Extension of Agoa remains the elephant in the room

This Friday President Cyril Ramaphosa will host the 20th Africa Growth Opportunity Act (Agoa) Forum at Nasrec in Joburg which is destined to attract the participation of a large number of official trade delegations from AU member states.

The fact that South Africa was invited by US President Joe Biden to host the forum on his behalf suggests a welcome realpolitik rapprochement between Washington and Pretoria.

This is largely due to the bridge-building visit by Treasury Secretary Janet Yellen to South Africa last January and by other US officials subsequently, and a seemingly more pragmatic policy approach by the Ramaphosa government towards boosting economic relations with the US in the face of entrenched economic challenges at home including subdued GDP growth, rising cost-of-living, sticky inflation, record levels of unemployment and a fall in foreign investment.

Far from cosying up to the Biden administration as some radical detractors may suggest, this rapprochement comes despite Pretoria’s resolute foreign policy stance on the Ukraine conflict and refusing to brand the Russian foray as an occupation to the chagrin of the US, its close relations with China and its co-leadership in the BRICS bloc.

It seems that the US still sees South Africa, the most industrialised country on the continent, as the “partner-of-choice” to drive its Africa strategy.

In fact, Biden, when he announced that Agoa 2023 would be held in Joburg, was crystal clear as to his Africa policy: “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.”

The reality is that when Biden opens the 2023 Agoa Forum, he comes armed with a beauty parade of American largesse and soft power as manifested through a string of initiatives aimed at the rising but neglected continent of which the annual US-Africa Leaders’ Summit, the Agoa Forum (also called the US-Africa Trade and Economic Co-operation Forum), the US-Africa Trade & Investment Conference/ Expo, the USAID Africa Trade and Investment Programme, the US-Africa Business Forum, the US-Africa Partnership in Promoting Two-Way Trade and Investment in Africa the Digital Transformation with Africa Initiative, the US-Africa Partnerships in Gender Equality and Women’s Empowerment are the key core components.

The holy grail for South Africa and the 34 other AU accession states is to convince Biden to extend Agoa beyond 2025 when its tenure expires.

The business case for the extension is a win-win situation for both sides in boosting trade, investment, cultural ties, co-operation towards achieving the 17 UN Sustainable Development Goals (SDGs) and the Net Zero targets of the Paris Climate agreement and supporting economic growth dynamics through the African Continental Free Trade Area that will cover 54 countries and 1.4 billion people.

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 Programme.

Africa-centric US companies are too aware of the opportunities that Agoa promises, given that since its inception the trade balance between Agoa countries and the US has always been in favour of the African states peaking at $64 billion in 2008 and on an upward trajectory once again at $13.5bn in 2022.

Two-way goods trade between Agoa countries and the US amounted to $46.5bn in 2022 of which $30bn comprised US imports from $16.5bn US exports to Agoa countries.

In the year-to-date end July 2023, Agoa exports to the US had reached $17.14bn. US companies are also heavily involved in the $8.3bn Just Energy Transition Programme led by the US, EU and UK.

The potential downside and threat to any Agoa extension are the issues which encompass the competing hegemonies that divide any US-Africa consensus – geopolitical tension especially relating to Russia, China and the West.

African states remain unimpressed by the failure of the West to fully honour pledges relating to climate finance including the loss and damage fund, initiatives on building resilience regarding food security, health inequalities including vaccine inequality and accessibility and pandemic preparedness, compounded by an ambiguous policy towards sovereign debt forgiveness under the Common Framework for Debt Treatment and fairer terms of international trade especially in access to markets and trans-border taxonomies.

But then a week is a long time in politics. A few days after he announced the location of Agoa 2023, who would have thought Israel-Palestine would blow up again in yet another round of senseless violence as evidenced by the Hamas-Israel War.

It may not impact directly on Agoa but it could change the mood music given the resolute support of several AU governments and peoples, especially the ANC-led government of Ramaphosa, for the Palestinian right to self-determination and refusal to condemn the Hamas onslaught per se instead calling for a cessation to the violence on both sides and the need for an urgent humanitarian ceasefire.

At the same time Ramaphosa attended the Cairo Summit for Peace on October 21 at the invitation of Egyptian President Abdel Fattah El-Sisi and called on a cessation to hostilities, a ban on arming the warring parties, and an urgent resumption to the peace process leading to a two-state solution.

Intriguingly he reminded that the US has “a duty and a responsibility to support processes that will deliver a long-lasting and durable peace between the Israelis and the Palestinians”.

Yet as if he was extending a foreign policy olive branch, Ramaphosa a few days earlier also held a telephone conversation with Ukrainian President Volodymyr Zelenskiy, pledging commitment to a peaceful resolution to the Russia-Ukraine conflict, continued engagement in the Africa Peace Initiative, participation in the Ukraine Peace Formula talks that are held at the level of National Security Advisers and the revival of the Black Sea Grain Initiative.

The hope is that the two sides agree to disagree on certain issues and that Biden remains committed to his stated declaration to make Agoa more transformative, meaningful and impactful in the lives of millions of ordinary Africans.

The elephant in the room is that any Agoa extension will have to be approved by a vote in the US Congress, which currently has a Republican majority and which only a few days ago elected a pro-Trump House Speaker in the conservative Mike Johnson.

The stakes for the Agoa 35 are high.

The consensus is universal. Trade and Industry Minister Ebrahim Patel at a media briefing agreed that: “Agoa has helped to promote the export of African goods to the US, and we believe there is scope to deepen its impact on African industrialisation.

An extension of Agoa beyond 2025 will promote inward investment in Africa and provide benefits to both the US and African countries.”

Trade union and business leaders perhaps are a bit more sanguine about the real economy implications.

Cosatu president Zingiswa Losi warned at the briefing that any South African exclusion from Agoa after 2025 would be devastating for job creation, given the current 41.1% unemployment rate, of which 60% are young people.

Similarly, Business Unity South Africa CEO Cas Coovadia maintains that it is in the national and continental interest to retain Agoa.

US Deputy Assistant Secretary, Bureau of African Affairs, Joy Basu, affirmed that Agoa was a priority and cornerstone of fostering new engagement in Africa for the Biden administration.

Let’s hope the rhetoric is matched by action and delivery from both sides!

Parker is an economist and writer based in London.

Cape Times