The African Growth and Opportunity Act has handed South African exporters duty-free, quota-free access to the vast US market, and that privilege now hangs by a thread. President Donald Trump wrote to Congress on Monday announcing his intention to remove South Africa and Rwanda from the Agoa list, a decision that lands squarely on the shoulders of exporters, thousands of jobs and the country’s growth prospects.
Rwanda’s removal came as a surprise. South Africa’s did not. Washington’s five “asks” remain unresolved, including claimed Afrikaner discrimination, black economic empowerment and land expropriation without compensation, or the confiscation of white land as Trump prefers to characterise it. A newer concern has been added: South Africa’s foreign policy positions, which Washington says pose a threat to US national security. That could be read as a reference to Pretoria’s relationship with Iran, its criminal case against Tel Aviv over the war in Gaza, and its membership of Brics+, a bloc the US regards as anti-American. National security interest, however, is very broad and subjective, a point that matters for investors trying to price political risk.
Because no bilateral trade agreement exists between Pretoria and Washington, South African exports will from January enter US markets under the most favoured nation regime of global trade rules. That is a materially less favourable footing for producers competing on thin margins.
The commercial exposure is unevenly distributed. Agriculture, mining, manufacturing and the auto sector are the industries likely to be hit, with the Eastern Cape, the Western Cape and Limpopo the three provinces most exposed to the new dispensation. Both business and labour are rightly concerned at the adverse effects of Washington’s decision, since behind the products are thousands of South African jobs.
Meanwhile, the government has promised support for the affected sectors. When US-SA relations began deteriorating, it set up a help desk housed in the trade, industry & competition department, the DTIC, which was supposed to help exporters find alternative markets. Between then and now, China has moved in, scrapping import duties for exports from the African continent, a signal worth weighing for any operator reassessing its market mix.
There is also a cost on the American side of the ledger. The decision is a double-edged sword: as well as hurting South African producers, it will make South African goods uncompetitive in US markets while depriving American consumers of choice. The wrangling is between two governments, yet the punishment is directed at nongovernmental actors, including civilians. It is the private sector, its millions of employees and their families who are the victims; few, if any, state-owned enterprises export directly to the US.
Up until now, Washington has threatened to sanction South African politicians and policymakers, but no list of targets for visa and travel restrictions has been published. Apart from bellicose rhetoric, the only tangible actions have been uninviting South Africa from the G20 leaders’ summit later this month and stalling trade talks with Pretoria through near-impossible demands.
Diversifying away from the US will take months, if not years. The government should accelerate efforts towards a mutually beneficial free-trade area, while in the interim providing targeted support for the affected sectors. Whether exporters can reposition before January, when the harsher tariff regime kicks in, is now the question every operator must answer.