SA likely to secure trade status extension with US, say officials – but for how much longer?

1 Nov 2023

Maintaining South Africa’s status under the African Growth and Opportunity Act will save 30,000 jobs in the Western Cape alone and increase trade from an annual R50bn-plus. But commentators warn that SA might not be so lucky next year.

Officials are “cautiously optimistic” that South Africa can maintain its African Growth and Opportunity Act (Agoa) status with the US, as the Agoa Forum kicks off in Johannesburg on Thursday, 2 November.

This week the US cut Uganda, Gabon, Niger and the Central African Republic out of Agoa, which gives eligible African countries duty-free access to the US for most of their exports. The Biden White House did not put SA on the chopping block in its annual eligibility report to Congress.

US President Joe Biden said on Thursday he “strongly supported” the reauthorisation of Agoa beyond 2025 when it comes up for renewal: “I strongly support reauthorisation of the African Growth and Opportunity Act – a landmark, bipartisan law that has formed a bedrock for US trade with sub-Saharan Africa…

“I am committed to expeditiously working with Congress and our African partners to renew this law beyond 2025, in order to deepen trade relations between our countries, advance regional integration and realise Africa’s immense economic potential for our mutual benefit.”

This is good news after all the earlier threats to SA’s Agoa privileges emanating largely from the US Congress because of Pretoria’s perceived palliness with Russian President Vladimir Putin.

But some commentators are warning that Congress could still scupper South Africa’s hopes next year.

As Daily Maverick reported at the weekend, South Africa wants to increase exports to the US under Agoa, from the current $2.7-billion annually (about R50-billion on 1 November). This represents a significant 30% of its total exports to the US. With low growth and cuts in spending, Finance Minister Enoch Godongwana needs a fiscal boost from increased trade.

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The US is South Africa’s second-largest trading partner and still the source of a significant proportion of foreign direct investment (FDI). Six hundred US companies host their regional headquarters in the country.

The Lady R debacle and the jetting in of a sanctioned Russian plane caused Democratic US Senator Chris Coons and three other congressional leaders to lobby Biden to move the Agoa Forum away from SA and possibly strip SA of its benefits.

They argued that Pretoria’s cosiness with Russia violated one of the Agoa eligibility requirements, that a country should not jeopardise US national security or foreign policy interests. In June, Coons (a long-time ally of SA) and his three colleagues questioned whether SA should host the Agoa Forum or benefit from the trade deal on which 30,000 jobs in the Western Cape alone depend.

Vigorous shuttle diplomacy by SA officials to the US, and the help of SA businesses, appears to have saved the day.

sa trade us

Read more in Daily Maverick: SA expected to retain its Agoa status despite differences with US

“The geopolitics is settled,” one SA official said. Now, trade officials will negotiate the extension of Agoa and try to ensure that SA is not migrated out as a middle-income country.

The forum will not decide on Agoa’s extension, but will recommend to Congress whether the trade deal as a whole should continue or whether it has run its course after more than two decades.

Domestic business interests in the US have lobbied for SA to be migrated out of preferential trade access because of its developed economy. But trade officials say the country will show that the broader southern African region benefits through South Africa and that the deal should be extended when it comes up for renewal.

“The talks will probably be positive,” a senior trade adviser said.

David S Feldmann, mission spokesperson at the US Embassy, said: “The United States has a strong relationship with South Africa, and that relationship is based on the priorities of the American people and the South African people. We are committed to an affirmative agenda through which we work together to bring our nations’ respective priorities to the table. Among those is robust bilateral trade.

“We recognise that South Africa has been one of the countries to benefit most from Agoa and to realise the economic benefits for which the programme was designed. Because Agoa is a law, Congress will determine the future of Agoa after 2025.”

Ongoing friction

Anthony Carroll, a retired adjunct professor at Johns Hopkins University and a seasoned observer of US-Africa relations, who is attending this week’s Agoa Forum, said: “South Africa was rightfully included as a beneficiary country under Agoa.

“The only real friction point is the conditionality of engaging in activities that are inimical to US security and foreign policy interests and South Africa’s outreach in Washington aided in the outcome.”

However, he added that South Africa’s and America’s differing positions on Ukraine and now on Israel amid the current explosion of violence with Hamas would stress the relationship “in the very near future, especially as Congress asserts itself now that the House of Representatives Speaker selection process has been concluded”.

J Peter Pham, an Africa expert at the Atlantic Council and a former US special envoy to the Great Lakes and to the Sahel, was even gloomier about South Africa in his predictions.

“Irrespective of why and how the executive branch of the US government – the Biden administration – decided to ignore clear, bipartisan signals from the co-equal legislative branch to review South Africa’s eligibility for Agoa benefits, they can only kick that can down a very short road.

“Next year the entire Agoa must be renewed by act of Congress. So the review that the Biden administration refuses to undertake this year will happen next year under the supervision of the same bipartisan group of senior senators and representatives who sent the letter to Secretary of State Blinken earlier this year.

“In fact, ignoring their concerns now may be very shortsighted and come back to bite not just the administration, but also South Africa next year if Congress chooses to leave it out of any renewal.”

Read more in Daily Maverick: Ahead of crucial Agoa Forum, Pretoria again treads a fine line with its stance on Israel, Palestine, Gaza

Whatever happens, this suggests that South Africa’s diplomatic battle to preserve its Agoa benefits is not over.

Senators who were due to travel to South Africa to attend the Agoa Forum will now not do so as Biden needs to push through Congress a sizeable aid package to both Ukraine and Israel. South Africa will use the forum to ensure that the rest of sub-Saharan Africa benefits more from Agoa.

It is seen as a means of boosting the African Continental Free Trade Area. Virtually all sub-Saharan Africa’s exports to the US (an estimated R200-billion a year) are made through Agoa, and South Africa is the largest single beneficiary.

Ethiopia’s Agoa benefits remain suspended, while Guinea and Mali previously lost their trade status.

Nine countries across Africa have fallen to coups since 2020, as Bloomberg reported.

South Africa exports cars, jewellery, ferroalloys, fruit, nuts, beverages and spirits to the US. The Western Cape investment promotion agency, Wesgro, says SA has maintained a trade surplus with the US since Agoa’s inception in 2000. DM

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Ongoing friction