US lawmakers who support a renewal of the Africa Growth & Opportunity Act (Agoa) assured South Africa and other African countries in Washington this week that they would lobby for its extension.
It is understood that in private meetings, senators told the South African delegation led by trade, industry & competition minister Parks Tau and a host of business leaders that there was a strong desire to reauthorise Agoa, but this process could not be concluded yet.
Open to eligible sub-Saharan African countries, the law allowed for duty-free access to the US market for more than $3bn (R55bn) worth of South African exports in 2022 alone, mainly motor vehicles, fruit and wine. Under Agoa South African exports in 2023 had reached $2.9bn by November.
Aspen Pharmacare group senior executive Stavros Nicolaou — who was part of the business delegation — told Business Times there was “positive sentiment” towards renewal of the trade pact. He said the formation of a government of national unity (GNU) was viewed as a plus by US lawmakers.
“There was positive sentiment towards the GNU... A number of positive signals from [US state] secretary [Antony] Blinken on the continuation of Agoa. In fact, his terminology was that he was fully supportive of this administration. These are all positive signals and a number of congressmen expressed similar sentiments.
“The minister was extremely well received. His message was solid and I think that we put our best foot forward as South Africa. Our role as business is to put a business case forward. The minister [presented] a very strong case for South Africa.”
Nicolaou said signals were strong that both the US and Africa need the partnership underpinned by this act.
With the US heading to elections this year and the prospect of Donald Trump returning as president, some doubts have been raised about South Africa’s future participation in Agoa.
In May, the US House of Representatives passed the US-South Africa Bilateral Review Act, requiring the Biden administration to undertake a full review of South African relations with the US. It first needs to pass in the Senate before it can be signed into law by the US president.
It accuses South Africa of taking stances that are contrary to US international policy on matters such as Russia’s invasion of Ukraine, and the Israeli offensive in Gaza. It is also critical of South Africa’s close relations with China.
The bill reads: “In contrast to its stated stance of non-alignment, the South African government has a history of siding with malign actors, including Hamas, a US-designated foreign terrorist organisation and a proxy of the Iranian regime, and continues to pursue closer ties with the People’s Republic of China and the Russian Federation.”
Agoa has had a positive impact upon not only South Africa but Africa as a whole. It provides reduced tariff access for large volumes of South African goods to the US market, currently the world’s largest economy
— Matthew Parks, Cosatu parliamentary co-ordinator
BusinessLIVE reported on Friday that South Africa, on the other hand, pushed for the relaxation of eligibility requirements for beneficiaries of Agoa, including setting aside nontrade-related requirements.
Beneficiaries are prohibited from engaging in activities or implementing policies that undermine US national security interests. They are required to be market-based economies and allow for political pluralism.
“We urge the US administration to refrain from using nontrade considerations in determining Agoa eligibility criteria and to ensure the developmental dimension of the Agoa programme, particularly in relation to infrastructure, industrial development, and technology transfer [be maintained],” Tau said at the opening of the ministerial session at the Agoa Forum in Washington.
“We stress the importance of addressing graduation in order not to jeopardise the achieved gains,” the minister said. Members of Agoa have expressed concern that a provision that “graduates” them out of the programme if they attain a certain income level works to their detriment.
“A review of Agoa .... should ensure the prioritisation of continued mutual benefits,” Tau said.
Cosatu parliamentary co-ordinator Matthew Parks welcomed the the government’s efforts to extend South Africa and other African countries’ membership of an enhanced Agoa.
“South Africa, like all nations in this globalised era, is heavily dependent upon trade with other countries. Our key trade and investment partners include the world’s leading economies, in particular the US, the EU, China and Japan.
“Agoa has had a positive impact upon not only South Africa but Africa as a whole. It provides reduced tariff access for large volumes of South African goods to the US market, currently the world’s largest economy.”
Parks said the act allowed investments by US companies supporting 450,000 direct and indirect South African jobs and large mining, manufacturing and agriculture exports to the US.
But the labour federation had been dismayed by statements by some US politicians “who have sought to weaponise trade relations and undermine South Africa’s hard-won sovereignty, principled non-aligned stance, and firm belief in the need for conflicts to be resolved through peaceful dialogue”.
Anne Aliker, head of corporate & investment banking client coverage at Standard Bank, said agreements such as Agoa had driven growth on both continents and that while challenges still existed, immense opportunities remained for investors who approached the opportunity “with diligence and adaptability”.
XA Global Trade Advisors CEO Donald MacKay said while the Agoa forum was a regular feature, this year’s meeting followed a tumultuous week in the US and was the first since South Africa’s elections.
“I don’t honestly know what this forum holds, but it’s fair to say that South Africa enters on the back foot following how we have communicated our positions on Ukraine and Israel. Not so much our actual stance, but how we’ve spoken about it,” he said.
The US remained an incredibly important trading partner and investor, accounting for about 10% of South Africa’s exports — which made up only about 0.3% of US imports.
“If the relationship continues to break down, the implications for South Africa will be severe, but will barely be noticed by the Americans. It’s essential for minister Tau to work on strengthening this relationship while, of course, standing firm as a sovereign nation.”
From our research, we have seen that the direct benefits of Agoa, while important for South Africa’s exporters at roughly a fifth of our overall exports to the US, are an important building block for broader trade between the countries
— Saul Levin, head of Trade and Industry Policy Strategies
MacKay said trade driven primarily by the private sector would be harmed if the benefits under Agoa were scrapped, but the impact would still be relatively muted.
“We export around R180bn to the US each year, R60bn of that is under Agoa with cash benefits of about R2bn in duties saved. Not nothing, but also not massive. A far greater risk would be if the US sanctioned South Africa, but there is no reason to believe this is a risk at the moment.”
He said South Africa should seriously look at replacing Agoa with a bilateral trade agreement as this would remove the ability of the US to weaponise Agoa and access to its lucrative market.
Saul Levin, head of Trade and Industry Policy Strategies, said Agoa had been bipartisan and received support from both Democrats and Republicans for a while, and it had made little difference who was in the White House.
“It is notable, however, that under president Trump there was a stronger focus of that administration on bilateral trade relations rather than a multilateral approach. That may well be the case again if he is re-elected. South Africa’s challenges within Agoa are however beyond that of the re-enactment of Agoa, which seems likely.”
Levin said South Africa’s continued membership was under threat due to its upper-middle income status and to some of the political positions the country had taken. He said South Africa needed to carefully explain its political positioning so that it is understood from a US perspective.
“At the current Agoa forum, it is important for South Africa to highlight the importance of Agoa as a measure that cements broader South Africa-US trade relations and contributes to improving our bilateral trade position.
“From our research, we have seen that the direct benefits of Agoa, while important for South Africa’s exporters at roughly a fifth of our overall exports to the US, are an important building block for broader trade between the countries.”
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