What is AGOA?
The African Growth and Opportunities Act (AGOA), first enacted in May 2000, is set to expire in September 2025. This U.S. trade legislation aims to boost economic growth and cooperation between the United States and eligible sub-Saharan African countries. At present, 40 countries meet the criteria for AGOA, granting them the following advantages:
Duty-free entry to the U.S. market for certain products.
Preferential trade advantages.
Increased trade and investment opportunities.
How much South Africa made from AGOA
In 2022, South African exports through the African Growth and Opportunity Act (AGOA) constituted approximately 21% of the country's total exports to the United States, primarily driven by agricultural and manufacturing products. This facilitated a tariff savings of R1.8 billion for companies. Although total exports to the US reportedly declined in 2023, AGOA exports remained steady at roughly 22% of the total exports, with a rand value of R155 billion. Exports to the US account for about 2.2% of South Africa's GDP, a figure that continues to fluctuate, underscoring the US as one of South Africa's largest export markets.
Threat
Reports indicate that South Africa's relationships with China, Russia, and Iran are the cause of the threat. South Africa participated in military exercises with Russia, permitting the use of their sanctioned warships at the Pretoria base, while South African soldiers are trained in Russia, which seems to have triggered some form of retaliation. These actions by South Africa are seen as efforts to distance itself from the West. South Africa and the US maintain significant trade relations, with the automotive industry and orange produce being key exchanges between the two nations.
Impact of being kicked out of AGOA
Being expelled from AGOA will be catastrophic for South Africa, particularly given the current economic situation and the living standards of the population. This will manifest in the following ways:
No duty-free imports from America - We might face import duties of up to 100%.
Costlier goods and services from America.
Worsening economic conditions.
Less competition in industries that benefited from AGOA, leading to higher unemployment rates.
A significant drop in imports between the US and RSA.
It's important to recognize that these economic challenges are likely to take some time to fully manifest, as they transition from a macroeconomic to a microeconomic level, which generally don't occur simultaneously.
Author's input
The US is South Africa's second largest trade partner, making them an extremely important trade partner to South Africa. The duty-free trading is absolutely beneficial to the South African businesses, especially in the agricultural and manufacturing industries, resulting in reasonably priced products and increase in profits. BRICS+ is also such an important partnership to South Africa as well, with China being South Africa's biggest export partner. South Africa is caught in between a rock and a hard place and the decision to go fully west or fully east is not as easy as the citizens may feel. Ads for the week
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