Various South African sectors keeping close eye on future of AGOA
Different sectors of South Africa’s economy will be keeping a careful eye on discussions between the government and US representatives on the fate of the African Growth and Opportunity Act (Agoa) agreement.
South Africa’s neutral stance on the war in Ukraine and the docking of the Russian vessel the Lady R in Cape Town amid accusations from US ambassador to South Africa Reuben Brigety that weapons were loaded on to the ship have strained diplomatic relations between the countries.
Also, the US could decide that South African exporters have benefited enough from the unilateral trade agreement. Trade, Industry and Competition Minister Ebrahim Patel told Parliament last week that the US could find South Africa had benefited sufficiently from Agoa to be removed as a beneficiary even before the agreement expires in 2025.
Patel said it was in the best interest of the country to benefit from the agreement and that South Africa would continue to engage with US representatives before the expiry of the agreement.
US lawmakers recently wrote to Secretary of State Antony Blinken asking for an Agoa summit, scheduled to take place in South Africa in November, to be moved to another country because of the country’s stance on Russia.
They reminded Blinken that the statutory requirements for eligibility to be part of Agoa include that countries not engage in activities that undermine US national security or foreign policy interests. According to Trade and Industrial Policy Strategies (Tips), in the fourth quarter of last year the US surpassed China to become South Africa’s top export market, accounting for 9.9% of total export value, worth R47.4 billion.
China was the second-largest export market for South Africa, accounting for 9.1% of total exports, worth R43.7bn in the same period.
“The top five export products to the US comprised precious stones (46%), vehicles (13.9%), iron and steel (5.5%), industrial machinery (5.5%) and aluminium (4.5%). Tips’ earlier research showed that 38% of South Africa’s exports to the US went through Agoa, which provides duty-free or low-duty access to the USA.”
Tips executive director Saul Levin said South Africa could make representations to remain part of the agreement but there were benefits for both countries.
“South Africa’s non-aligned stance does not mean it is automatically excluded as there are benefits to the US economy by continuing to trade with reduced tariffs as an incentive.
“Agoa is a measure targeted at poorer countries and the US will look at whether SA is still justified to remain and benefit from the agreement.”
Levin said it was a complex arrangement and removing South Africa could have an impact on poorer countries.
“The American Congress will have to put a lot of thought into it and South Africa will want to keep all trading partners on its side.”
Jaco Minnaar, president of Agri SA, said agricultural exports would be affected by the loss of the trade agreement, including wine and stone fruit.
“Our politicians need to act and speak to the Americans so we still do business with them. The turmoil in Ukraine means that the Russian market is closed for export and it would not be good if the same happens with the US.
“Another concern is how some countries in Europe might react if Agoa is suspended.”
Minnaar said the agriculture sector was a bigger multiplier in terms of the GDP and job creation, especially as high-value crops were exported.
“High-value crops need a lot of labour and the loss of trade would have an impact on jobs in those areas and the economy. It will have a major impact.”
Izaak Breitenbach of the SA Poultry Association said while the termination of the agreement would benefit the local poultry industry, it was “a big call to make”.
“Our politicians should be looking to secure the arrangement but under Agoa, we import 71 000 tons of chicken a year from the US and this is free of anti-dumping tariffs.
“If the agreement is terminated then we will see a reduction in imports.”
International relations expert Dr Noluthando Phungula of the International and Public Affairs Department at the University of KwaZulu-Natal said if Agoa was discontinued then exports would continue but at higher tariffs for local businesses.
“The Agoa situation has been weaponised because it is a disagreement between a superpower and us.
“South Africa must do everything in its power not to lose out on trade benefits, but it must also maintain its non-aligned stance.”
Phungula said the backlash would be felt in the vehicle sector and other industries.