[Opinion] AGOA: The renewal signs are positive

The trade agreement is set to be renewed in 2025 but there has been growing talk among some politicians in the US about excluding South Africa from it, as they are unhappy with the country’s close ties to nations like Russia and China, which they see as rivals and adversaries.

The stakes are high for South Africa. It is one of the 35 sub-Saharan African countries that benefit from the duty-free access AGOA provides to the USA market. According to the Financial Mail’s Claire Bisseker, in 2023 SA exports to the USA measured at more than $14-billion; about a third of those entered duty-free, as part of AGOA.

There are two major risks to SA’s continued participation in AGOA. The first is proposed legislation that, if adopted, would require the given US administration to undertake a comprehensive review of US-SA relations.

The second is the upcoming US presidential elections. The review-containing legislation has passed the US House of Representatives but still needs to pass the Senate or be signed by the US president – at present, Joe Biden.

The concern is who will be president after Biden. If the Democratic nominee, vice president Kamala Harris wins, while not guaranteed, AGOA renewal is more likely.

But if the Republican candidate, former president Donald Trump wins, the possibility of not including South Africa in AGOA, can not be ruled out, under a second Trump presidency.

Tau and Whitfield, however, were confident South Africa would continue to participate in the program after its possible renewal.

Upon their return from the US minister Tau stated:’ “We received bipartisan support for the reauthorisation of AGOA… We’re confident that AGOA would continue and that South Africa would stay in AGOA.”

Whitfield said: “My feeling leaving Washington DC, based on the previous months in the run-up to this, is that we had a positive visit.”

Though nothing has been officially confirmed by the US, Whitfield said there was a feeling amongst the South African delegation that nothing was going to change regarding the country’s relationship with AGOA.

If so, it would be good news for some industries.

The automobile, base metals, agriculture, and chemical sectors benefit the most from AGOA; should South Africa’s status as an AGOA participant not be renewed, they will be the hardest hit; but they will survive.

What is of greater importance, though, is the macro signal sent to current and potential trading partners that would accompany such an event.

South Africa’s continued participation in AGOA would send the right – and necessary for economic growth reasons – signal to things such as capital flows and investment, foreign direct investment, and the country’s general reliability as an investment- and trade-partner and highly desired destination.

In a global interest-rates-are-higher-for-longer environment, capital will seek out higher-return (and ideally, less risky than others) countries.

Continued participation in AGOA, and the strengthening of initiatives such as the Africa Continental Free Trade Area (AfCFTA), will situate South Africa in an ideal place to benefit from changing trade- and capital-flows.

Article originally published here.