Founder: Turnaround Talk
Since the lifting of South Africa’s economic sanctions between 1991 and 1993, South Africa has grown to be one of the largest and most diversified economies on the African continent.
Partnerships with international trading partners are critical to this, and the African Growth Opportunities Act (AGOA) has contributed significantly over the past 23 years. However, there have been mounting concerns regarding investing in South Africa since establishing the Zondo Commission of Enquiry in 2018.
At a recently held AGOA Summit, President Cyril Ramaphosa urged the US to hastily renew the Act and to do so for a longer period.
The News24 article points out that Ramaphosa, who was delivering the opening address of the 20th AGOA forum at Nasrec in Johannesburg, said the African continent would also be able to build even more capacity to supply the US with products.
He said, “Shorter periods of extension impede investment ambitions. And we therefore want to see a much lengthier period of extension. The United States and Africa are going to be here for a long time. The United States, us, we are here for the long haul, so let us make AGOA a long-haul opportunity.”
10-20 year extension
The News24 article points out that AGOA is a US trade law which expires in 2025 and which SA and other African countries are hoping will be extended for at least another 10 to 20 years.
The law significantly enhances market access to the US for the 35 qualifying sub-Saharan African countries. The three-day forum is a platform for African countries to lobby for the extension of the law and for political, business and civil society delegates from the continent and the US to unpack challenges and opportunities to encourage trade between the two.
Ramaphosa’s call for the renewal of AGOA before it expires came as he also struck a bullish note about Africa’s role in world trade. Not only was the continent “on the move”, but it is also the “next best story of economic growth” in the world, he said.
the News24 article points out that this early renewal of AGOA should also come with attention to how it can be improved to ensure the “legislation achieves its objectives and reaches its full potential”.
Ramaphosa said AGOA had served as the cornerstone of the US-Africa commercial relationship for more than two decades, but as a whole, remained underutilised by African countries.
“The legislation has helped to promote manufactured exports into the United States, but so much more can be done,” he said.
Beneficiation and utilisation
The News24 article pointed out that Ramaphosa also echoed sentiments expressed by Trade, Industry and Competition Minister Ebrahim Patel earlier at the conference on Thursday about the need to increase beneficiation on the continent. Ramaphosa said that while Africa was an “important source of critical raw materials,” it did not want to be defined as such.
AGOA utilisation rates also varied quite widely among the eligible sub-Saharan African countries, with Ramaphosa welcoming the fact that some countries, such as Kenya and Lesotho, are performing well.
He noted that 88% of Kenyan exports and 99% of Lesotho’s exports to the US qualified for zero-tariff treatment.
Image By: News24
The News24 article adds that Ramaphosa said that when crude oil exports under AGOA were excluded, the data also showed the programme had also substantially improved the export competitiveness of certain African products, especially textiles and apparel.
“Apparel exports from Lesotho, Ethiopia, Mauritius, Madagascar and Kenya have not only led to the creation of tens of thousands of jobs, but these countries have become reliable producers for American customers.”
SA’s automotive exports to the US under AGOA have helped not only it but its neighbours as well, said Ramaphosa, adding, “For instance, SA automotive companies source their leather car seats from Lesotho and wiring harnesses from Botswana, who are neighbours to SA. You can see the value chain that emerges. These companies source copper wire that they utilise from Zambia,they source rubber from Côte d’Ivoire, Nigeria, Malawi, Ghana and Cameroon, and steering wheel components from Tunisia. These are then installed in cars that are exported to the US under AGOA.”
Ramaphosa said the inputs in this specific example accounted for more than $200 million (R3.7 billion) worth of products traded among the affected African countries themselves, illustrating the vital contribution of AGOA to regional industrial development and the integration of economies on the continent.
Future relationships
The News24 article points out that, in her address to delegates, US trade representative Katherine Tai emphasised the US’s commitment to Africa, referencing President Joe Biden’s remarks at the US-Africa Leaders’ Summit last December, where he said the country was “all in on Africa”.
She said the US remained a committed partner of the continent.
Tai said AGOA had been a vehicle for workers and businesses across Africa, adding that the total value of goods imported into the US under the legislation was about $10 billion in 2022, a significant increase on the $6.8 billion imported the previous year.
Image By: junrong/Shutterstock.com
the article adds that other positive developments include the commencement of the African Continental Free Trade Area (AfCFTA) in January 2021, as well as the African Union joining the G20 in September, she said.
SA, in particular, had been one of the largest AGOA users, with Tai pointing out it had been the top exporter in 2022 with $3.6 billion in exports.
Tai also praised SA for leading the continent in its “clear commitment to human rights”.
Even with the challenging global economic circumstances being experienced, the US saw further opportunities for future US-Africa trade.
The article pointed out that Tai also played delegates a video message from US Secretary of State Antony Blinken, who said the US partnership with the continent was about “what the United States can do with African nations, not for African nations”.
AGOA was central to realising this, with Blinken saying that Biden fully supported its reauthorisation and that the US doesn’t just want to simply extend it, but also “work at making it even better”.
Settling concerns
The Act will most likely be renewed as it is equally lucrative for the USA. However, there are some concerns that Ramaphosa won’t be able to shy away from.
Chief among them are the Energy and Logistics Crises. South Africa has been on the receiving end of many enquiries regarding these issues, with foreign investors having serious value-based discussions. Is there a plan to end these crises, and what are the relevant timelines?
What does the future look like beyond 2024 should Ramaphosa not receive a second term as the country’s President? Sure, the status quo will continue, but will Ramaphosa’s successor be equally business-minded? If the ANC loses the 2024 election, it will be a changing of a ruling party that will have governed the country for just short of 30 years; this will bring about some measure of political instability.
Additionally, what progress is being made to eradicate South Africa’s greylisting? Since the second term of Former President Jacob Zuma, South Africa has been increasingly regarded as a country that is a hotbed of corruption. This is another detractor of value for investors.
Finally, South Africa’s current political standpoints have attracted the wrong attention of the US. There were threats of removing South Africa’s favourable trade treatment with the US following the docking of the Lady R in Simonstown earlier in the year. At the height of the Ukraine conflict, the US accused South Africa of loading weapons on the ship which would aid Russia. Additionally, in the latest Israeli War against Hamas, South African political parties (which include the ANC) are siding with the Palestinian cause as opposed to Israel, which is a US ally.
It is clear that South Africa needs AGOA, and there are indeed plenty of advantages to renewing the Act for a longer term. South Africa may benefit from the Act more than we realise if investors seek concrete solutions to the challenges mentioned above. If investments and job creation are on the line, the ANC may move beyond paying lip service towards addressing these challenges.
