Much excitement appears to have been generated domestically, not least within the labour movement, by the US trade representative’s December 21 announcement that President Joe Biden had made no changes to the US’s African Growth & Opportunity Act (Agoa) country beneficiaries for 2025.
There are several reasons why this excitement may be premature. First and most obvious is the change of administration in Washington and re-entry of Donald Trump to the White House after his inauguration on January 20. Second is that Agoa requires annual redesignation of country beneficiaries by the president, and the Central African Republic, Gabon, Niger and Uganda were all de-designated in the past year, either for unconstitutional changes of government or gross violations of international human rights. Third, Agoa itself is due to expire on September 30 and attempts by Congress to extend it have so far not succeeded.
As a nonreciprocal trade preference programme with the US, Agoa provides duty-free access to the US market for 32 African countries, including SA, covering about 6,700 products. For SA it allows for duty-free exports of motor vehicles, automotive components and parts (worth $806m in 2022); agricultural products, including citrus fruits, wine and nuts ($643m) and chemical products ($914m). About 25%, or $3bn, of SA’s exports to the US benefited from Agoa in 2022, leaving the US with a $9bn trade deficit with SA (the country’s total exports to the US amounted to $14.5bn that year). Agoa is thus of considerable importance to the SA economy, employment and the balance of payments.
Eligibility under section 104 of Agoa requires a beneficiary country to establish (or make continual progress towards establishing) a “market-based economy that protects private property rights, incorporates an open rules-based trading system and minimises government interference in the economy”. It likewise requires a country to observe the “rule of law, political pluralism and the right to due process” (which explains why Gabon and Niger were removed by the Biden administration in the past year). Additionally, a country must not engage in “gross violations of internationally recognised human rights” — hence the de-designation of the Central African Republic and Uganda.
Significantly, Agoa also requires in section 104 that a country “does not engage in activities that undermine US national security or foreign policy interests”. This, together with the US’s significant trade deficit with SA, is likely to attract the attention of the Trump administration as it takes office. A harbinger of this was contained in last year’s proposed amendment to the National Defence Authorisation Act by John James, the Republican chair of the US House of Representatives Africa subcommittee.
The James amendment required the president, in consultation with the secretary of state and secretary of defence, to release publicly an unclassified determination on whether SA has “engaged in activities that undermine US national security or foreign policy interests”, together with the justification for such a determination. To this end the president, in consultation with the secretaries of defence and state, the administrator of the US Agency for International Development, the US ambassador to SA and the relevant heads of federal departments, must conduct a review of the bilateral relationship between the US and SA, the findings of which shall be submitted to Congress.
In addition to this, the James amendment required the secretary of defence to report to Congress on the extent of US defence co-operation with SA, including “military exercises, arms sales and international military education and training”. Ominously, it also required the secretary of defence to provide a report on “defence co-operation between the government of SA and the government of the Islamic Republic of Iran, the government of the People’s Republic of China and the government of the Russian Federation”.
This amendment did not emerge from a foreign policy vacuum. Unlike Kenya and Zambia, for example, SA has refused to condemn Russia’s invasion of Ukraine in February 2022 and consistently abstained from UN General Assembly resolutions on the matter. A Russian freighter, the Lady R, was seen loading and offloading unspecified goods in Simon’s Town in December of the same year. A few months later, in March 2023, the SA navy participated in naval exercises with Russia and China. After Israel was attacked by Hamas militants from Gaza in October 2023, SA declined to condemn the attack and after engaging Iran (and apparently Hamas) subsequently instituted proceedings against Israel for genocide in the International Court of Justice, which remain ongoing.
Given the Republican Party’s control of both houses of Congress and the presidency from this month, the James amendment (which lapsed with the last session of Congress) is likely to resurface in one form or another this year. As any review of SA’s foreign and defence policy from a US perspective is unlikely to pass muster, SA would be well advised to take a leaf out of Kenya’s book and attempt to negotiate a free trade agreement with the US along the lines of that initiated by the erstwhile Kenyatta and Trump administrations in 2020, not least in light of its significant trade surplus with the US under Agoa.
Though the Biden administration attempted to convert this into a strategic trade and investment partnership, rather than a proper free trade agreement, there is every likelihood that the Trump administration will resuscitate its previous efforts. Continuing to rely on Agoa in view of its significant unilateral risks as much as its unpredictability, is unlikely to be in SA’s best interests, not least when our biggest trading partner, the EU, has had an economic partnership agreement (a free trade agreement) and thus reciprocal market access in place with SA since 2016.
• Leon is partner at Herbert Smith Freehills.
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