As South Africans, we are used to quite a bit of bad news streaming in. Many people don’t like the idea of a war in Europe, much less South Africa feeling the need to take sides with Russia.
At this point in time (conspiracy theories aside), South Africa should be focusing on economics and trade. When it comes to trading partners, the US and Europe are more important than Russia.
From a pure business perspective, it makes a lot more sense to remain neutral and to prioritise trade and looking past the war. It’s not like Russia is going to emerge from this war an economic powerhouse ready to reward those who stood by them, that will suddenly overshadow the trade we give to other nations, particularly exports of fruit and vegetables.
Unless a pro-western leader emerges and offers up significant Russian reforms, I don’t see this happening.
What is AGOA and why is everyone talking about this all of a sudden?
I pulled out salient points from an article written by Ryan van Niekerk on MoneyWeb in June with Thomas Stamey Link at the bottom of the article if you would like to read further.
This stands for Agoa [African Growth and Opportunity Act] agreement with the US. Agoa was passed at the end of the Clinton administration. It was part of the ‘trade, not aid’ policy that Clinton had. So, from 2000 on it has faced a lot of amendments and renewals. But essentially the goal has been to initiate economic development in sub-Saharan African countries.
South Africa has probably been the biggest beneficiary of the programme because our economy is the most developed and we have the products to export to the US. What is the extent of the benefits South Africa has enjoyed and is currently enjoying?
Essentially South Africa represented 52% of all Agoa exports in 2022. Of the over 30 countries that participate in the programme still, of all these exports over half of them came from South Africa.
So, what could the impact on our economy be if the US kicks us out?
It’s hard to be sure whether or not South Africa will be removed. But one thing that’s clear is that it really won’t be as damaging as has been stated in recent media coverage. Agoa, it’s important to remember, is a fraction of a fraction of South Africa’s exports. The US represented 9.4% of South Africa’s exports in 2022, and Agoa exports were only 20.7% of US exports. So Agoa was 1.95% of South Africa’s total exports in 2022.
But really, it’s not all doom and gloom for a sector like agriculture.
In the past, Ethiopia was removed from Agoa in 2022. Its textile and apparel industry had 97.6% of its exports under Agoa in 2021. And when Ethiopia lost Agoa, that industry had its exports to the US grow 32.4% in the following year. So really an industry that was heavily exposed to Agoa didn’t just survive losing the programme, it actually thrived.
In 2022 Ethiopia was removed, Mali was removed, Guinea was removed. There have been many countries that have been removed over the years, but always with the goal of essentially getting [their] status reinstated later on.
Nobody in their right mind would be happy with economic exclusion. Its good to know that there are examples where industry has thrived in other, arguably less advanced nations like Mali. Let’s hope that we are not excluded from Agoa. If we are, we will have to see how each industry fairs, but its worth noting that its not all doom and gloom thankfully.