With accusations of breaching certain criteria for trade eligibility, South Africa faces a potential squeeze on our benefits from the United States special trade framework under the African Growth and Opportunity Act (AGOA). However, the Western Cape has since 2021 shown the capacity to strike deals on our own, and have signalled our differences in foreign policy from Pretoria, both in regard to the recent Ukraine and Palestinian conflicts.

However, it is hard to tell if this will make a difference.

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What is AGOA?

To qualify, countries must follow the model of governance that is exhibited by Western countries, and eliminate trade barriers to Western countries. This includes a market-based economy, a Western justice system, political pluralism, welfare-based economic redistribution and development, anti-corruption measures, and workers rights.

According to the Act which regulates the trade agreement, the countries must not undermine American foreign policy interests, or violate human rights, though in practice, the latter is determined in a discretionary manner. The 1974 Act adds more factors and bases for eligibility, such as not being a Communist country, not disrupting the world economy, not causing adverse effects on U.S. commerce, providing compensation for seized property, and respecting arbitration awards.

Somalia and Sudan haven't requested AGOA designation, while Equatorial Guinea and Seychelles graduated from the General System of Preferences (GSP) due to income and are ineligible for AGOA. The GSP is a category created by the same Act which launched AGOA, and marks countries for their low level of economic development and potential competition with US industries.

Currently, 36 countries are eligible for AGOA. In 2020, the Democratic Republic of the Congo regained AGOA benefits, but lost them again in 2021, along with Ethiopia, Guinea, and Mali military coups.

In January 2022, Ethiopia lost its beneficiary status under AGOA due to "gross violations of internationally recognized human rights," according to US President Joe Biden, referring to the conflict in the Tigray region. Ethiopia had been part of the AGOA program since 2000, significantly benefiting from it. The textile and leather industries, employing around200,000 people, especially young women, were major contributors. Uganda lost its status for its imposition of life imprisonment for gay sex, and Rwanda lost its textiles benefits for halting second-hand clothing imports in an attempt to protect its garment industry.

Ethiopia's exports to the US surged from $28 million in 2000 to nearly $300 million in 2021, with almost half under AGOA. Unfortunately, Ethiopia's withdrawal led to the loss of approximately 100,000 jobs, with most affected being women in the southern textile factories, unrelated to the Tigray conflict.

The Ethiopian government argued that AGOA's removal would reverse substantial economic progress, and have an adverse effect on the population. However, the United States asserts that AGOA's conditions are essential for upholding human rights and granting the US leverage to address conflicts.

Recent developments saw Uganda, Niger, Gabon, and the Central African Republic losing AGOA access due to reasons like anti-homosexual laws and military coups. Conversely, Mauritania's access was reinstated for its progress on worker rights and eliminating forced labor. Critics argue that AGOA imposes stricter trade barriers on African countries compared to other nations like India and Brazil, creating an uneven playing field for access to the vast US market.

How do we benefit?

Despite the uneven playing field, trading with the United States without the preferential conditions is markedly more expensive. At the moment, the United States is the 2nd largest export market for the Western Cape in the past five years, and trade with South Africa as a whole totalled R192.99billion in 2021.

The most affected agricultural exports are citrus fruit, nuts, wine, grapes and ice cream, which disproportionately affects the Western Cape, which is SA’s agricultural export powerhouse, with the top contribution in terms of employment and value in the sector.

Together with WESGRO and the Citrus Growers Association, Premier Alan Winde has been lobbying the United States delegation for consideration in the AGOA talks. Major issues cited by the official press release included the major disruptions caused by incompetent management at Eskom and the National ports Authority, causing delays and expenses to pile up at both the manufacturing and export stages of our industrial trade.

The Western Cape has engaged the United States for several special trade and aid arrangements in 2021, primarily through WESGRO, the main provincial trade and investment forum. The public brochure on the trade deal in question lists a few items of interest. PepsiCo bought out Pioneer foods, so now Sasko, Weetbix and most of the pasta and pap in your local store, are now owned by America. Google’s $150m high speed fibre cable to Cape Town is on there, as is Amazon’s three new cloud data servers. There are some export-friendly deals too, in SA medical device manufacturing, and food supply.

Wesgro is responsible for much of the aforementioned deals struck and they have, in a relatively short time, brought a great deal of investment to our shores, totalling R7.8bln, most of it at the National Investment Summit (which Ramaphosa naturally took credit for). MEC David Maynier and Deputy Consul General Will Stevens were interviewed on Cape Talk emphasise the deal as a commitment to “deeper integration” across most major economic sectors. What was interesting, was that they mentioned a concerted effort by major American corporations to invest in the Western Cape in the middle of the economic crash.

America has now become the number one foreign direct investor.

By visiting the South Africa country profile page on the official AGOA website, traders can register for benefits under the scheme by filling in the requisite forms.

Why is our status under threat?

There are two broad reasons why our status is under threat: property rights, and foreign policy. While the Expropriation Bill (currently passed in Parliament but not signed by the President) has not been mentioned in discussions yet, it eliminates the right to compensation for seized property, which is a legal criterion for AGOA eligibility.

Second, Pretoria has been rebelling against American foreign policy aims, largely due to its membership of BRICS. This first began with their position on the Russian war in Ukraine, which split the country’s foreign policy stance between the DA-run Cape, which favoured Ukraine, and the ANC-run interior, which favoured Russia under a nominal position of neutrality. But now with the open support of Hamas in the current Israeli war, South Africa crosses a more solid line, by supporting a designated terrorist organisation.

Our support for Cuba, including millions of Rands of aid, was also highlighted, an issue which organisations like AfriForum have successfully litigated against recently, and was included in the agenda of a recent visit to the United States by Afrikaner trade union Solidariteit.

Our Foreign Minister Naledi Pandor, having gone so far as to call for the arrest of Israeli officials by the ICC, has made this matter unequivocal, in a way the stance on Russia was not – the infamous cocktail bash at the Russian embassy, celebrating an “end to the unipolar world order” at the start of the invasion of Ukraine, was not accompanied by an openly partisan stance, but an officially neutral one. However, South Africa did continue with naval drills with Russia and China, begin naval drills with Iran, and end the regular naval drills with the United States.

We also allowed an embargoed Russian vessel, Lady R,  to dock at Simonstown.

Republican US Senator Jim Risch aims to overturn the Biden administration's decision to extend South Africa's full AGOA trade benefits. Ina letter to US Secretary of State Antony Blinken and Trade Representative Katherine Tai, Risch criticized South Africa's AGOA eligibility, citing concerns about its ties to groups such as Hamas, Iran, and Russia, as well asits criticism of Israel, and contended that South Africa had jeopardized US national security and foreign policy interests.

Risch called for tighter AGOA eligibility requirements and argued that the current setup does not align with US principles and national security interests. The AGOA program, set to expire in 2025, is crucial to US economic engagement with Africa, benefiting both African and American interests. Top of Form

It remains to be seen whether our provincial government’s lobbying efforts can mitigate the damage our national government has caused, but if not, there is some hope that provincial-level arrangements, like those struck in the past few years, can soften the blow on Cape industries. After all, Mayor Geordin Hill-Lewis’s decision to join the Western solidarity campaign for Ukraine last year led to a pat on the head from the US Ambassador to the UN General Assembly. This was a crucial loyalty test, and the importance of the US’s remarks here are hard to overstate - it meant an official, public endorsement of the DA by the broader Atlantic establishment.

With any luck, it may just count enough.

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