South Africa heading for disaster

South Africa’s rocky relations with the United States, and president Donald Trump’s direct attacks on the country’s policies and laws, are putting it in line to be booted from the African Growth and Opportunity Act (AGOA).

Troubles with the states have been hanging over South Africa for the past week after Trump signed an executive order freezing funding to the country and opening a pathway for white farmers to ‘flee’ and settle in the US.

The president accused South Africa of human rights violations and discrimination against white people through the Expropriation Act, alleging that the government was confiscating land.

As many economists and experts have pointed out, this is a complete misunderstanding of the Act.

However, the damage to South Africa’s image and relations with the US has already been done, and many worry that other trade agreements, like AGOA, are next in line.

AGOA grants qualifying members beneficial access to US markets. South Africa’s continued presence in the Act has long been under question, even before Trump’s second term.

There is bipartisan (Republican and Democrat) concern that South Africa’s moves against its allies (Israel) and strong support for its enemies (Russia, China, Iran) on the global stage move against US interests.

AGOA is expected to end in September 2025. Hopes for a renewal under the Biden administration were climbing; however, under Trump, these hopes are dwindling fast.

According to Aluma Capital chief economist Frederick Mitchell, South Africa stands to lose billions if it is booted from AGOA, which will have significant economic consequences.

He noted that in 2023 alone, South Africa exported about $8.3 billion worth of goods to the US, including mineral resources like gold and platinum, agricultural products like citrus and wine, and manufactured goods, particularly in the automotive industry.

“Overall, South African exports benefit from favourable trade terms, particularly under the AGOA agreement, which allows tariff-free access for eligible products,” he said.

On the other end of the equation, South Africa imported around $9.2 billion worth of goods from the United States. The country mainly imports things like machinery, chemicals and agricultural commodities.

This trade flow shows that South Africa has a strong reliance on US technology and innovation, which is instrumental in South Africa’s development and industrialisation, Mitchell said.

“AGOA represents a cornerstone of South Africa’s trade relationship with the United States,” he said.

It gives the country enhanced market access, allowing approximately 6,500 product lines from South Africa to enter the US market without tariffs. This promotes our exports and boosts the local economy.

As a result, the Act also boosted local job creation and stimulated economic growth—particularly in sectors like textiles, apparel, and agriculture, where export volumes have surged due to preferential access, he said.

“The advantages offered by AGOA have made South Africa a more attractive destination for US investors, fostering growth and innovation in various sectors,” Mitchell said.

If South Africa loses access to AGOA, these benefits will disappear. The economist noted that the suspension of the agreement poses a serious economic risk for South Africa.

Getting booted could result in increased tariffs, which would make South African products less competitive in the US market.

This loss could translate to reduced export revenues and job losses in affected sectors, he said.

The sudden shift in trade dynamics could also lead to decreased foreign direct investment and negatively impact local businesses reliant on the export market.

While losing AGOA would be bad, Mitchell said that South Africa is not completely defenceless. He noted a few “mitigation strategies” that the country could apply to soften the blow of any potential booting.

These include expanding trade relations with other countries and regions to reduce reliance on the US market.

“Strengthening partnerships with emerging economies could help absorb any potential losses,” he said.

The country could also boost domestic production and support local SMEs to create jobs and enhance export capacity.

There’s also the African Continental Free Trade Agreement (AfCFTA), which allows duty-free imports and exports to 12 African countries.

“This initiative is likely to boost South African exports by an expected 29%, adding an estimated R655 billion to exports of South Africa. This will likely boost economic growth and foreign exchange earnings,” Mitchell said.

However, the top prize would be for AGOA to continue and for South Africa to remain eligible.

To this end, Mitchell said that South Africa should continue to diplomatically engage with US officials to try and highlight the mutual benefits of AGOA for both countries.