South Africa’s access under AGOA helps neighbouring countries, says country's trade minister
SA is to argue strongly that its participation in the Africa Growth and Opportunities Act (Agoa) benefits neighbouring countries through shared value chains, said trade, industry and competition minister Ebrahim Patel on Tuesday.
The argument will be made in November when the Agoa forum meets in Johannesburg that neighbouring countries will suffer significant losses if SA is excluded from the scheme, which provides preferential access to certain products from Africa to the US market.
The forum will bring together the governments of the US and Agoa-eligible countries, as well as representatives from key regional economic organisations, the private sector, civil society, and labour. The next Agoa forum will be held in the US in 2024 when clarity is expected on the time frames for the renewal of the act.
Patel addressed a joint meeting of the select committee and portfolio committees on trade and industry, which was also attended by representatives of provincial legislatures.
The present term of Agoa expires in 2025 and there have been rumblings in the US about SA’s exclusion due to its perceived support for Russia in its war against the Ukraine, though SA has stressed its non-aligned position. SA has sent high-powered delegations to the US to argue its case with US officials, Congress representatives and the private sector.
“Given the political divisions in the US Congress, a bipartisan consensus is essential to secure the necessary backing,” Patel said.
“The example of Agoa’s success is often the example of SA,” he noted. “I will be providing at bit more detail in November at the Agoa forum to my counterparts in the US how an integrated value chain ensures that the benefits of Agoa to neighbouring countries is often via this regional value chain that SA takes part in.”
He gave the example of Botswana, which exports more manufactured products via SA value chains than it does directly in its exports of manufactured products to the US. Botswana supplies wire harnesses, Lesotho car seats and the Ivory Coast rubber.
“So if SA was taken out (of Agoa) many neighbouring countries would suffer quite significant losses,” Patel said, adding that SA’s participation in Agoa supported benefited economic development in the southern African region.
The US is SA’s second-largest national trading partner after China, and SA is the largest exporter to the US on the African continent, exporting three times more than the next largest supplier (Nigeria) in 2022. SA in turn is the largest sub-Saharan African importer of goods from the US.
Patel noted that one of the major risks facing the extension of Agoa was domestic pressure in the US, where there was a greater focus on its own market, on localisation and the re-industrialisation of its own economy. The second risk is geopolitical as the world becomes more divided.
“The growing geopolitical polarisation poses challenges to SA, a country that has strong economic relationships with both west and east, and whose economic challenges require it to maximise the trade and investment relationships with countries across the geopolitical divides. SA trade strategy therefore argues against fragmentation and in favour of multilateralism,” Patel said.
Two-way trade in goods and services between SA and the US amounted to $25.5bn in 2022 with the US being SA’s second largest national export market, after China.
In 2021, SA total goods exports to the US amounted to $15.4bn. Of this 82% was under Most Favoured Nation terms, with an export value of $12.7bn; and 18% was under Agoa and the generalised system of preferences (GSP) programme with an export value of $2.7bn.
Exports under AGOA and GSP together accounted in 2022 for about 2.4% of total SA global exports.
Collectively, Agoa including GSP, provides duty-free market access for 5,235 tariff lines from Sub-Sahara African nations classified as developing countries.