South Africa: 'Not time to be inward-looking'
Spare a thought for Trade and Industry Minister Rob Davies, who will have a tough job convincing the US not to impose possible export duties on vehicle and component exports.
He has already lost the battle to have SA excluded from US President Donald Trump’s tit-for-tat trade war with China, with duties imposed on steel and aluminium.
With vehicles and components, however, the stakes are higher.
Of all the sectors Davies’s department has been punting for a revival in local manufacturing, it has been by far the most successful, with automotive exports reaching R164.9bn in 2017, nearly 14% of total exports.
In addition to lucrative government incentives, automotive manufacturers in SA benefit from duty-and quota-free access to the US under the Africa Growth and Opportunity Act (Agoa), which was signed into law by former US president George W Bush in 2000 to provide improved market access to the US on a range of products for qualifying African countries.
The aim has been to encourage development and alleviate poverty on the continent, where few countries have reached middle-income status.
There has been lobbying in the US to exclude "too rich" SA from Agoa over the years, as many other much poorer countries around the world do not enjoy the same market access. The critics would also like to see some reciprocity for US exporters. Why give duty-and quota-free access to South African producers, if US manufacturers do not get the same privileges in SA?
Without a formal trade agreement between SA and the US, Davies does not have much of a leg to stand on. As a unilateral trade policy, the US can revoke privileges at any time — and not only for automotive exports, but a range of other products shipped duty-free, including clothing, textiles and footwear, chemicals, agricultural products and electronic products.
Admittedly, even if we had a formal agreement in place — years of talks came to nought in 2006 – Trump would not hesitate to ride roughshod over it, given how he has been treating his most important trade allies.
Trump’s disregard for the multilateral trade system should provide pause for thought for South African policy makers, who have been reluctant to enter into new trade agreements after the liberalisation of the economy in the 1990s and early 2000s – and the job losses seen in sectors such as manufacturing since then.
With an election looming and unemployment at 27%, one can understand the reluctance of politicians to touch anything that may put jobs at risk.
Yet this is the time to resist being inward-looking. It has been demonstrated, notably in the latest Visa Africa Integration Index, that the extent and nature of a country’s connections, to the global and the regional economy, is one of the single biggest influencers of socioeconomic change. By increasing their levels of connectedness, countries can boost economic growth, inclusion and income levels, according to the index.
A clear example is Rwanda. Between 2012 and 2017, Rwanda displayed the largest relative gain in connectedness among the 19 countries in the Visa index, including SA, manifesting in a 7% gain in per-person income per year. SA’s is largely unchanged.
One challenge is that we are stuck in a bad neighbourhood, speaking from an economic competitiveness perspective, with no neighbour in a position to really keep us on our toes. All support should therefore be made available to help Zimbabwe recover, and for Mozambique to benefit as much as possible from its mineral riches. It may even be time to blow some new energy into Brics.
And if President Cyril Ramaphosa has to wine and dine every leader in the Middle East, Southeast Asia and Latin America over the next 12 months, let us happily pick up the tab.
Read related news articles
South Africa walks a tightrope on US relations
South Africa has been conducting a high-wire act in its relations with the United States (US). It is maintaining friendships with Washington’s enemies like Russia, Iran and China while trying to avoid disrupting its economic relations with America. Tensions came closer than ever to breaking point this month as the US House of Representatives’ Committee on Foreign Affairs passed the US-South Africa Bilateral Relations...
28 March 2024
Remarks by Deputy Treasury Secretary Adeyemo on the US-South Africa economic relationship
As Prepared for Delivery in Johannesburg, South Africa Thank you for the warm welcome. I want to express my gratitude to Consul General Spera and the American Chamber of Commerce for hosting me. I am honored to be joined today by South African Entrepreneurs that are building companies to unlock the economic potential of their country. I owe my own presence here today to the inspiration I drew from South Africa. In the middle of the...
13 March 2024
South African president Ramaphosa meets with US congressional delegation
South African President Cyril Ramaphosa today, 21 February 2024, received for a visit from a bipartisan congressional delegation from the United States of America, in Tuynhuys, Cape Town. The delegation is visiting South Africa at the invitation of the Aspen Institute. The President and the US congressional delegation discussed the importance of the relationship between South Africa and the US, which manifests in strong economic,...
21 February 2024
US congress receives Bill to review South Africa relations
A bill has been submitted to the United States congress calling for a full review of the country’s bilateral relationship with South Africa following the International Court of Justice ruling that found it plausible that Israel has committed acts of genocide against Gaza. The bipartisan bill which was introduced by US Republican congressman John James and Democratic Party congressman Jared Moskowitz this week could threaten South...
09 February 2024
Fitch research unit expects better AGOA deal for South Africa
Fitch’s research arm, BMI, believes SA has done enough to get improved trade terms under the African Growth & Opportunity Act (Agoa), which it expects to be extended and modified before its expiry in September 2025. But it warns that the deal might be stillborn if Donald Trump is elected US president. The research think-tank said in a note it assigns a 65% probability that Agoa will not only be renewed but modified to the benefit of...
09 January 2024
South Africa: BLSA CEO calls for more companies to leverage AGOA opportunities
Many more South African companies could benefit from the African Growth and Opportunity Act (AGOA), which gives eligible countries access to US markets free of tariff barriers, business organisation BusinessLeadership South Africa (BLSA) CEO Busi Mavuso writes in her weekly newsletter. Apart from mainstream formal sector businesses, there are opportunities to enable more entrepreneurs, including women-led...
20 November 2023
US ambassador: AGOA is an opportunity to deepen ties between the US and South Africa
President Joe Biden last December at the US-Africa Leaders Summit affirmed that the US will elevate its relationship with Africa. The future is Africa. One example is its youthful population: the median age on the continent is 19. By 2050, one in four people in the world will be in Africa. The US wants them to be healthy and wealthy. What happens in Africa will affect the rest of the globe — and we want to work together to ensure it is...
09 November 2023
US Senator Chris Coons proposes AGOA extension by 16 years, immediate review of SA’s AGOA eligibility
Powerful US Democratic Party Senator Chris Coons is circulating a discussion draft of a Bill to renew the African Growth and Opportunity Act (Agoa) for 16 years that would also require an immediate “out-of-cycle” review of South Africa’s eligibility for Agoa. That could lead to South Africa being removed next year from the programme, which has provided considerable benefits to SA exporters to the US of cars, fruits and wine, in...
07 November 2023
AGOA benefits extend beyond trade [incl. VIDEO of Friday's opening session]
Economies in Sub-Saharan countries stand to benefit far more from the African Growth and Opportunity Act (AGOA) than notable trade statistics, says President Cyril Ramaphosa. “AGOA enhances the diversification of African economies, enabling them to export value-added products. By enabling African countries to have preferential access to the US market, this opportunity incentivises African countries to develop and export value-added goods...
06 November 2023
South Africa pins its hopes on an early 2024 US Congress renewal of AGOA
South Africa’s government is hoping that the process to renew the African Growth and Opportunity Act (Agoa) by the US Congress will be concluded by early 2024, ensuring that more than 20 African countries continue to have duty-free access to the world’s largest economy. This is the first time that the South African government has given a timeline for when it hopes the US Congress might extend Agoa, which has been renewed twice...
05 November 2023
SA trade minister Patel expresses confidence at media briefing about South Africa’s continued inclusion in AGOA
Ahead of South Africa hosting the US-AfricaTrade and Economic Cooperation Forum – also called the AGOA Forum – from November 2 to 4, Trade, Industry and Competition Minister Ebrahim Patel on October 26 briefed the media on the state of readiness for the forum, expressing confidence that the South African government’s relations with the US were strong. Various South African stakeholders have been motivating for...
26 October 2023