The trade relationship between South Africa and the United States (US) 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). "Increased 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, particularly in manufacturing and agriculture. Companies dependent on AGOA benefits could struggle to maintain sales. Supply chain disruptions may occur, particularly in the automobile sector, where production relies on tariff-free access.
"Investor confidence could decline as companies reconsider their strategies," said Lenoke. "The uncertainty surrounding trade relations with the US could also affect the rand, increasing import costs."
Without AGOA, South Africa may seek trade alternatives with the European Union, BRICS nations, and the African Continental Free Trade Area (AfCFTA). The shift may not fully compensate for lost trade with the US.
"Increased dependence on BRICS, particularly China, could worsen trade imbalances," said Lenoke. "The AfCFTA offers opportunities, but the benefits will take time to materialise."
Exploring new trade agreements may become necessary. A bilateral free trade deal with the US could be an option, though negotiations could be lengthy. Enhancing South Africa’s economic partnership agreement (EPA) with the EU may help mitigate losses. Expanding trade with Asia and the Middle East could create additional export opportunities.
"South Africa must implement policies to support industries affected by the potential loss of AGOA," said Lenoke. "Investment in manufacturing, infrastructure and innovation is essential. Government support, including tax incentives and grants, will help businesses adjust to new trade conditions."
As uncertainty continues, industries reliant on AGOA benefits await clarity on future trade policies. The decisions made in the coming months may shape South Africa’s economic landscape for years to come.
