The agriculture sector and other experts have welcomed news that the US Senate supports extending the African Growth and Opportunity Act (AGOA) for another two years, although the full approval process has some way to go yet.
The news is crucial to the agriculture sector, which relies on AGOA for easing of tariff pressure on agricultural products to the US, allowing South Africa's agriculture market to stay competitive. AGOA’s impact extends beyond farm exports, as it also grants preferential access by South African companies to the US market across a range of sectors including vehicles and parts, metals and minerals, clothing and chemicals and industrial goods.
Wandile Sihlobo, Chief Economist at the Agricultural Business Chamber of South Africa (Agbiz), said however that the process is not yet final.
“There are further processes to be completed before the bill reaches the US President for his approval. Positively for us, South Africa remains part of this process, and AGOA continues to benefit various sectors of the South African economy."
He said that for South Africa’s farming sector, the American market is important, accounting for just over half a billion dollars in exports a year, which is about 4% of total agricultural exports of about $15.1 billion (R243bn).
Sihlobo added that the figure may seem relatively small, and others have even argued that South African farmers must focus on China.
“But the U.S. market remains critical for farmers and agribusinesses in certain value chains, particularly raisins, table grapes, citrus, nuts, and wine, amongst other products.”
Sihlobo said they should view the Chinese market as an addition to the group of countries that offer access to the South African markets, not a substitute for others.
“That is the posture that the South African farming sector and organised agriculture have maintained. South Africans do not enjoy the luxury of choosing sides.”
Professor Emeritus of International Law, Professor André Thomashausen, said that diversification is fundamentally important in any trade or investment relation.
“Only diversification can mitigate risks. Additionally, any product that succeeds in the US market has the best chance to also succeed in other markets, simply because the US markets operate on the highest levels of competitiveness. AGOA thus remains a top trade policy priority for South Africa,” he said.
North West University Business School economist, Professor Raymond Parsons, said South Africa should welcome the renewal of AGOA by the US Senate.
“South Africa must now build on the AGOA renewal to the advantage of certain key sectors of the economy. It also provides an element of certainty about AGOA as an important factor in South Africa’s relations with a valuable trading partner like the US, at least for the next two years.”
Parsons added that at the same time, the benefits of AGOA have been diluted by subsequent tariffs imposed on South Africa by the U.S, which now lessens its broader trade impact.
Professor Waldo Krugell, an economist at North-West University, said that it is positive to see that the U.S. is still interested in growth and opportunities for the African continent. “The implication for South African exports to the US is a complicated story:
- Many products are exempt already. South African exports of oranges, macadamia nuts, and fruit juices pay tariffs (with or without AGOA).
- The Article 232 tariffs on cars, steel, and aluminium are still at 25%.
- The Section 301 "forced labour" tariffs of 12.5% are still in place.
- AGOA exempts the Most Favoured Nation (MFN) tariffs. Here the average is 3%, but it differs amongst products. On a macro level, the extension, and whether South Africa stays eligible, will probably not matter much, but some exporters will benefit.”
Professor Simphiwe Madikizela, senior lecturer in economics at UNISA's School of Graduate Business and Leadership, said that he sees the potential extension of AGOA for two years to 2028 as welcome news for economic growth and development for South Africa.
Madikizela added that the extension was supported by an overwhelming majority, so therefore whilst still in process, it’s more likely to be approved, which is very much welcome and exciting.
yogashen.pillay@nationalmg.co.za