The news that Donald Trump will make his way back to the US presidency in January has been met with optimism on some fronts and a real sense of trepidation on others, with local economists already speculating about the effect on SA.
For many ordinary South Africans already confronting the worst financial crisis they have faced in decades, the implications could be dire — worsening job security and negative investment sentiment on the back of economic and policy uncertainty, which would dash any hopes of recovery from their predicament.
There is a deep concern for the SA consumer, especially at a time when households are already on their knees following a sustained period of fuel, power and food price hikes — not to mention the country’s escalating water crisis, which poses a real threat of higher water tariff hikes in the foreseeable future.
Trump’s “America First” approach, which prioritises US interests over international collaboration, may result in stricter trade conditions for SA. This is particularly concerning given the trade advantage we currently enjoy under the African Growth & Opportunity Act (Agoa). This critical piece of legislation currently provides Sub-Saharan African countries, including SA, with duty-free access to US markets — an essential lifeline for many local businesses, farmers and workers.
Signed into law by former US president Bill Clinton in May 2000, Agoa aims to raise living standards on the continent and create badly needed jobs through trade rather than aid. It covers almost 2,000 products, from jeans to jewellery, chickens and flowers, as well as minerals and automotive products.
Although Agoa is not without its critics, there is no denying that countries that have traded under the programme have grown their exports significantly. In 2021 SA was the largest exporter in the agreement, generating about $2.7bn in revenue, mostly from the sale of vehicles, jewellery and metals. Neighbouring countries such as Eswatini and Lesotho have also greatly benefited from Agoa.
SA is among 35 countries currently trading under the programme, which is set to expire in September 2025, pending renegotiation. While the focus of these negotiations will be on high-level import tariffs and domestic foreign policy, we cannot lose sight of the hundreds of thousands of South Africans whose livelihoods are potentially at risk.
If Agoa were to be scrapped or reduced in any way, the trickle-down effect on SA consumers could be catastrophic in the form of job losses, pushing even more people into an unsalvageable debt cycle.
According to the latest NCR Credit Bureau Monitor Report, of the 28.15-million credit-active consumers in SA, 21.74% were three months or more in arrears as of June 2024. A further 12% had adverse listings, meaning they had in effect reached the end of their credit line.
With the household debt-to-income ratio now projected to hover around an astounding 65% in 2024, my greatest concern is that South Africans will not be able to withstand any further financial pressure whatsoever.
Domestic policymakers must heed the warnings of international relations experts such as Dominic Maphaka and Kingsley Makhubela, who warn that under Trump’s leadership the imposition of tariffs on SA exports could become a reality, undermining the country’s industrialisation efforts and threatening the livelihoods of those who rely on the Agoa framework.
The reality is that increased tariffs and diminished trade benefits could see big job losses in the agricultural, mining and manufacturing sectors — all major sources of employment for South Africans.
While the US election outcome is now clear, the stakes for SA’s economic health have never been higher. Consumers can only watch, wait and hope that Agoa and good sense prevail.
• Roets is CEO of Debt Rescue.
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