AGOA: Is Trade Between The US And South Africa Mutually Beneficial?

In this column Dr. Lyndall Singh grapples with the question, “Is trade between the US and South Africa mutually beneficial?”

Can either party afford to simply ignore trade opportunities between the two countries, including those facilitated through the AGOA as an instrument for market access to sub-Saharan African countries?

Much has been said about South Africa’s non-aligned position in relation to the Russo-Ukrainian War, an ongoing international conflict between Russia and Ukraine. Some assertions neither represented South Africa’s official foreign policy nor factual analysis based on credible insights. 

The world has noted the misplaced commentary, opinions, and rhetoric that was, at a point, fuelled by a bipartisan group of US lawmakers, who issued a letter demanding that the Biden administration punish South Africa for its alleged support for Russia.

At the core of the arguments contained in the letter, dated June 9, 2023, are concerns or allegations, about South Africa’s eligibility to continue receiving trade benefits from the US within the context of the African Growth and Opportunity Act (AGOA). 

In terms of this legislation, the US creates an opportunity for market access to qualifying sub-Saharan African countries, by providing duty-free access to the US market, provided they fulfil certain conditions. 

Inevitably, South Africa is one of the biggest beneficiaries of this piece of legislation, with SA’s exports to the US through AGOA, estimated at over $3 billion in 2022. 

Importantly, the US is South Africa’s third-biggest trading partner with Germany being second, and China occupying the lion’s share.

South Africa’s diplomatic relations with Russia date back to 28 February 1992, preceded by a common purpose of defeating Apartheid during the days of the struggle for liberation. 

According to the Minister of International Relations, Naledi Pandor, “That level of ‘historical friendship’ was strengthened by ‘cooperative partnerships’ for many, many years.”

It is inconceivable therefore, that South Africa as Pandor puts it, would become “sudden enemies on the demand of others,” adding “while we are friends with many all over the world.”

From an economic perspective, the South African Revenue Services indicates that South Africa recorded a preliminary trade balance surplus of R6.9 billion in March 2023. 

This surplus is attributable to exports of R192.2 billion and imports of R185.3 billion. 

The US is the third largest trading partner to South Africa.

As much as 7.7% of South African goods are exported to the US. 

On the reverse, South Africa imported 8.2% from the US. 

Therefore, trade relations between South Africa and the US cannot be taken lightly, and invariably, both countries would benefit, as they are gaining right now, from a recognition that this is a mutually beneficial relationship. 

An analysis of key exports during the year 2021 alone shows that South Africa exported $14 billion worth of goods to the US, mainly Platinum ($6.98B), automobile ($798M), and Gold ($687M). 

Furthermore, for nearly three decades, South Africa’s exports to the US have increased at a yearly rate of 6.9%, from $2.46B in 1995 to $14B in 2021. 

With South Africa remaining the largest producer of platinum in the world by a significant margin, and production amounting to an estimated 140 metric tons in 2022, there is no doubt that the country’s contribution to trade between itself and the US will remain critical for both parties in the long term.

In terms of AGOA, South Africa boasts complex rail network of approximately 31 000 track kilometres (20 900 route kilometres) over which commodities are railed, without which, the movement of goods and services in the SADC region becomes difficult. 

Transnet Freight Rail is the largest railroad and heavy hauler in Southern Africa, of which about 1 500km are heavy haul lines. 

Its rail infrastructure represents about 80% of Africa’s total, again signifying the country’s position as a key role player in facilitating trade and investment in Southern Africa. 

Like any other country, it is beneficial for South Africa to maintain a healthy trade relationship with its key markets, and this should not compromise South Africa’s (or any other country’s) sovereignty in terms of its foreign policy.

The key is to strike the balance between trade, investments, and bilateral relations in a mutually beneficial and sustainable manner.

The writer of this column is Dr. Lyndall Singh, a medical doctor, CEO of AOM Group, and scholar at the Tsinghua University Vanke School of Public Health in Beijing, China. He is the chairperson of Global Value Chains Working Group of the South African National Healthcare Products Masterplan. The views expressed by Dr. Lyndall Singh are not necessarily those of The Bulrushes