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South Africa asks US for early AGOA extension

South Africa asks US for early AGOA extension
Minister Ebrahim Patel and Minister Enoch Godongwana met with US Under Secretary for Economic Growth, Energy and the Environment Jose W Fernandez
Published date:
Tuesday, 25 July 2023

South Africa has asked the US to consider an early extension to the African Growth and Opportunity Act (Agoa), saying this would provide certainty for investors and encourage them to commit additional investment on the continent.

Trade, industry & competition minister Ebrahim Patel said the expeditious renewal trade agreement, which gives SA and other sub-Saharan African countries preferential access to US markets, would be beneficial not only for SA, but also Africa’s industrialisation.

“We identified improvements that can be made in the terms of Agoa, but also made the point that an expeditious renewal of Agoa in its current form is better than an improved version that may require a lengthy process to finalise,” Patel said.

“If we extend Agoa largely in its current form, we can incrementally improve the terms over the next few years. Many African countries are keen on an early extension because it gives investors certainty to commit additional investment on the continent,” he said.

“There is a trade-off between a significantly improved Agoa and an expeditiously extended Agoa. For SA, the greatest value would be in an early extension of Agoa, with an opportunity to incrementally improve the terms thereafter.”

Patel spoke exclusively to Business Day after a high-powered mission to the US in early July to convince Washington that SA should remain a part of the Agoa trade pact, which expires in 2025, and to iron out preparations for the Agoa Forum to be hosted in SA this year.

The delegation — which included Patel, finance minister Enoch Godongwana and minister in the presidency Khumbudzo Ntshavheni — also met the US trade representative Katherine Tai.

Patel confirmed that concern about SA’s relationship with Russia was raised at their meetings with Tai and other US legislators and businesspeople.

In geopolitical matters, countries “will all have their positions”.

“We explained SA’s position and took the time to speak to the various concerns raised; pointed to what was being done to address some of the matters that had been considered by the SA government and I hope closed the gap due to inadequate information sharing,” said Patel.

“Most importantly it was about affirming the value of the economic relationship with the US. And at the same time, SA of course, is putting [in an] effort to develop stronger value chains on the African continent. There is a recognition that if the US looks at long-term partnerships to support the industrialisation of African economies, SA can play a key role. It does so through integration of regional value chains and by our efforts to regional stability and development,” he said.

In its written submissions to the US trade representative, submitted on July 7 in support of SA’s Agoa bid, trade union federation Cosatu accuses SA’s government of mishandling geopolitical fallout with the US after Washington’s ambassador to SA, Reuben Brigety, accused SA of supplying arms to Russia to support its war with Ukraine.

“We believe that the SA government and some individuals in SA have not handled all matters well and at times badly ... Cosatu is concerned about the allegations that arms and ammunition may have been sold to Russia as this would be in violation of SA law. We welcome government’s denial that this was approved and its decision to appoint an independent inquiry headed by a retired judge to investigate this,” the document reads.

As the US is one of SA’s largest trading partners, any negative shift in trade relations between the countries would have a devastating effect on the local economy as the country battles an electricity crisis hampering its growth prospects.

In 2021, the US ranked the second-largest destination for SA’s exports globally after China, followed by Germany (up from third position in 2020), and third in terms of source of imports after China and Germany.

During the same year, trade between SA and US peaked at $21bn.

SA has been a part of Agoa since its inception in 2000 but fears were recently raised that SA could loose its membership due to its perceived closeness with Russia amid the war in Ukraine that has prompted some senior US legislators to request that Tai move the upcoming forum from SA to another country.

Agoa provides preferential access for about 20% of SA exports to the US, or 2% of SA exports globally.

The SA government is keen to retain these benefits “because that gives us an edge in the US market”, Patel said. “So framing Agoa as part of the overall economic and strategic relationship, we have provided the US government with quite a detailed analysis of the trade and investment flows,” he said.

“We have been able to show the flow of goods, the investment flows, the way in which these flows mutually reinforce the economic relationship and benefits to the US and SA.

“So while Agoa is helpful in promoting exports, we have a higher ambition for the level of our trade and investment with the US.

“We want to be able to export additional value-added products and encourage more American investment in processing of raw materials on the African continent,” Patel said.

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