Differences with US unlikely to affect SA’s Agoa status

The eligibility of countries for the US’s African Growth and Opportunity Act (Agoa) has been under review during the past few months, and it is becoming clearer that South Africa is one of the countries that will continue being a part of the trade agreement.

A strong indication of this is that the annual Agoa Forum will take place in Johannesburg between 1-4 November.

Donald MacKay, the director of XA Global Trade Advisorssaid: “At present, I think we are more likely to be extended than terminated. The US agreement to host the [forum] in SA is a strong positive indicator. On the other hand, how we speak about the Hamas-Israel war is no trivial thing. If the US perceives us to be supportive of Hamas, this could swiftly change.

“Based on what I have seen in the media, it is not clear to me that the government understands the very large difference between Hamas and the Palestinian people, and this could be a lot more problematic than our fumbles around Ukraine.”

South Africa’s relationship with the US has been turbulent throughout the year, with SA being embroiled in the Lady R saga and having to constantly clarify its stance on the Russia-Ukraine war.

The US and South Africa are again on opposite ends of the spectrum pertaining to the Israel-Hamas war, as the latter country has maintained its longstanding support for the people of Palestine.

Read more in Daily Maverick: Naledi Pandor denies supporting Hamas attack on Israel

Daily Maverick spoke to senior officials at the Department of Trade, Industry and Commerce who said there were ongoing discussions about South Africa’s stance on the Middle East crisis and its possible impact on Agoa.

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One official was confident that this would not lead to the country losing its Agoa status or being swayed to change its stance on the crisis. The official said the US also needs South Africa for the trade agreement to make sense.

The SA government has pointed out the role the country will play in the US’s move to boost its manufacturing sector, as South Africa is the source of many of the raw materials which the US needs to compete with China in developing modern technologies.

Defending SA’s participation

In testimony before the House of Representatives’ Foreign Affairs Subcommittee on Africa last month, which examined the US-South Africa relationship, Anthony Carroll, a retired adjunct professor at Johns Hopkins University, defended SA’s continued participation in Agoa.

“While I understand and share the concerns of many about the direction of our relations with SA, I would oppose making it ineligible for Agoa.

“First, I do not believe that its embrace of Russia constitutes a direct threat to US security interests.

“Second, those goods exported to the US provide critical jobs in South Africa and provide lower-priced goods for US consumers. Indeed, South Africa is the largest supplier of whole oranges into the US market.

“Third, SA’s removal from Agoa would only play into the hands of anti-US elements within the ANC and the radical EFF party. Also, as SA is a member of the Southern African Customs Union (Sacu), it would be impossible administratively to impose a restriction on SA exports without damaging the economies of other member states with which we enjoy close relations.

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“Rather, while Agoa needs to be extended in this Congress, that does not preclude restarting negotiations for a US-Sacu Free Trade Agreement, as is now being negotiated with Kenya. Also, as South Africa has an Economic Partnership Agreement with the European Union that disadvantages US exports, we could make SA’s continuation as an Agoa beneficiary subject to the grant of equivalent status to the US.”

Read more in Daily Maverick: Confidential document reveals SA fears that Agoa trade pact status is under threat

One issue that South Africa wants to tackle is Agoa’s annual review process, which Pretoria believes has a negative impact, especially from an investment perspective, because it creates uncertainty. The general sentiment is that membership of Agoa should be extended for a longer period.

Africa is looking to position itself not just as a source of primary raw materials, but also wants to show its manufacturing capabilities at the Agoa Forum next month. South Africa wants to leverage Agoa and expand its coverage while fostering an investment relationship with the US that will ensure that Africa is enabled to industrialise.

Since its enactment in 2000, Agoa has been at the core of US economic policy and commercial engagement with Africa as it provides eligible sub-Saharan African countries with duty-free access to its market.

The US is an important trade partner of South Africa, with total two-way investment stocks in 2021 totalling just over $11.9-billion. There are more than 600 US firms in South Africa, many of which use the country as a gateway to other African nations.

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The US is the country’s second-largest national trading partner, after China, and South Africa is Africa’s largest exporter to the US. DM