Although the widely anticipated removal of the African Growth and Opportunity Act (AGOA) preferences for South Africa by the US on 1 January 2027 will have a minimal impact on the domestic economy as a whole, specific sectors like agriculture and the motor industry will inevitably be negatively affected.
In commenting on the decision by the United States to exclude South Africa from AGOA from 1 January 2027, Prof. Raymond Parsons, economist at the NWU Business School, says the automotive and agricultural industries are poised to bear the brunt of the AGOA exclusion.
He says while only about 10% of South African exports to the United States are currently subject to AGOA, the exit of South Africa still puts thousands of jobs in these sectors at risk.
“Although the loss of AGOA preferences is highly regrettable and the specific sectoral impact may be painful, the situation is manageable if the right market adaptations are made. Addressing the negative economic consequences of losing AGOA preferences will therefore continue to require close collaboration between the government and the relevant business interests to identify alternative trade strategies.”
Prof. Parsons points out that, in addition, despite the AGOA decision, non-AGOA trade relations with the United States remain far more substantial, with the overwhelming bulk of South African exports to that country falling outside AGOA preferences.
“This trade then drives the vast majority of existing bilateral economic ties between South Africa and the United States. The non-AGOA trade relationships are therefore reinforced by a robust footprint that goes beyond trade balances.”
He explains that the AGOA result still means that the core economic pipeline of trade and investment connecting South Africa and the United States remains intact and must continue to be nurtured.
“Nonetheless, the AGOA exit also now reinforces two things. First, South Africa must accelerate its market diversification strategy in a changing geoeconomic world that offers new opportunities. Enlarging and diversifying trade options includes expanding East Asian market access to growing economies there, as well as further leveraging economic opportunities through the African Continental Free Trade Agreement (AfCFTA).”
He says that, secondly, the government must aim to make the domestic economy more internationally competitive by reducing the costs of doing business in South Africa.
“This in particular encompasses expediting logistics reform, especially in rail and port facilities, that will help to offset the AGOA loss by keeping South Africa globally competitive.”
Prof. Raymond Parsons
