South Africa’s plan to make friends with Donald Trump

South Africa’s Trade, Industry and Competition Department is preparing to advocate for a better trade relationship with the US once President-elect Donald Trump is back in the White House.

This is according to Trade, Industry and Competition Minister Parks Tau’s response to a Parliamentary question from Action SA MP Athol Trollip.

Trollip asked the minister, considering Trump’s re-election earlier this year, what proactive measures his department is implementing to secure South Africa’s access to the trade benefits provided under the African Growth and Opportunity Act (AGOA).

This comes after Trump, shortly following his re-election, expressed intentions to end the AGOA and impose a 10% tariff on all products imported into the USA.

The AGOA is a US trade program that allows eligible sub-Saharan African countries to export a range of products to the US duty-free. 

South Africa has been a participant since the program’s inception in 2000 under the administration of President Bill Clinton. 

AGOA was initially enacted for eight years but has been extended multiple times, with the most recent extension in 2015, set to last until 2025.

Daily Investor recently analysed South Africa’s trading volumes with many prominent countries.

South Africa’s largest trade partners are China, the USA and Germany. These countries account for 24% of all South African exports and 30% of its imports.

South Africa’s trade with the US is made easier through the AGOA, which removes approximately 6,800 US tariffs to promote Sub-Saharan African exports to the US.

South Africa is one of the largest beneficiaries of AGOA. The program has facilitated significant exports of South African goods, including automobiles, agricultural products, and industrial goods like chemicals and steel.

However, over the past few years, South Africa’s continued inclusion in AGOA has come under scrutiny for several reasons.

In particular, South Africa’s close ties with BRICS countries like Russia and China have raised concerns.

This issue was heightened during the Russia-Ukraine war, with allegations that South Africa provided arms to Russia. 

Although these claims were disputed, this incident strained South Africa’s relationship with the US.

In addition, technically speaking, South Africa, as a middle-income country, was not meant to be a part of the AGOA as the Act is specifically aimed at low-income countries.

Therefore, South Africa can “graduate” out of the AGOA if it has developed and grown to a point where it no longer needs preferential access to the US market. 

In 2023, former Trade Minister Ebrahim Patel commented that South Africa had “graduated” out of the AGOA because the country had benefitted enough from it. 

This was met with severe backlash, as many argued that the Act is seen as essential to maintaining strong trade ties with the US.

The AGOA has been vital in bolstering South Africa’s export sectors and maintaining jobs in industries like agriculture and manufacturing. 

Therefore, losing access to the AGOA access could negatively impact sectors that heavily rely on the US market. 

As AGOA’s 2025 expiration date approaches, there is increased pressure on South Africa to ensure its continued eligibility or renegotiate its trade relations with the US on different terms.

This pressure was heightened recently when, in June 2024, Trump announced that if he is re-elected in November, he plans to impose 10% across-the-board levies on all products imported into the US from overseas.

This brought into question whether the AGOA would also be at stake.

Preparing for President Trump

Tau explained in his response that South Africa has been advocating for the renewal of the AGOA beyond September 2025 for a minimum of 16 years, with all countries retained in the programme. 

“There has been bipartisan and bicameral support for renewal of the AGOA,” he said. 

“There have been questions on the continued inclusion of South Africa in the AGOA; in this regard, Africa Ministers of Trade have been clear and urged the US not to use non-trade conditions in the renewal of the AGOA.” 

In addition, he said South Africa remains critical to the regional value chains that have developed in sub-Saharan Africa on the back of the AGOA. 

“There is also recognition in the US that the AGOA must support the implementation of the African Continental FTA, and the role of South Africa in this is well acknowledged,” he said.

“Given the recent election in the United States, South Africa will engage with the new Congress once sworn in in January 2025 to continue advocating for early and long-term renewal of AGOA.”

He said these advocacy efforts will be strengthened by the announcement of the new Ambassador of South Africa to the United States, Ambassador Ebrahim Rasool.

Regarding the proposed 10% tariff, Tau said it is important to note that this is not yet law or officially proposed. 

He said South Africa will continue to engage the US to mitigate the effects of the application of the tariff should it be implemented in view of the supply chains in key sectors that exist between the two countries. 

He added that South Africa will also continue to advocate for the resuscitation of the Trade and Investment Framework Agreement.

This agreement would provide an opportunity to engage at a high level on both sides and discuss all issues of interest or concern to strengthen the bilateral relationship with the US.