The letter addressed to President Cyril Ramaphosa by US President Donald Trump announcing 30% punitive tariffs against the country has exposed two things:
- Ramaphosa’s hopes that the two nations would push a reset button over tainted relations is but a distant dream.
- It has also been the most important signal that South Africa needs to hasten its intentions to look beyond the Western superpower as its most stable economic trading partner.
The letter has also made clear that any ambitions to have the Africa Growth and Opportunities Act (Agoa) renewed later this year must be revised.
It’s been said by many economic and political leaders that over 70,000 South African jobs stand to be lost should the US cut its generous deal to sub-Saharan Africa. But no-one can say they never saw this coming.
During US President Joe Biden’s administration, threats to South Africa’s existence in the Agoa deal were prevalent. In 2023, during the Agoa summit in Johannesburg, Biden’s deputy assistant secretary at the US Bureau of African Affairs, Joy Basu, conceded to South African media that the then US administration and its congress were considering demanding reciprocal duty-free access in some African countries, which had received preferential treatment through Agoa. This decision would have rendered the deal null and void.
“We want to find ways to increase two-way trade. Maybe through the Agoa, maybe through other trade programmes. I think conversations will continue. We need to think about the right channels for all of them,” Basu said as the Ramaphosa administration was making attempts to have South Africa on the list of countries that would continue to reap the benefits of the deal.
Brazil’s President Luiz Inacio Lula da Silva perhaps put it quite aptly when he said the world needs to find a way that trade relations don’t have to pass through the dollar.
South Africa is in the third term of its Agoa trade agreement with the US and is awaiting approval on its application for an early extension. The pact provides duty-free product coverage for 1,835 products across sub-Saharan Africa. In 2021, South Africa’s total goods exports to the US amounted to $15.4bn. Agoa benefits include job creation in agriculture and manufacturing, export earnings and economic development.
But economists have downplayed the effects of losing Agoa. Economist Matthew Stern recently said losing Agoa would be more of an irritation than devastation to the South African economy.
According to Stern, 25% of South Africa’s exports to the US fall under Agoa, and the preferences received were not large, Business Day reported. But Stern said the 30% tariff increase that Trump has proposed for South Africa’s exports to the US, excluding mineral exports, was of great concern.
At his inaugural budget speech in parliament this week, agriculture minister John Steenhuisen warned of the impact the 30% tariffs would have on the country’s agricultural exports, conceding that this would also mean an end to Agoa.
“More than ever, it highlights the need for urgent reform in South Africa so we can ensure our economy meets the requirements of our trading partners around the world,” Steenhuisen said.
Kwame Asante, executive director at Standard Chartered Bank, believes the African Continental Free Trade Area (AfCFTA) offers an alternative path to Agoa for African countries. Asante recently wrote that the AfCFTA provides a framework for Africa to negotiate with global partners from a position of strength, arguing that it reinforces the continent’s ambition to define its trade agenda based on shared prosperity, self-sufficiency and strategic alignment.
South Africa can also look towards new trade allies in the South-South countries, which are proving to be a formidable alternative to the US. Among these are its Brics partners in the Middle East, Asia and South America.
What is ultimately clear for South Africa and its government is that the Trump administration is unpredictable, but all is not lost for South Africa.
Brazil’s President Luiz Inacio Lula da Silva perhaps put it quite aptly when he said the world needs to find a way that trade relations don't have to pass through the dollar. Perhaps it is time for South Africa to look beyond favours and start reimagining itself as a global player in both politics and the economy.
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