meant that government budgets therefore that would, and perhaps should, have been spent on defence were simply allocated elsewhere. This was the peace dividend in real time. Spending money on arms when, for all intents and purposes, the concept of violent conflict was outdated, was both politically unpopular and economically nonsensical.

A clear example of this was when UK Prime Minister Sir Keir Starmer announced last week that the UK would cut its aid budget to redirect it to defence. This is an extraordinary turnaround from a centre-left Labour politician and ex-human-rights barrister who has spent much of his career arguing for the central importance of international development aid. Yet, such is the extent to which we have fallen, that not even a country that is supposedly a leader of international development can continue to afford it.

For investors geopolitics is back


The second effect of this new more dangerous world is the return of geopolitics to investment decisions. Geopolitics — in a real sense — has simply not been relevant for managing money. Notably there have been a few exceptions; Brexit trashed sterling to an extent from which it has never recovered. But with the global economy underpinned by the relentless profit-seeking of multinationals seemingly removed from the headlines of geopolitics, it was largely inconsequential.

Despite the initial spike in energy prices, global equity markets marched on largely unscathed through the Russian invasion of Ukraine. The war in Gaza was almost entirely inconsequential for markets. Even the Israeli stock market, which one would think would be at least slightly affected by the humanitarian catastrophe and ethnic cleansing playing out on its borders, is hovering around all-time highs. The Israeli benchmark TA35 index is up around 55% since 7 October 2023, according to Bloomberg data.

That period of ignorant bliss is over. Geopolitics, for those who make investment decisions, is back. The return of the spectre of tariffs and the unwinding of the global trade system can only hurt profits. An early example is American and European auto makers. As if this tortured sector needed any further pain the tariffs between the US and its neighbours Canada and Mexico are likely to be disastrous. When Trump announced the tariffs, the share price of those with particularly interlinked supply chains such as General Motors immediately dropped 7%. 

“The auto sector is going to shut down within a week,” Flavio Volpe, the president of Canada’s Automotive Parts Manufacturers’ Association, said last week when interviewed by Bloomberg. “At 25%, absolutely nobody in our business is profitable by a long shot.”

But if the return of geopolitics can be a risk in equity markets, it can arguably be an opportunity. The immediate need for Europe to rearm itself, which became horribly apparent after the trainwreck on Friday of a meeting between Ukrainian President Volodymyr Zelensky, US President Donald Trump and Vice-President JD Vance, has had an immediate impact on European defence stocks. BAE Systems, tank maker Rheinmetall and Italian defence contractor Leonardo have been some of the best performing stocks of 2025, with the sector up 8% on Monday, 3 March alone.

South Africa will not be spared


South Africa, in a sense, has the luxury of at least pretending it will not be affected. Perhaps it is too geographically remote, and generally geopolitically irrelevant. Yet, the image of the remains of fourteen SANDF soldiers repatriated from the DRC last week makes it clear how flawed and naïve this belief is. In this new Hobbesian world of a war of all against all, Africa will not be spared. Instability across the Sahel, the Great Lakes and increasingly in Mozambique is only increasing.

Indeed, as aid and investment budgets are cut, Africa could end up being very much on the frontline as great powers like China and Russia seek to assert themselves ever more in a post-American hegemonic vacuum. Without assistance from the West, humanitarian catastrophes, such as the one playing out in Sudan, are only likely to get worse and more prolonged, resulting in ever more destabilising flows of refugees, many of whom will seek to come to South Africa.

It is significant that in all the hullabaloo over the delayed Budget last week, one area that attracted precisely zero attention was defence. As the rest of the world rushes to rearm itself for its own security, South Africa continues to serially underinvest in its ability to assert itself through force, both domestically and abroad, spending a miserly 0.74% of GDP in 2022. This may be a sensible allocation of resources, or it could prove to be a disastrous oversight of the costs of a dangerous world.

The old global order was not perfect. But, peering ahead into a gloomy, frightening and ever more violent world, I think we will miss it now that it is gone. DM

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