South Africa urged to establish stronger US trade relations as Agoa benefits at risk

South African agricultural organisations have urged lawmakers to pivot towards establishing a robust bilateral engagement with the United States amid fears of the country losing its African Growth and Opportunity Act (Agoa) benefits. 

This comes on the back of hardening political relations between South Africa and the Trump administration, which has culminated in the expulsion of South Africa’s Ambassador to the US, Ebrahim Rasool, on Friday. 

Agoa provides eligible sub-Saharan African countries with duty-free access to the US market for more than 1 800 products, in addition to the more than 5 000 products that are eligible for duty-free access under the Generalized System of Preferences program.

Agriculture, particularly citrus and wine, manufacturing, mining, automobile assembly, metalworking, machinery, textiles, iron and steel, chemicals, fertilizer, foodstuffs, and commercial ship repair, are among the major beneficiaries of Agoa in South Africa.Agoa is estimated to have created or sustained around 250 000 thousands of jobs in South Africa.However, experts have been reflecting on the importance of Agoa for South Africa's agricultural sector and have highlighted the unilateral nature of the current trade engagements.

Wandile Sihlobo, chief economist for the Agricultural Business Chamber of SA, said on Friday that South African agricultural exports to the US currently constituted a modest 4% of the country's total agricultural global trade, which amounted to approximately $13.7 billion annually. 

Speaking at the Mapungubwe Institute for Strategic Reflection webinar on the “Implications of changes in US administration for South Africa and Africa”, Sihlobo said a staggering half of agricultural products were exported to other African nations, while the EU and Asia accounted for 20% and 21%, respectively. 

Yet, despite this small fraction of trade with the US, Sihlobo said certain vital sectors such as citrus, nuts, and wine heavily depended on Agoa’s favourable terms.

Sihlobo warned that should Agoa not be renewed later this year, or if the trade access were terminated, South African products could face a 3% tariff to enter the US market.

He said this reality could detrimentally affect South African competitiveness in the US market.

“There are some sectors that would be hard to see if we were to be outside of this,” he said. 

Sihlobo shared his apprehensions about possible future tariffs and the need to navigate various diplomatic hurdles.

“There are a couple of risks in this relationship that we are having with the US. Perhaps pivoting to a new direction may be a useful thing, both for securing our relationship long term,” Sihlobo said.

“We think that the new direction that the South African lawmakers should be taking to the table, whenever that engagement happens, is really thinking about how we can find a bilateral engagement with the US and come out of what we are having, which is a unilateral engagement.”

Sihlobo also pointed towards enhancing trade relationships beyond the US, highlighting South Africa's membership in BRICS and calling for deeper intra-group trade as the current BRICS agricultural exports held an 8% share of South Africa's agricultural total.

“I think that beyond the chaos and some of the geopolitical noise that we are experiencing, South Africa should be thinking about that long-term trade engagement with the US. And I think as that is happening, we do need to pay a lot of attention to opening as many export markets as possible in other parts of the world,” he said.

“Having your tentacles as well as just the links across the world is somewhat hedging against some of these risks and the noise and unpredictability that we are having now.

Meanwhile, Rasool was expelled from the US on Friday after speaking at the same webinar where he said US President Donald Trump was showing “a disrespect for the institutional base of the current hegemonic order”. 

US foreign policy expert, Prof. Michael Walsh, had already warned last week that South Africa should expect that the Trump Administration would request that Rasool be recalled to South Africa as many Republican elites felt that his position was untenable for a number of reasons.

“While not everyone has a personal gripe with the ambassador, there is a general belief that the Government of South Africa selected someone who they could not reasonably expect to be able to repair the bilateral relationship,” said Walsh, a senior fellow in the Africa Program at the Foreign Policy Research Institute and a visiting scholar at the University of California, Berkeley.

“Many Republican elites therefore see his appointment as yet another piece of evidence that the Ramaphosa Administration has no desire for friendly relations with the United States.” 

In the wake of Rasool’s expulsion, the South African Presidency urged all relevant and impacted stakeholders to maintain the established diplomatic decorum in their engagement with the matter.

BUSINESS REPORT