AGOA: Ramaphosa and co know which side bread is buttered on

Finance Minister Enoch Godongwana. Picture: Timothy Bernard/African News Agency (ANA)

Finance Minister Enoch Godongwana. Picture: Timothy Bernard/African News Agency (ANA)

Published Oct 2, 2023


The spectre of Cosatu welcoming South Africa hosting the US Government’s African Growth and Opportunity Act (AGOA) Summit in Johannesburg on 2-4 November must be warming to the cockles of Finance Minister Enoch Godongwana’s heart.

“We support the government’s efforts to extend South Africa’s membership in AGOA, host the Summit in Johannesburg in November and enhance the scope of products covered to further incentivise our economic and industrial development.

“AGOA has had a positive impact upon not only South Africa but Africa as a whole. It provides reduced tariff access for large volumes of South African goods to the US market, currently the world’s largest economy.

Our mining, manufacturing and in particular auto-manufacturing, clothing, jewellery and agricultural exports have benefited from this favourable tariff regime,” declared Cosatu in a statement.

According to AGOA data, the aggregate two-way goods trade between the 35 AGOA countries and the US amounted to US$46.5bn in 2022 of which US$30bn comprised US imports from and US$16.5bn (roughly R303bn) US exports to AGOA countries.

The Act which was introduced in 2000 saw a peak in 2008 when the US imported US$82bn of goods from and exported US$18bn to AGOA countries. The importance of AGOA to African economies is evidenced in that since its inception the trade balance between AGOA and the US has always been in favour of the African cohorts peaking at US$64bn in 2008 and on an upward trajectory once again at US$13.5bn in 2022.

In the year-to-date end July 2023, AGOA exports to the US totalled US$17.14bn. While the ANC and Cosatu appreciate the importance of South Africa’s AGOA-related trade relations with the US, its coalition partner in the ANC dominated administration of President Cyril Ramaphosa, the SACP is unmoved warning in July after the NATO summit that Washington “is using a wide range of measures, including economic and trade policies (for example, the US’s AGOA) to coerce governments in different global regions to abandon neutrality and replace it with support for and subordination to NATO.”

Far from being a matter of semantics, this intra-party dissonance has plagued the ANC since the onset of post-apartheid democracy, perhaps not as brazen during the presidency of Madiba who was ‘protected’ by his status as a global icon for freedom and justice.

It did however play a part in the ousting of President Thabo Mbeki and the rise of his successor President Jacob Zuma, who eventually fell foul of his administration’s wide-scale state capture and corruption.

It continues today especially in the vital energy and electricity sector which is plagued by ideological differences in policy especially relating to part privatisation of utilities, a much faster transition to a just and clean energy strategy as opposed to a slower and “orderly” transition based on an eventual weaning off from coal and other fossil fuels, and greater involvement of private capital in renewables and Green Hydrogen.

The result has been the loss of huge opportunity costs and three years of persistent load shedding misery for South Africans through the devastating human and economic costs – exacerbated by procurement and disbursement corruption, the capture of copper cables and other assets by organised crime, and a perceived government policy inertia in getting to grips with the issues, with the embarrassment of Eskom assets having to be guarded by the army.

Is there a danger that such a scenario could be repeated under AGOA?

Most unlikely and would take a catastrophic level of incompetence and factional in-fighting within the ruling ANC coalition. Not that the US is an innocent party in all of this. American foreign policy towards Africa has at best been minimalist over the last decade or so especially during the Trump presidency, despite growing evidence of increasing Russian and Chinese political, economic, financial, security and military influence on the rising continent.

The US is seething at Pretoria’s “neutrality” in refusing to condemn the Russian invasion of Ukraine, together with African nations’ legitimate gripe of a neo-colonialist Western attitude to African economic aspirations and development needs relating to inequitable and costly access to finance, trade, investment and guarantees, compounded by an ambiguous policy towards sovereign debt forgiveness under the Common Framework for Debt Treatment, have conspired to confine US-African relations to a nadir. US dismissal of calls for paying reparations related to the brutal African slave trade remains a potentially festering political sore.

Whether it is a reset or a rapprochement, realpolitik in the last few months seems to be winning the day in revitalising US-African relations.

President Biden, announcing that AGOA 2023 will be held in Johannesburg crucially declared: “The future is Africa. I look forward to visiting South Africa in November to discuss our shared priorities, reaffirm the Administration’s commitment to the continent, and discuss opportunities to make AGOA more transformative as we deepen our trade and investment relations with the sub-Saharan African (SSA) countries.”

A lack-lustre BRICS summit in Johannesburg in August and a more dynamic counter G20 gathering in New Delhi in September, in which the African Union was admitted as a permanent member equal to the status of the European Union, and the US/Europe committed to develop the Trans-African Lobito Corridor through a Greenfield Railway line connecting DCR and Zambia to regional and global trade markets via Lobito Port in Angola, exposed the mistaken perceptions of several African nations including South Africa, of a Russian and Chinese panacea to their entrenched development and economic issues on a primus inter pares basis.

The stakes are high for both AGOA-acceded countries and the US.

Since its inception in 2000, AGOA has been at the core of US economic policy and commercial engagement with Africa. AGOA provides eligible SSA countries with duty-free access to the US market for over 1,800 products, in addition to over 5 000 products that are eligible for duty-free access under the WTO’s Generalised System of Preferences program.

To meet AGOA’s rigorous eligibility requirements, countries must establish or make continual progress toward building a market-based economy, the rule of law, political pluralism, and the right to due process. Countries must also eliminate barriers to US trade and investment, enact policies to reduce poverty, combat corruption, and protect human rights.

No sooner had the coup in Niger taken place, Biden immediately suspended prior financing agreed for projects in the west African country.

In contrast, South Africa’s accession to AGOA expires in 2025. No wonder, President Ramaphosa, Patel, the ANC in general and Cosatu are all keen for the renewal of South Africa’s AGOA dispensation. They know which side their bread is buttered on!

Parker is an economist and writer based in London

Cape Times