SA’s AGOA future is uncertain

South Africa’s lucrative duty-free and quota-free access to the big US market remains in the balance despite US President Barack Obama’s administration’s assurances that it will do all it can to ensure that it continues after 2015.

Visiting US Secretary of State Hillary Clinton last week said the administration would do its “very best” to ensure that the African Growth and Opportunity Act (AGOA) would be extended when it expired in 2015, and that South Africa would continue to enjoy its benefits.

International Relations and Co-operation Minister Maite Nkoana-Mashabane said after meeting Clinton that 98 percent of South Africa’s exports to the US entered without tariffs or quotas under AGOA.

The legislation has helped boost the US to South Africa’s third-largest trading partner and given the country a trade surplus of over $2 billion (R16bn). The local government also values AGOA because a large part of exports to the US are manufactured goods like vehicles which helps to boost manufacturing and create jobs.

Nkoana-Mashabane said the government was “eagerly lobbying” the US over AGOA, with AGOA figuring prominently in meetings last week with Clinton’s delegation, including senior officials and the heads of major US corporations.

Clinton said that continuing AGOA was a key part of Obama’s new Africa policy, one of the pillars of which is promoting sustainable growth.

The Obama administration would start working on the campaign when the new US Congress comes in after the November elections. Congress will have to decide if AGOA is extended. But the new Congress is an unknown quantity, Obama might not be around next year and Clinton herself has said that even if he wins a second term in the November elections, she intends to leave her present job.

And so Francisco Sánchez, US Under Secretary of Commerce for International Trade, who was in Clinton’s delegation, was unable to predict with any certainty that the new Congress would extend AGOA or include South Africa.

It was put to him that many US businesses are complaining that South Africa is too highly developed economically to continue getting AGOA benefits, which are supposedly intended for poorer countries.

Sánchez said in an interview that he would have to defer that question to analysts who were familiar with the numbers. The decision by Congress would depend on how the new legislators interpreted the numbers, he said. “There are a number of different ways to look at it, including the way it was set up. I can’t predict the future on this.”

He had earlier expressed confidence, though, that the new Congress would “by and large” recognise the geo-political and economic importance of Africa and especially South Africa for the US and, therefore, the need to continue AGOA. Sánchez noted that six of the ten fastest-growing economies in the world were African, and South Africa in particular offered considerable trade and investment opportunities.

Diplomatic sources have said that anti-Western and anti-capitalist rhetoric from some members of the tripartite alliance, as well as conflicting statements about government policy especially on nationalisation, might harm the chances of the US renewing South Africa’s AGOA benefits.

But Sánchez dismissed these, saying “what matters here is action more than rhetoric. South Africa has enormous opportunities, as well as enormous challenges, one of which is job creation. South African leaders know they need a multi-faceted approach to job creation, one of which is foreign direct investment.

“I think that South Africa will be up to the challenge of job creation and knows that foreign direct investment, including from the US, is important. And we have a better track record, including in job creation, transfer of skills and training, than others,” he said in an apparent reference to China.

“On the US government side and on the South African government side, actions speak louder than words,” he said.

Robert Hormats, the Under Secretary for Economic Growth, Energy and the Environment, told a US-South Africa Business forum in Johannesburg last week that he did not think South Africa’s growing alliance with China – cemented by its recent joining with Brazil, Russia, India and China in the influential Brics bloc of emerging nations – would hurt its chances of retaining its AGOA benefits.

Clinton herself agreed, saying that it would amount to “political malpractice” if South Africa did not seek greater commerce wherever it could, including with China, as the US itself was doing.