The current stance of the U.S. administration towards South Africa has raised concerns about the potential exclusion of South Africa from the African Growth and Opportunity Act (Agoa), due for renewal in 2025. Agoa, a trade preference program established by the U.S. in 2000, allows certain exports from South Africa and other eligible sub-Saharan African countries to enter the U.S. market duty-free. South Africa is the leading African agricultural exporter under Agoa, with two-thirds of its agricultural exports to the U.S. benefiting from tariff-free treatment. Since Agoa's inception, South Africa has exported over $7 billion worth of agricultural products to the U.S., as reported by the USDA Foreign Agricultural Service in November 2023.
The Brookings Institution's November 2023 report outlines the potential impact of losing Agoa benefits for South Africa. The report suggests that the impact on exports and GDP would be minimal, with a projected 2.7% decrease in total exports to the U.S. The food and beverages, transport equipment, and fruit and vegetable sectors would experience the most significant losses. However, the GDP decline is estimated at only 0.06%. The Western Cape, benefiting the most from Agoa, accounted for 49% of South Africa's agricultural exports to the U.S. between 2018 and 2022, followed by Mpumalanga with 15%.
Three potential scenarios are considered regarding Agoa's future. First, South Africa could lose its preferential treatment, leading to a decline in export volume unless goods remain competitive. Second, the U.S. importer and South African supplier might absorb the duty costs, maintaining trade. Third, the full duty could be passed onto U.S. consumers, which seems unviable with current tariffs. To prepare, South African suppliers should model these scenarios, understand tariff risks, and negotiate with importers. Diversifying markets is advisable, exploring opportunities in Canada, the EU, and the UK, and leveraging regional agreements like the SADC Protocol on Trade and the AfCFTA.
Exploring new markets, including Russia, amid potential easing of sanctions, and engaging with the G20's B20 forum could provide additional opportunities. Building relationships with U.S. importers and other markets remains crucial. Diversification and competitiveness are essential strategies for safeguarding positions in the global market.
Source: IOL