While South Africa has made the list of countries eligible to benefit under the United States’ African Growth and Opportunity Act (AGOA) in 2024, concerns are growing that this could change in an instant if geopolitical tensions with the West turn sour.
This past week, the Office of the United States Trade Representative published the list of 32 African countries eligible to benefit from AGOA, including South Africa.
AGOA is a piece of US legislation which benefits various parts of South Africa’s economy, particularly the automotive and agricultural sectors and related exports. The country exported over R50 billion of goods using AGOA in 2022/23.
The Act is set to expire in September 2025, but indications are that it will be again renewed and possibly extended to a 10-year period – something which would greatly benefit the countries attached.
According to Investec chief economist Annabel Bishop, however, concerns are growing that South Africa may lose eligibility due to its stances on various high-profile geopolitical tensions – where South Africa has made a habit of cosying up to the USA’s “adversaries”.
Bishop noted that the AGOA is not a treaty but rather a piece of US legislation, which means the US can “terminate the designation of the country as a beneficiary sub-Saharan African country or withdraw, suspend or limit the application of duty-free treatment with respect to articles from the country,” and there is no need to negotiate.
The AGOA, as read, says that the US president is authorised to designate a Sub-Saharan African country as an eligible Sub-Saharan African country, and it is up to his discretion to determine whether these countries do not violate human rights or engage in activities that undermine US national security or foreign policy interests.
“South Africa’s inclusion is up for review in 2025 – but its benefits can be cut sooner by the US,” Bishop said.
“The Israeli-Hamas War, and that of Russia and Ukraine, are adding to geopolitical stresses. (There are) concerns over disruptions to trade relations with South Africa, which is seen to have very cordial relations with Russia, causing some Western concerns.”
“South Africa’s close relationships with Russia and Hamas has raised concerns that its inclusion in AGOA may not be renewed – also given its recent court case against Israel,” she said.
The loss of free trade benefits under AGOA would mean South Africa’s exports would cost more in the US, which would reduce their competitiveness, in turn negatively impacting demand for these exported goods, weakening the trade balance, Bishop said.
“Loss of the AGOA benefits would also cause a severe underpin of weakness to the domestic currency, as well as damaging economic growth further.”
