Clock is ticking for critical South African employer

South Africa’s vital export manufacturers have received another year of grace with the United States Congress’s extension of the African Growth and Opportunity Act (AGOA). 

This gives these manufacturers a tight window in which they need to reduce their reliance on exports to the United States, particularly to the country’s manufacturing crown jewel, the automotive sector. 

Apart from this, manufacturers have to continue to push for better relations with the United States to create long-term certainty about South Africa’s access to the world’s largest consumer market. 

This is feedback from BDO South Africa partner Siya Mthembu, who explained that the automotive sector in particular finds itself at a crossroads. 

Among the challenges Mthembu has previously said the industry faces are logistics inefficiencies, local policy uncertainty, and a stagnant local economy. 

The announcement of tariffs on South African exports to the United States in April 2025, with no trade deal secured as of the time of writing, made the country’s export manufacturers uncompetitive in the world’s largest economy. 

These tariffs undermined the benefits of the AGOA agreement for South Africa, but, more importantly, they created immense uncertainty regarding trade with the United States. 

“South Africa welcomes the extension of AGOA, as it provides a degree of certainty regarding trade with the United States,” Mthembu said. 

“However, the South African government must continue engaging the US authorities on the 30% tariff imposed on goods exported from South Africa, as this significantly undermines the benefits of AGOA.”

Mthembu noted that a one-year extension is a very short period, with South Africa having a tight window in which it can show it has learnt the lessons of the past. 

 “One key lesson South Africa should have learned from the tariffs imposed by the US is the importance of market diversification,” Mthembu said. 

“At present, South Africa appears overly reliant on its traditional trading partners, with limited progress in securing new trade agreements.”

In contrast, India has recently negotiated a trade deal with the European Union (EU), placing South Africa in direct competition with India in the EU market. 

In addition, South Africa remains in a trade deficit with its BRICS partners, yet there is little evidence of a proactive strategy to reverse this trend.

South Africa must also place greater emphasis on intra-African trade. The African Continental Free Trade Area aims to create a single market for goods and services across 55 African countries, promoting increased intra-African trade. 

“This presents a significant opportunity and should be a key focus area for South Africa’s trade strategy. Market diversification is critical to reducing vulnerability to external shocks,” Mthembu said. 

Manufacturing exposed

South Africa’s manufacturing sector is one of the most exposed to international trade tensions, with it being heavily reliant on exports. 

This can be seen in manufacturing employment data, which PwC analysed to understand the potential impact of tariffs on the local economy. 

Manufacturing employment is the most exposed to geopolitical tension and tariffs from the United States, with around 490,000 jobs in the sector sustained by export revenues. 

This is around a quarter of the 1.7 million jobs sustained by exports in South Africa and double the share of mining, which is traditionally seen as the most important export sector. 

PwC explained that South Africa is a small, highly open economy, which makes it vulnerable to external shocks like changing political relationships and technological innovation. 

An added layer of vulnerability is the country’s dependence on trade and foreign investment for economic growth, both of which have come under immense pressure in recent years.

Mthembu noted that while the extension of AGOA gives South Africa some relief, it is far from a solution to the present challenges. 

“It is important to note that AGOA does not override the 30% tariff imposed by the Trump administration,” Mthembu said. 

“As a result, exports to the United States are effectively subject to 0% under AGOA plus 30% under the so-called ‘Liberation Day’ tariff, materially eroding competitiveness.”

He explained that these tariffs continue to place substantial pressure on the automotive industry in particular. This industry is one of the few examples of South Africa’s industrial policy driving positive outcomes. 

Mthembu pointed to the example of manufacturers like Mercedes-Benz, which export the majority of their vehicles to the US, as being particularly exposed. 

This underscores the importance of ongoing negotiations with the US to remove or reduce the 30% tariff, without which the full benefits of AGOA cannot be realised.