Opportunity in disaster for South Africa

As South African farmers sweat over the potential of being booted out of the United States’ African Growth and Opportunity Act (AGOA), economists say the door might open to brighter horizons—particularly those in the east.

Concerns are rising that South Africa’s strained relationship with the Donald Trump-led US administration will see the country lose preferential access to the states through AGOA.

While the loss of AGOA has been on the cards for South Africa for some time, under the previous Biden administration, the likelihood of staying within the Act were far greater.

Since Trump took his second term, however, he has been hell-bent on evening the playing field from the US with its trade partners, which has erupted into a volatile tariff war with major US trade partners and the withdrawal of funding to other markets.

South Africa has been no exception, with the Trump administration pulling over $400 million worth of aid to the country and withdrawing from its $1 billion commitment to the Just Energy Transition.

AGOA, which is set to expire in September 2025, appears to be a shoo-in for the chopping block.

The latest Business Confidence Index reflected these concerns. AGOA’s duty-free access to the US has benefited several sectors, including the agricultural sector.

Discovery Chief Executive Officer Adrian Gore told Bloomberg TV that losing AGOA “looks very, very possible”, and economists have repeatedly warned that it will have significant economic consequences.

“Losing AGOA … could cost tens of thousands of jobs and dent the government’s economic growth strategy,” the Bureau for Economic Research (BER) said in its analysis of the index.

However, there exist opportunities in the loss.

According to Aluma Capital chief economist Frederick Mitchell, while South Africa stands to lose billions if it is booted from AGOA, there are some “mitigation strategies” that the country could apply to soften the blow.

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

South Africa could tap into the African Continental Free Trade Agreement (AfCFTA), which allows duty-free imports and exports to 12 African countries, or it could turn its attention to the BRICS bloc.

Look east

Agbiz data shows that, last year South Africa’s agricultural exports reached a record $13.7 billion.

These agricultural exports are diverse, with 44% of these products exported to other African countries, 21% to Asia and the Middle East, 19% to the European Union and 6% to the Americas.

Wandile Sihlobo, Chief Economist of the Agricultural Business Chamber of South Africa (Agbiz), says that great opportunity exists for South Africa’s farmers in China in particular.

He noted on Sunday (9 March), that China is currently trying to boost food security, and this has “tremendous potential” for a country like South Africa that exports many staples.

While China is trying to secure its own capacity to become food secure, with a population of 1.4 billion people accounting for 11% of global agricultural imports, it has no real choice but to seek outside help.

“China’s size warrants more attention from South African policymakers. The South African agricultural sector has been calling for greater efforts to increase South African exports to China,” Sihlobo said.

The economist noted that South Africa already exports many of the products China needs to import, and often produces surpluses in some categories.

This means that is room to expand to China. He said that both governments should work toward lowering trade barriers to make this possible.

“This means arguing for a broad reduction in import tariffs that China currently levies on some of the agricultural products from South Africa. Removing phytosanitary constraints in various products is also key,” he said.

President Cyril Ramaphosa is fully aware of the importance of the agricultural sector and what it means for the country.