Facing Washington's wrath for her perceived anti-US foreign policy positions may not be as catastrophic as previously imagined.
As Americans vote in the presidential election today, deciding between two candidates with divergent views on trade with Africa, South Africa's flourishing trade with the United States under the African Growth and Opportunity Act (AGOA) faces a major turning point.
The trade agreement's future, which has been at the core of Washington's commercial engagement with Africa since 2000, hinges on the outcome of the November election that pits former President Donald Trump against Vice President Kamala Harris. The fraught political landscape in the US and the increasingly complex geopolitical environment means Africa may not enjoy the same import and export opportunities previously yielded by AGOA.
South Africa is the largest beneficiary of AGOA, a program that provides eligible sub-Saharan African countries with duty-free access to the US market for over 1,800 products. In addition, more than 5,000 products are eligible for duty-free access under the Generalised System of Preferences program. With the US election, and a potentially crippling Bill in Congress facing South Africa, the race is on for the four-month-old Government of National Unity to surmount its foreign policy challenges that could see the country lose its AGOA quota when the current term ends in 2025.
The current imbroglio is inflamed by perceptions that South Africa has abandoned its traditional policy of nonalignment which, in the view of some in Congress, could justify its exclusion from the program. With two months left in office, the outgoing Joe Biden administration is currently discussing extending AGOA with reviews of eligible and non-eligible participating countries. But Donald Trump could end the program altogether should he win the presidency.
South Africa must seek economic stability and reconfirm AGOA regardless of the political outcomes in the US. The move will require predictable messaging and discipline which has not always been a strength of the current South African leadership. The knee-jerk response from government officials during the proposed takeover of London-based Anglo American Plc by Australian-based BHP was an example of how messaging can deter investment. A repeat occasion like this that mixes messaging on investment in South Africa could be detrimental to AGOA.
AGOA's contribution to the South African economy is important. US imports from South Africa were $14.6 billion in 2022, up 68 per cent from 2012. That's compared to $6.5 billion of goods exported to South Africa from the US in 2022. The US government's imports from Africa under AGOA increased 26 per cent to $10.3 billion in 2022 with petroleum products continuing to account for the largest portion of AGOA imports with a 45 per cent share of overall AGOA imports.
When AGOA first took effect in 2000, South Africa's economy benefited significantly. For example, South Africa increased its automotive exports to the US from $195 million in 2000 to $1.8 billion in 2013. In 2000, South Africa exported a total of $2.2 billion in automotive exports and 8.7 per cent of it went to the US. By 2013, South Africa exported $8.9 billion of automotives and sent 19.9 per cent to the US. In 2013, motor vehicles accounted for 25 per cent of South Africa's exports to the US. However, by 2022, this figure had diminished to approximately 10 percent as many benefits in the program dwindled due to economic diversification and trade diversion. South Africa now directs almost two-thirds of its automotive exports to the European Union. But the loss of AGOA could still have ramifications for the US. The US relies on South Africa for a range of critical minerals. In 2021, the US imported nearly 100 per cent of its chromium from South Africa as well as over 25 per cent of its manganese, titanium, and platinum. Leveraging Agoa as a form of economic diplomacy is key for encouraging the security of critical mineral supplies. Analysts say the GNU may secure South Africa a "honeymoon period" for retaining its privileged access to US markets under AGOA.
President Cyril Ramaphosa remains optimistic that the country's bilateral ties with the US will be cordial irrespective of who succeeds President Joe Biden in the White House. His GNU has lobbied aggressively against the move in the US Congress that could reverse AGOA. In June, the US Congress introduced a Bill to require a full review of the bilateral relationship between the United States and South Africa. While the Bill is not yet law, it could signal a shift in policy-setting between the two countries.
According to the Brookings Institution, a centrist US think-tank, there is a debate in the US as to whether South Africa should be excluded from the AGOA renewal in 2025 --either on political grounds or due to its status as an upper-middle-income country. Whatever the outcome, Brookings Institution data shows that exclusion from AGOA would result in nominally higher tariffs on SA exports to the US, and a GDP shrink of just 0.06%. The loss of both AGOA and the GSP window will see a higher GDP fall of 0.11%. At sectoral level, there would be a higher degree of decline of exports by around 2.7%, with the biggest losers being food and beverage exports, likely to fall by 16%, and transport and equipment by 13%. The drop will be 18% and 14% respectively if GSP is factored in. However, the loss of all preferential access to the US market also sees significant declines in South African exports of grains and crops (10%), fruit and vegetables (4.5%), textiles, leather, and clothing (11%), chemicals (13%), other minerals (6.5%), and electric and electronic equipment (9%).
Nevertheless, the research agency concludes that for the loss of both AGOA and the GSP, the impact on South Africa's overall exports is likely small. For both scenarios, South Africa's total global exports are estimated to fall by around 0.1%, mainly because South Africa's exports to the U.S. amounted to roughly 10% of South Africa's total exports in 2022. Thus, the overall impact of changes to preferential trade policies on South Africa's total export basket will be more muted.
In addition to this, South Africa's exports to the U.S. are highly concentrated in metal commodities, which are not impacted significantly by the loss of tariff preferences. It's unlikely there will be a decline in commodities exports regardless, given the growing demand for critical minerals such as platinum, palladium, and manganese, all of which are on the United States Geological Survey (USGS) critical minerals list.
US legislators who have sponsored the Bill that could impact South Africa's participation in AGOA accuse Pretoria of undermining US national security and foreign policy interests by acting against its stated stance of nonalignment to side with "malign actors", including Hamas, and that it continues to pursue closer ties with the People's Republic of China and the Russian Federation. These legislators also censure the African National Congress (ANC) government's ties with Iran-- and its perceived hostility to Israel, particularly in taking it to the International Court of Justice on charges of genocide in Gaza.
President Ramaphosa and some GNU ministers separately visited the United States where they spoke on the importance of maintaining closer ties between South Africa and the United States, including renewing the country's participation in AGOA. During his September trip, The president highlighted Agoa's significant contribution to the South African economy, pointing out that in 2023, the United States was the second largest destination for South Africa's exports with bilateral trade totalling USD 17.6 billion.
Ramaphosa said between 2019 and 2023, total exports to the US accounted for 8 per cent of all South African exports; whilst under AGOA and the GSP, South African exports to the US accounted for 25 per cent of South Africa's global exports. He said as an anchor for regional value chains in Africa, South Africa has sourced inputs from many countries in the continent into its manufacturing sector, which are re-exported as final products under AGOA. The US program has further bolstered South African exports of wines, citrus, iron and steel, organic chemicals and precious stones.
Alluding to the Congressional Bill, and the reality that it could negatively affect AGOA ties, Ramaphosa said despite South Africa and the United States taking different views on some of the world's pressing issues, their partnership was strong enough to withstand what he called "principled disagreements." He argued that South Africa has sought to advance an inclusive and representative world order, to strengthen multilateralism and to promote the resolution of conflict through dialogue.
It is clear, therefore, that South Africa's foreign policy stance will increasingly come under intense scrutiny, especially from the West, who form its largest economic trading bloc, with Agoa a crucially important gateway to the United States market.
Bhaso Ndzendze, an associate professor of politics and international relations at the University of Johannesburg and Nhlakanipho Hlabisa from the Digital Policy Research Unit at the University of Johannesburg, argue that South Africa's strong economic links with the West and its political leanings towards the West's adversaries could be the biggest test yet for the new coalition cabinet. Writing for the Africa Policy Research Institute (APRI) in July, they say the ANC, whose foreign policy is increasingly pro-BRICS, must now accommodate views that differ from its own in respect to the GNU, whose ministers, especially from the DA who hold opposing views about South Africa's involvement with BRICS and to the ANC government's 'non-alignment' and apparent support for Russia in its war against Ukraine.
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According to these two researchers, although South Africa's foreign policy has hardly moved the needle in the last election, the outcome will decide whether it continues to champion its positions, or if the inclusion of new parties in government will have a moderating effect. It is this respect that analysts are terming a 'Honeymoon period" for retaining AGOA benefits. The GNU is seen as an opportunity to reset relations and perhaps signal some compromise in South Africa's foreign policy trajectory. The GNU's adoption of a portfolio cluster system in the South African government is for various parties with overlapping policy domains to coordinate.
In July, Parks Tau, minister for Trade, Industry and Competition led a GNU delegation to Washington DC, where he emphasised the importance of early and long-term reauthorisation of the Agoa to provide policy certainty for investors and drive industrialisation in Africa. Some 6000 American companies are operating in South Africa.
Pretoria and Washington had also agreed on reviving the Bilateral Trade and Investment Framework Agreement (Tifa), that governs trade relations between the two nations. The US and SA signed a Tifa deal in 2012, which amended the agreement originally signed in 1999. Tifa provide strategic frameworks and principles for dialogue on trade and investment issues between the US and the other parties.
President Ramaphosa's appointment of Ronald Lamola as the country's new minister of International Relations and Cooperation may have been a firm signal that the administration will pursue the current foreign policy direction. Lamola, was the immediate former minister of justice and played a key part in the case against Israel at the ICJ. President Ramaphosa previously tapped him to be the deputy president of the ANC in the party's 2022 conference, a pole position to eye the presidency in future. But how the two act together to chart the future of South Africa in the international platform amid expected pull and push within the GNU remains to be seen.
Erick Kabendera is a UK based Tanzanian journalist and academic researcher currently researching a book on the rise of resource nationalism in Africa's extractive industries.
