Perfect storm about to hit South Africa’s biggest employers

South Africa’s agriculture and automotive sectors are facing a storm of epic proportions as the United States’ tariffs are about to kick in, and there’s near certainty that the African Growth and Opportunity Act (AGOA) will end.

South Africa urgently needs to diversify its trade partners as the country looks to be losing the battle to win over the United States, and the end of AGOA will add significant pressure to key markets.

According to economists and business leaders, this should be a priority for the country after US President Donald Trump launched a global trade war last week.

Trump initiated a baseline 10% tariff on US imports taking effect from 5 April, with higher tariffs on countries with large trade imbalances, which will kick in from Wednesday, 9 April.

South Africa is among the countries getting hit with higher tariffs, announced at 31%.

The tariffs are based on the trade balance between each country and the United States and has little to do with actual trade policies. Nevertheless, the move sent markets crashing.

The United States is South Africa’s second biggest trade partner, and the impact of the tariffs will be felt hardest by the agriculture and automotive sectors. Minerals and metals were largely exempt.

These sectors will also suffer a double blow if the country is booted from AGOA—something that is very likely to happen.

According to the South African government, the tariffs being hiked against South Africa already wipe out the benefits of AGOA, which is up for renewal in September 2025.

Losing the beneficial access to American markets provided by the Act, however, will make this worse.

Combined, these sectors are some of the biggest employers in the country, with around 900,000 people employed in agriculture and over 100,000 in the automotive sector.

Chief Economist of the Agricultural Business Chamber of South Africa (Agbiz), Wandile Sihlobo said that South Africa needs to work at retaining its access to US markets—but it also needs to start preparing for a post-AGOA world.

Critical to maintaining healthy export markets is to diversify and find other countries that are open to trade.

Sihlobo said that South Africa’s agriculture exports were up 3% to $13.7 billion in 2024, with destination markets already varied.

The African continent accounts for almost half of the exports, while the EU, Middle East and Asia, and the UK are also sizable importers.

“South Africa should not rest on this success but should maintain and deepen trade relations in regions where capacity remains,” he said.

The EU is quite protective and may not offer many growth opportunites for South Africa, the economist said, but there is huge potential in the Middle East, where Saudi Arabia alone imports $25 billion of agricultural products a year.

“Moreover, the UAE is a large agricultural market that imports roughly $22 billion of agricultural products annually. South Africa has a 2% share and is the 16th largest supplier,” he said.

“Qatar imports about US$4 billion of agricultural products a year. But here, South Africa also plays a minor role, ranking 10th in the list of suppliers to Qatar and having a 2% market share in Qatar’s agricultural imports.”

Plans closer to home

According to Business Leadership South Africa (BLSA) lead, Busi Mavuso, the other big opportunity for South Africa is closer to home in Africa.

Outside of the country’s traditional trading partners, there is huge potential for increasing trade within Africa, which makes up only about 17% of the country’s merchandise trade, she said.

Mavuso said the Africa Free Trade Agreement came into force in 2019 but was effective only from October 2022, with the launch of the AfCFTA Guided Trade Initiative (GTI)—a pilot initiative to test the operational, institutional, legal and trade policy environment under the AfCFTA.

“BLSA believes both business and government should pay renewed attention to the AfCTA. It is hugely ambitious, bringing together so many countries with differing needs and priorities,” she said.

“But the final mechanisms are falling into place and improving trade with other African countries will be mutually beneficial.”

Mavuso said that the South African government has taken the right approach with the United States, by keeping open channels of communication and not trying to hit back.

However, she said South Africa also has to face the reality that it is “not exactly in the front of the queue of the many other countries that are trying to initiate trade talks with the US”.

“Given South Africa’s weak negotiating position on the trade front, it is even more important that we look at what we can influence to improve the country’s economic situation,” she said.

Fortunately, Mavuso said that it appears that the government is on the same page.

“BLSA agrees with ministers Lamola and Tau that strengthening and diversifying our trade relations with other countries is critical – and let’s bear in mind that most countries may now need to reduce their dependence on trading with the US,” she said.