Recent accusations by the USA that South Africa has supplied arms to aid Russia in the
Ukraine conflict has caused concern that they might suspend South Africa’s preferential export tariffs granted under the Africa Growth and Opportunity Act (AGOA) trade
agreement. The agreement has been in effect since 2000, and is coming up for review
in 2025.
The US is South Africa’s largest export market. According to foreign policy analyst Peter
Fabricius, the preferential trade that happens under AGOA makes up about 25% of the
R300 billion a year trade with this major power, with citrus and wine comprising 15% of
the goods they import duty-free.
South Africa’s pursuit of its non-aligned status in respect of the conflict in Ukraine,
poses risks for the net trade surplus it garners from its US market; revenues sorely
needed by the country.
The AGOA agreement plays no small part in helping to maintain this healthy balance as
20% of the trade takes place under the favourable conditions imposed by it – a
unilaterally beneficial one, though the US dictates the terms and uses it as leverage by
threatening to withdraw when a participating country acts in a manner not deemed in
America’s best interests.
Nevertheless, the benefits are significant; for the country overall, and for the Western
Cape, the lead province in the agricultural export sector, as it supplies up to 60% of the
agricultural goods and beverage traded.
Maryna Calow, communications manager of Wines of South Africa says in 2022 “we
exported wine to the USA to the value of R798 million, making this market one of our
top five.”
The industry makes a significant contribution to the country’s GDP, she says, and
employs hundreds of thousands of workers, thus suspension from AGOA would
definitely have an impact.
“If SA were to be taken out of this agreement,” Calow continues, “we will still export our
wines to the US, but it could hamper our growth because the wine will cost more and
there could be some resistance to that from the local trade and consumers. It is,
however, very difficult to quantify how much volume could be lost, but there is no
question that it would result in South Africa losing wine market share in the US.”
While these losses may not be a death blow – and would be cushioned by other existing
markets for SA agricultural products, such as the EU – it is compounded by the fact that
for the duration AGOA has been in play, SA did not take full advantage of the
arrangement.
Beverly Farmer, CEO of the wine production company Women in Wine, asserts that
after 20 years, the benefits for smaller businesses have not been optimally realised:
“The AGOA agreement seems to be a high level trade agreement and businesses
downstream have not significantly benefitted from it.”
She reasons that South African companies would gain more if there was awareness
and training on the value of the agreement.
