The trade relationship between South Africa and the United States faces uncertainty as tensions between Pretoria and Washington grow. The potential loss of benefits under the African Growth and Opportunities Act (AGOA) raises concerns about economic consequences for key industries. "If South Africa loses AGOA benefits, the impact will be felt in manufacturing and agriculture," said Mpho Lenoke, an academic at the North-West University (NWU). "Increasing tariffs will make South African products less competitive in the US market, affecting export revenue.
The removal of AGOA benefits may lead to job losses, especially in manufacturing and agriculture. Companies dependent on those benefits could struggle to maintain sales. "Supply chain disruptions may occur, particularly in the automobile sector, where production relies on tariff-free access," Lenoke explained. "Investor confidence could decline as companies reconsider their strategies. The uncertainty surrounding trade relations with the US could also affect the rand, increasing import costs. Without AGOA, South Africa may seek trade alternatives, including deals with the European Union, BRICS nations, and the African Continental Free Trade Area (AfCFTA)."
This shift, Lenoke cautions, may not fully compensate for lost trade with the US. "An increased dependence on BRICS, particularly China, could worsen trade imbalances," he added. "The AfCFTA offers opportunities, but the benefits will take time to materialize." Exploring new trade agreements could become necessary, perhaps through initiating a bilateral free trade deal with the US. Such negotiations, though, are expected to be lengthy.
At the same time, enhancing South Africa’s economic partnership agreement (EPA) with the EU may help mitigate losses from AGOA. Expanding trade with Asia and the Middle East could create additional export opportunities. Ramaphosa emphasized the need for South Africa to implement supportive policies for industries impacted by the potential loss of AGOA. "Investment in manufacturing, infrastructure, and innovation is key, and government support, including tax incentives and grants, will help businesses adjust to new trade conditions," said Lenoke.
The backdrop to this economic tension is rooted deeply within diplomatic relations. South Africa seeks to reach a broad-ranging agreement with the US on various issues amid these strained ties. President Cyril Ramaphosa recently stated the need for meaningful negotiations with the US, especially as disputes over Pretoria’s land and foreign policies have thwarted relations. The US administration under Trump has halted aid to South Africa, citing issues including its new land-expropriation laws and its stance on Israel.
Trump's decision led to significant funding issues, with R7.5-billion ($407-million) shortfall affecting longstanding HIV programs. "It’s an interconnected world—we’ve got to deal with each other, whether we like it or not, and we’ve got to look at other policies where we may differ," Ramaphosa remarked during a Goldman Sachs event.
Trump recently claimed on his Truth Social account, "South Africa is confiscation land," which Ramaphosa countered, explaining, "We haven’t confiscated any private land since the end of apartheid in 1994. He got the wrong end of the stick on our land policies." Ramaphosa called for patience as South Africa seeks to navigate through these discussions without knee-jerk reactions.
Complicatively, South African lobby groups representing the interests of White Afrikaners, like AfriForum and Solidarity, urged the Trump administration to impose sanctions against senior members of the African National Congress (ANC) linked to corruption. Their meeting with US officials involved presenting names for sanctions under the Global Magnitsky Act, which targets foreign officials involved with corruption and human rights violations. Kallie Kriel, CEO of AfriForum, disclosed the names of officials implicated by the Zondo commission, which documented expansive graft during Jacob Zuma's presidency—costing taxpayers R500 billion ($27 billion) with minimal accountability since its conclusion.
The pursuit of sanctions, these lobby groups also urged, reflects broader concerns about cultural discrimination faced by Afrikaners, claiming misalignment between US and South African foreign policies. They voiced their apprehension about losing preferential access to US markets due to the political fallout stemming from land policy disputes. Trump’s recent aid freeze and his offer of refugee status to Afrikaner farmers stirs fears of economic declines. Notably, since apartheid's close in 1994, there hasn’t been any appropriation of private lands, as asserted by South Africa's leaders.
Across the board, industries reliant on AGOA benefits now await clarity on future trade policies as economic decisions made within the upcoming months are primed to reshape South Africa's economic architectural framework. South Africa's next steps could define its international standing, with the consequences reverberated throughout its diverse, particularly vulnerable sectors.