The Minister of Trade, Industry and Competition Ebrahim Patel has warned of a couple of risks that could see South Africa’s trade with the US under the Africa Growth and Opportunity Act (Agoa) slightly diminish even when the country survives being kicked out.
Agoa provides duty-free product coverage for about 1 835 products, and its extension from 2025 requires a decision of the US Congress and is, thereafter, signed into law by the US President.
South Africa and 34 other sub-Saharan African countries are currently eligible for preferential access for specified goods to the US market under the terms of Agoa.
Patel yesterday told Parliament that South Africa valued the economic relationship with the US, and was seeking to maintain and expand such relations with all large economies globally.
However, Patel said the localisation policy of inward buying recently adopted by the US might hurt the volumes of South African products that are eligible for exports under Agoa.
“The first risk with the extension of Agoa is US domestic pressures. There's been a significant move away in the US from an earlier period where the US favoured new trade agreements. In the last seven years or so, we've seen a greater focus in the US on its own market, a greater focus on seeking to to build a ‘Buy American campaign’ and to reindustrialise their own economy,” Patel said.
“There's a bigger focus on localisation now in the US. And that means so for example, when the Generalised System of Preference came up for renewal, it was at a time when the political mood domestically in the US didn't favour these kinds of things. So that is a risk that we must bear in mind.”
Patel, however, said they had done quite a bit of engagement with US industry and political leadership to show how the economic relationship with the African continent was actually a critical part of US’s own re-industrialisation.
“America is dependent on critical minerals from other parts of the world, and a big part of it is from the African continent. So it's not just a one way economic relationship where we have access to the American market,” he said.
Patel was addressing a joint meeting of the portfolio committee on trade and industry and the select committee on trade and industry on the current status of South Africa’s access to the US market under Agoa.
He also wanted that the growing geo-political polarisation posed challenges to South Africa, a country that has strong economic relationships with both west and east, and whose economic challenges require it to maximise the trade and investment relationships with countries across the geo-political divides.
As a result, Patel said South Africa’s trade strategy therefore argued against fragmentation in favour of multilateralism.
“The second risk is geopolitics as the world becomes more divided, particularly the technology leadership race between, on the one hand the United States and the other hand China. There is the danger that one or more countries and blocs will begin to take a fairly short-sighted geopolitical view,” Patel said.
“It may come from any of the different parties in these things. So that's a second that I said we need to bear in mind.”
Two-way trade between the two countries amounted to $25.5 billion (R485bn) in 2022, with the US being South Africa’s second largest national national export market after China.
This comes as both countries confirmed over the weekend that South Africa will host the 20th Agoa Forum in November, dispelling prior concerns about the possible relocation of the summit to a different country.
Trade relations between South Africa and the US nearly broke down in May, with the US threatening to remove South Africa from Agoa after the US Embassy to South Africa, Reuben Brigety, accused the government of selling arms to Russia.
In July, the Democratic Alliance (DA) as the official opposition submitted a case to the US Trade Representative for South Africa's Agoa renewal in 2024.
DA MP Dion George yesterday said Patel’s brief presentation to Parliament lacked any insight on what the government’s thoughts were on trade “beyond Agoa” as the US considers its future trade relationship with South Africa and the region.
George said the DA would now write to US Trade Representative Katherine Tai to request that the party be allowed to present and participate in the Forum.
“Our presentation will not only aim to maintain the status quo but to elevate South Africa's position within Agoa and the global market in a manner that benefits both South Africans and our international partners,” George said.