Agoa.info - African Growth and Opportunity Act
TRALAC - Trade Law Centre
You are here: Home/News/Article/Fitch research unit expects better AGOA deal for South Africa

Fitch research unit expects better AGOA deal for South Africa

Fitch research unit expects better AGOA deal for South Africa
Published date:
Tuesday, 09 January 2024
Author:
Kabelo Khumalo

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 SA’s exports, saying a renewal of 10-20 years is likely, as it provides a long enough time frame to foster stability in trade.

“We believe that there is scope for alterations to the agreement that will promote additional export volumes from SA. The US is an important trade partner of SA, being its second-largest individual export partner after mainland China.

“SA is also Africa’s largest individual exporter to the US.

“Nonetheless, SA’s main export partners are relatively diversified, comprising a mix of European, Asian and North American powerhouses.

“SA goods exports totalled $123bn in 2022. Of this, 8.9% went to the US and only a fifth of these goods benefited from Agoa preferences in 2022.

“Therefore, Agoa accounted for only 1.9% of SA’s global goods exports in 2022, suggesting that the benefits of Agoa are quite limited, with only around $3bn worth of SA exports benefiting from Agoa preferences.”

SA hosted the 2023 Agoa forum in Johannesburg last November. During the forum, African and American representatives led by Katherine Tai discussed extending and modifying the Agoa agreement.

The lead-up to the summit was characterised by diplomatic tensions between Pretoria and Washington over the latter’s close ties to Russia.

In particular, relations between the two countries soured after SA’s participation in military drills with both Russia and China in March 2023 and allegations by the US ambassador to SA in May that Pretoria had provided arms to Russia in December 2022. An investigation launched by President Cyril Ramaphosa later found no merit in the allegations.

There were attempts by some US legislators to have the forum moved from SA. The legislators pointed to SA’s perceived closeness to Russia in its war with Ukraine as the reason behind the request.

BMI says the decision by the SA authorities not to host President Vladimir Putin in person at the Brics conference in August 2022, coupled with SA’s conclusion of the investigation into the arms allegations, helped to ease tensions.

BMI sees a 30% probability that Agoa will be renewed in its current form, a scenario that it said will not suit SA.

“Renewing the agreement as it stands, while beneficial, could mean missing out on opportunities to refine and boost trade. An unchanged renewal would be less favourable for SA exports to the US,” the research firm said.

“Under this scenario, we expect limited scope for significant increases in the rate given SA’s slow progress in developing a national Agoa exporting strategy, stringent rules of origin and a number of products not yet designated under the programme,” it said.

The entity warned that a possible Trump election later in 2024 might spell doom for the future of Agoa.

“While Agoa is expected to be renewed before it expires in September 2025, a second Trump candidacy may result in a shift of political priorities away from Africa, increasing the risk that Agoa is not renewed beyond its current expiration date.

“SA’s close ties with Russia will remain a source of tension between the markets.”

The former president is leading in many opinion polls.

Read related news articles

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

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

Business Leadership SA calls for business to capitalise on South Africa’s hosting of AGOA Forum

It is notable that South Africa will still host the African Growth and Opportunity Act (AGOA) Private Sector Forum next month, given that several US lawmakers have called for it to be moved elsewhere, and have questioned the country’s preferential trade terms with the US under Agoa as such preferential access to the US markets is open only to African countries that do not threaten American security interests. This is...

24 October 2023

'South Africa expected to retain its AGOA status despite differences with US'

It is almost certain that South Africa’s Agoa status will be renewed despite it and the US often being on opposite sides over geopolitical crises in the past year. The eligibility of countries for the US’s African Growth and Opportunity Act (Agoa) has been under review during the past few months, and it is becoming clearer that South Africa is one of the countries that will continue being a part of the trade programme. A strong...

19 October 2023

South Africa: Entrepreneurial sisters venture into US market [WATCH]

It was a drive to explore international trade that saw entrepreneurial sisters, Michelle and Mo Mokone, grabbing an opportunity to venture into the United States of America market. The pair are the co-owners of Mo’s Crib, a company that produces a range of handmade home décor products.  Their product range includes handwoven baskets, planters, trays, wall art and home outdoor items. It was in 2021 that the pair decided to take...

09 October 2023

You are here: Home/News/Article/Fitch research unit expects better AGOA deal for South Africa