The government has warned that US legislators hostile to Pretoria could use the upcoming African Growth and Opportunity Act (Agoa) Forum to highlight the country’s relationship with Russia and China to potentially exclude it from the preferential access to US markets that SA currently enjoys.
The Agoa Forum is scheduled to be hosted by SA in November, shortly after the Brics (Brazil, Russia, India, China and SA) trade bloc holds its summit in Johannesburg where the emerging markets group is expected to continue to ramp up its bid to counter Western hegemony.
Agoa provides duty-free access to the US market for some SA goods. The current 10-year cycle ends in 2025. The upcoming forum provides an opportunity for SA to continue to push for the country to remain one of the 35 Sub-Saharan African beneficiaries of the trade pact, and to dispel any tensions over its foreign policy.
In a confidential briefing note dated March 2023, the government warns that some influential business people believe SA could be graduated out of the trade pact because of its higher level of development compared to other African countries.
The document, seen by Business Day, is understood to have informed discussions by high-level envoys sent to the US by President Cyril Ramaphosa to explain SA’s stance on the Russian invasion of Ukraine and to lobby to retain SA as part of Agoa. The document spells out threats and opportunities facing SA as it moves to retain membership of the trade pact.
“Some US businesses are also believed to be opposed to a renewal of Agoa, demanding reciprocal access to African markets, and especially to the relatively sophisticated SA market,” the document reads.
The current 10-year review cycle comes at a time when SA is facing pressure from the US and its Western trade partners to take a tougher stance against Russia in its year-long “special military operation” against Ukraine, raising fears that SA could be excluded from the deal.
SA has adopted a nonaligned stance in the conflict between Russia and Ukraine. This led to US ambassador to SA Reuben Brigety accusing Pretoria of aiding Russia’s war effort by providing arms to Moscow in December 2022. SA has denied this accusation with President Cyril Ramaphosa launching an enquiry into the allegations.
Opposing Russia
In the document, the government further warns that SA has faced increasing pressure to speak out against Russia
amid the debate around the renewal of the Agoa pact.
“In addition, the new power dynamics in [the US] Congress; the current geopolitical context and big power competition for strategic influence, including in Africa, has afforded the Republicans a platform to use their narrow majority in the House of Representatives to put the Democrats under pressure to take stronger action against Russia, including countries that are perceived to be close to Russia.”
In a move widely regarded as retaliation against SA’s close ties with Moscow, a bipartisan group of US legislators wrote to the country’s secretary of state, Antony Blinken, national security adviser Jacob Sullivan and US trade representative Katherine Tai in June, asking that the forum be hosted in another country.
SA swiftly moved to confirm the forum would remain in SA as it had not received any communication from the US that it would be relocated.
This was followed by a trip to the US in early July by trade, industry & competition minister Ebrahim Patel, international
relations & co-operation minister Naledi Pandor, minister in the presidency Khumbudzo Ntshavheni and finance minister Enoch Godongwana to discuss preparations for the meeting.
Business Day understands the high-level SA delegation engaged directly with Tai.
On Monday, Tai held virtual public hearings with various Agoa beneficiaries who presented their submissions to the US state department on the annual eligibility review for 2024. “The oral hearings provide an opportunity for other public comments to be made by stakeholders who have not had that opportunity,” a source close to the talks said.
To remain as a beneficiary of Agoa, the US requires that countries have a market-based economy, a pluralist political system and not engage in activities that undermine the US’s national security interests.
SA qualifies for preferential trade benefits under Agoa, which permits it to export more than 7,000 goods to the US duty-free. The US is SA’s third-largest trading partner with more than 600 US companies operating in SA.
US foreign direct investment in SA was valued at R116bn in 2019, a 6.8% increase from 2018. US direct investment in SA is dominated by manufacturing, finance, insurance and wholesale trade. SA’s foreign direct investment in the US was valued at R59bn in 2019, a 1.2% increase from 2018.
Economic impact
China is SA’s largest trading partner among the Brics bloc countries, accounting for 9.4% of exports and 20.2% of imports in 2022, according to trade data by the SA Revenue Service. Russia accounted for 0.2% of exports in the same period. Any negative shift in trade relations between the US and SA would have a devastating effect on the local economy as the country battles the electricity crisis, which is hampering growth prospects.
Business Leadership SA CEO Busi Mavuso cautioned on Monday that SA should not sacrifice its relationship with the US as a Western trade partner for the sake of promoting its relationship with Brics.
“Harming relationships with the West by proclaiming that Brics exists to somehow counter the West would do us no good at all. Instead, we should look to work with Brics members to improve relations and opportunities for our economies to trade with each other,” Mavuso said. With Hajra Omarjee
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.