South Africa is facing significant challenges as concerns mount over its potential expulsion from the African Growth and Opportunity Act (AGOA). This move, if executed, could have sweeping economic ramifications for the nation, especially for its exports to the United States, which have historically benefited from this program.
Wamkele Mene, the secretary-general of the African Continental Free Trade Area (AfCFTA) Secretariat, addressed these concerns at a private sector roundtable breakfast meeting held at Nedbank's headquarters in Johannesburg on February 28, 2025. Mene noted the expected consequences of probable expulsion from AGOA, stating, "This crisis is also an opportunity for us to explore new markets in Africa." His comments were echoed by South African officials as they emphasized the need for the local private sector to diversify its export markets amid rising diplomatic tensions.
Since its inception in 2000, AGOA has facilitated over $55 billion worth of South African goods exported to the US. The automotive sector, which has seen exports rise from $195 million to $1.6 billion, exemplifies the significant role AGOA plays in South Africa’s economy. According to the Brookings Institute, the repercussions of losing AGOA eligibility could devastate several sectors, particularly food and beverages, transportation equipment, and textiles.
The potential loss of AGOA stems from worsening relations with the US, prompted by South Africa's stance on various international issues, including its relations with Iran and its support for Palestine. US President Donald Trump recently hinted at pulling financial aid from South Africa, amplifying fears of AGOA expulsion should the Expropriation Act remain unchanged. This law, perceived by many as harmful to property rights, contributes to the growing unease around South Africa's trade status.
While the US-South African ties seem strained, Mene urged South Africa to take inspiration from Ethiopia, which faced similar AGOA removal on January 1, 2022. After its exit, Ethiopia successfully pivoted to alternative export markets and doubled its exports to China. Mene asserted, "Ethiopia... broadened their export base and diversified. This is what all of us, I believe, should work toward – a diversified export market through the AfCFTA." He stressed the importance of the private sector's role to achieve this diversification.
Mene emphasized intra-African trade as an area rich with potential, noting how Africa's share of exports to China has grown from 3% to 14% between 2020 and 2024. He called upon African businesses to leverage the lifting of trade barriers under the AfCFTA to bolster their competitiveness against external markets. Yet, he did acknowledge the significant challenges posed by infrastructure deficits, which currently amount to around $170 billion annually, hampering trade across the continent.
Addressing these challenges, Mene noted AfCFTA's recent initiatives, including the establishment of the Pan-African Payment and Settlement System, which allows businesses to conduct transactions using local currencies. This development would eliminate the need for costly currency conversions, facilitating easier and less expensive cross-border transactions. Mene stated, "This system would... support small- and medium-sized enterprises..."
Trade, Industry and Competition Minister Parks Tau underscored South Africa’s potential as the key logistics hub for African trade, intiming, "By enhancing supply chain connectivity, we will... attract global investors to the continent." He projected significant reductions in tariff and non-tariff barriers by 2035, signaling progress toward improved trading conditions under the AfCFTA. Tau affirmed, "The removal of trade barriers... will drive economic growth... and is expected to increase exports by 17.6% across the continent."
He highlighted the steady growth of South Africa’s AfCFTA exports, which reached R696 million between January 2024 and January 2025, covering items from mining equipment to food products. The rise is indicative of the increasing integration within the AfCFTA framework and the growing opportunities within African markets.
Emphasizing the need for proactive engagement, Tau urged South African businesses to focus on intra-African trade as they navigate these transitional times, articulately stating, "South African companies must position themselves strategically to take full advantage of this transformative agreement." He called for stronger collaboration between public and private sectors to build competitive industries and supply chains across Africa.
Despite the challenges posed by high inflation and climate change, Tau remained optimistic, asserting, "Africa is... positioning the continent as one of the most attractive, sustainable investment destinations." He concluded by reinforcing the potential of the AfCFTA to transform Africa's economic fabric, inviting South African entities to seize this pivotal moment to expand their reach and influence across the continent.