South Africa: AGOA row threatens to stall automotive sector

South Africa: AGOA row threatens to stall automotive sector
Published date:
Monday, 26 October 2015
Author:
Roy Cokayne

The festering inter-governmental trade squabble between the US and South Africa is threatening to seriously dent the automotive industry’s lucrative trade with the US.

This follows a report last week that the US had vowed to press ahead with a review that could cut South Africa’s access to the Africa Growth and Opportunity Act (Agoa) trade benefits after South Africa missed a key deadline for resuming US poultry imports.

The South African government later denied it had missed a deadline for resuming imports, claiming instead that the deadline that had been missed by both countries related to an agreement on new animal health and safety rules.

Duty benefits available on exports into the US through Agoa have benefited trade between the two countries.

 

SouthAfrica automotive exports AGOA640px

 

Automotive trade

There has been a 264.4 percent increase in automotive exports from South Africa to the US between 2001, when Agoa commenced, and 2014, according to the National Association of Automobile Manufacturers of South Africa (Naamsa) and National Association of Automotive Component and Allied Manufacturers (Naacam).

In the same period, automotive exports from the US to South Africa increased by 397.5 percent, while total automotive trade between the two countries increased by 309.1 percent to R28.96bn, the organisations said in a submission in August to the Agoa implementation sub-committee of the Trade Policy Staff Committee, in response to the “out of cycle” Agoa review of South Africa.

Duane Newman, a director of Cova, a tax and government incentive advisory services company, said the US was a large investor in South Africa and Agoa had created further export opportunities for many businesses, especially in the automotive sector.

“It is vital that all stakeholders do their best to ensure these investments, and ultimately the jobs, are protected,” he said.

Azar Jammine, the chief economist at Econometrix, said there was a little bit of ambiguity about the stumbling blocks for Agoa. He said they might not be linked as much to poultry issues and a more serious threat to Agoa was the proposed legislation that would limit foreign ownership of private security companies in South Africa.

He believed there was a lot of posturing by both countries and was unsure whether the US was trying to retaliate “for the anti-US stance the South Africa government seems to be playing with all the time”.

BMW South Africa is the biggest potential loser from any loss of Agoa benefits.

Tim Abbott, the managing director of BMW SA, said this month that its plant in Rosslyn in Pretoria would produce 72 000 3-Series models this year that were exported all around the world, with about 42 percent exported to the US.

The BMW board of management member responsible for sales and marketing, Ian Robertson, said the planning was far advanced for the manufacture of a new model at the Rosslyn plant.

However, Robertson stressed this decision was not dependent on the renewal of Agoa.

He said the benefits of Agoa were viewed as “the cherry on the top” because it was not a good business case if production and investment decisions were dependent on them.

Norman Lamprecht, the executive manager at Naamsa, said the US was an important export destination for South Africa’s automotive industry and the top destination for vehicle exports in recent years.

He said automotive exports to the US would continue in the short term if Agoa disappeared, but had cost implications.

Economic anchor

Lamprecht expressed confidence that the South African government would sort out the disagreements before the US made any recommendation to either include or exclude South Africa from Agoa.

Edward Makwana, a BMW SA spokesman, said the group supported Agoa as a successful vehicle to promote African exports and strengthen Africa’s political and economic development. “We see Agoa as a political and economic anchor in the region that supports economic and political development in the country,” he said.

Makwana said BMW SA was unable to comment further until a final decision was reached by the US Congress at the end of next month.

 

Share this article

View related news articles

AGOA time: As 2025 approaches, opportunities for improvements eyed

Economic integration efforts underway in Africa and new ideas about decades-old U.S. trade policy could provide a host of options for bolstering Washington’s cornerstone trade policy program with sub-Saharan African countries, analysts and former senior officials tell Inside U.S. Trade. The African Growth and Opportunity Act, first signed into law in 2000, “has done more than people give it credit for, but it has not done nearly enough...

30 January 2023

US treasury secretary Janet Yellen touts deeper ties with South Africa to help boost trade

The US is seeking to deepen its economic integration with South Africa in pursuit of policies to diversify global supply chains, US Treasury Secretary Janet Yellen said. Closer ties with nations that share the US’s economic values will help promote so-called friendshoring, in which allies cooperate on manufacturing and sourcing raw materials, Yellen said at a meeting with South African Finance Minister Enoch Godongwana on...

25 January 2023

A proclamation to take certain actions under AGOA and for other purposes [Burkina Faso]

(1) In Proclamation 7853 of December 10, 2004, the President designated Burkina Faso as a beneficiary sub-Saharan African country for purposes of section 506A(a)(1) of the Trade Act of 1974, as amended (the “Trade Act”), as added by section 111(a) of the African Growth and Opportunity Act (the “AGOA”) (title I of Public Law 106-200, 114 Stat. 251, 257-58 (19 U.S.C. 2466a(a)(1))). (2) Section 506A(a)(3) of the Trade Act (19 U.S.C....

23 December 2022

Joe Biden is meeting African leaders - why free trade is a major talking point

African leaders face a dilemma over trade relations with the United States. Should they push for the extension of the Africa Growth and Opportunity Act (AGOA) or for each country’s bilateral trade deal with the world’s biggest economy? AGOA was the signature economic policy of the Bill Clinton administration. It provides eligible sub-Saharan African countries with duty-free access to the US market for over 1,800 products. It is set to...

13 December 2022

Bipartisan lawmakers in Congress are calling for the renewal of AGOA

 As President Joe Biden hosts nearly 50 African leaders in a summit aiming to boost U.S.-Africa relations, one prominent issue has circulated across the Hill: the renewal of the African Growth and Opportunity Act, which is set to expire in 2025.  What is it? The 22-year-old program works to provide eligible sub-Saharan African nations with additional duty-free access to more than 1,800 designated products, with the aim of...

13 December 2022

US trade chief Tai says African trade program needs to foster more investment

The duty-free access for nearly 40 African countries in a 22-year-old U.S. trade program is no longer enough to boost their development and a focus on improving investment is needed, U.S. Trade Representative Katherine Tai said on Tuesday. Tai, after a meeting with African counterparts at the start of a Sub-Saharan African leaders summit in Washington, said the African Growth and Opportunity Act (AGOA) needs improving to foster more equitable...

12 December 2022

The 'key to unlocking Africa's potential'

Africa is on the cusp of an economic transformation. By 2050, consumer and business spending on the continent is expected to reach roughly $16.1 trillion. The coming boom offers tremendous opportunities for global businesses – especially US companies looking for new markets. But unless African policymakers remove existing barriers to regional trade and investment, the continent’s economy will struggle to reach its true potential. Two...

02 October 2022

Ramaphosa vows to improve investment environment for US companies after talks with Biden

There was agreement on the need to create a more attractive environment for American companies to invest in South Africa. These are just some of the sentiments echoed by President Cyril Ramaphosa as he concluded his official working visit to the United States at the invitation of US President Joe Biden. Ramaphosa landed on Thursday in Washington DC, in the United States of America.  The two leaders deliberated on a range of critical...

18 September 2022

'The renewal of AGOA is vital' - SA President Ramaphosa

Address by President Cyril Ramaphosa during the meeting with the congressional black caucus and anti-apartheid veterans during his visit to the United States: Minister of International Relations and Cooperation of South Africa, Dr Naledi Pandor South Africa’s Ambassador to the United States, Ms Nomaindia Mfeketo Chair of the Congressional Black Caucus, Ms Joyce Beatty Spokesperson of the Rainbow Push Coalition, Prof Jonathan Jackson...

16 September 2022

South Africa puts trade on top of agenda for Ramaphosa’s meeting with Biden

Winning the US president’s support for a further extension of the Africa Growth and Opportunity Act, which gives South African exports duty-free and quota-free access to the lucrative US market, will be a high priority for Pretoria. Trade, rather than the war in Ukraine, is likely to top the agenda of President Cyril Ramaphosa’s meeting with US President Joe Biden at the White House on Friday. That, at least, is how Pretoria sees it....

15 September 2022

Biden-Ramaphosa meeting heralds a significant shift in US policy towards Africa

President Cyril Ramaphosa is the first African leader invited to the Oval Office since the release of the Biden administration’s “US Strategy Toward Sub-Saharan Africa”. That he is meeting president Biden so soon after seeing Secretary of State Anthony Blinken attests to the importance Biden attaches to the US-SA relationship. Biden is not going to repeat the mistake of calling Ramaphosa “my point man in Africa”, as George W Bush...

07 September 2022