South Africa going from hero to zero
South Africa has seen a promising trade trajectory, but poor diplomatic relations and a lack of urgency to address challenges, such as US tariffs, pose threats to the country’s economy and growth prospects.
This is according to Aluma Capital chief economist Frederick Mitchell, who highlighted how South Africa went from strength to strain, and what it needs to do to avoid jeopardising this essential partnership.
Mitchell noted that the country’s promising trade trajectory is now threatened by diplomatic tensions, policy inaction, and looming tariff changes that could severely impact key industries.
“South Africa’s economic landscape is increasingly intertwined with the United States, which remains its second-largest trading partner,” said Mitchell.
“This relationship is vital not only for its market access but also for safeguarding employment, technological transfers, and investment flows.”
One of the most pressing issues is the expiration of the pause on the so-called “Liberation Day” tariffs, which will now end on 1 August 2025.
With the pause expiring in two weeks, the US will likely impose tariffs that could raise import costs by about 30%, severely reducing the competitiveness of South African goods in the American market.
“The potential imposition of tariffs would hit key sectors, such as agriculture, mining, and automotive manufacturing, the hardest,” Mitchell warned.
“These industries have greatly benefited from the African Growth and Opportunity Act (AGOA), which has provided crucial market access, supported job creation, and stimulated economic growth.”
“That progress is now at risk.”
Trade data from May 2025 reflected some resilience. South Africa recorded a R21.67 billion trade surplus, driven by modest growth in exports of raw materials like base metals, gold, and minerals.
Imports of value-added goods such as vehicles and machinery saw a slight decline. A relatively stable rand and recent interest rate cuts have also helped support export demand.
Complacency is a luxury South Africa cannot afford
Despite these positive indicators, Mitchell stressed that South Africa’s heavy reliance on exports to the US remains a serious vulnerability.
“AGOA has amplified our market access, especially for agricultural and manufacturing exports,” said Mitchell.
“However, without certainty about our future eligibility, investor confidence may weaken, and industries could face a steep decline.”
Mitchell also highlighted that the US has made its expectations clear. For South Africa to continue enjoying AGOA benefits, it must address a range of political and social concerns.
These include violent farm attacks, land expropriation without fair compensation, and inflammatory rhetoric such as chants of “Kill the Boer, kill the Farmer.”
US officials have also raised concerns about South Africa’s Broad-Based Black Economic Empowerment (BEE) legislation, particularly where it might distort market fairness.
“These issues are sensitive and complex. But our approach must be rooted in safeguarding national sovereignty while demonstrating a willingness to cooperate on mutual concerns,” said Mitchell.
“Failure to engage diplomatically or implement meaningful reforms could jeopardise the entire trade relationship.”
Mitchell stressed that South Africa must adopt a multi-pronged strategy to navigate these risks and protect its access to the US market.
“Firstly, diplomatic dialogue is essential. South Africa must prioritise regular engagement with US counterparts,” he said.
“The country needs to clarify its positions and demonstrate a genuine commitment to addressing areas of concern, particularly around land reform, inflammatory language, and law enforcement.”
He added that clear and lawful policy reforms are also necessary. “The land expropriation process must be transparent and include fair compensation.”
“At the same time, the government must take a public stance against divisive or threatening rhetoric.”
“These are not just moral imperatives; they are economic necessities.” Another key recommendation is market diversification.
Mitchell said South Africa needs to reduce its reliance on a single trading partner to cushion against future policy shocks.
Expanding trade with other global markets could help build a more resilient economy.
“Lastly, fostering domestic stability through social cohesion and strong property rights isn’t just important for internal peace, it also reassures international partners of our reliability and commitment to fair governance,” said Mitchell.
In the current geopolitical climate, with rising global tensions and increasing competition for trade access, complacency is a luxury South Africa cannot afford.
Mitchell stressed that a pragmatic, proactive response to US concerns could help secure AGOA benefits, maintain investor confidence, and protect jobs and exports.
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