A country has trade agreements in place for a reason as they benefit each country they do business with. Why would any country who relies so heavily on this type of trade deal be so stupid to lose such a deal? South Africa is about to find out on how bad things are going to become because losing the US as a trade ally is suicidal.
On Monday the President of South Africa Cyril Ramaphosa stated that the country needs to be prepared in case South Africa is removed from the AGOA trade agreement with the United States. AGOA stands for the African Growth and Opportunity Act which is a unilateral trade preference meaning countries can pick and choose what is the duties or no duties that need to be paid on the traded items. There is no favoring one side over the other and can change or be adjusted at any time.
South Africa has benefitted with over 2000 products which had duty free access to the US markets for products like agricultural gods and automotive parts and vehicles. The vehicles are no longer duty free and why those manufacturers assembling in South Africa have now lost the US market. The duty free part made South Africa lucrative as a base to export into the US and now that this has disappeared there is no real reason to hang around anymore. The SA car market is way too small to justify these plants plus the carbon rich electricity is a negative for exporting to Europe since the introduction of CBAM.
When the person in charge says the country needs to prepare for something or to brace for the US blow then they already know and this announcement has not been made public or official yet. The AGOA trade agreement was extended until 2028, but more importantly those countries involved can be removed at any time.
Ramaphosa stating what I think we all knew means this announcement is imminent and a news channel has it down to a number of days so this could possible happen this week. Rampahosa talks about how important having access to the US market on a duty free basis yet at no point have they tried to mend the broken relationship. This I am afraid has always been a one sided affair with the SA Government thinking they can just keep taking with no consequences with regard to their ant West foreign policy. Joining BRICS was one thing, but then publicly stating the country is best friends with Iran and trades with Iran is shoving two fingers up to the rest of the world.
South Africa bought a case against Israel at the International Court of Justice for one reason only and that the ANC party was bankrupt and the Iran regime paid them money to lodge the case. The ANC was officially bankrupt back at the end of 2023, but miraculously announced that problem had stabilized. There was no proof of funding, but one can read between the lines of what happened here and most likely they received an exchange of goods like petrol and diesel instead of cash for lodging the case. A payment would have been too easy to find so this had to be done through other means that could be hidden.
If we rewind back to 2015 we can start to understand where South Africa has gone wrong economically and why all the jobs have vanished. AGOA back in 2015 was responsible for roughly 500 000 jobs directly and indirectly. The automotive industry had between 250k-275K employees and that figure is now barely making 100K. The fabric industry offers a similar decline, but more so as this industry is now a third party exporter as they import the fabrics from China. This changes the entire AGOA agreement as they used to manufacture their own cotton and fabrics. Fast forward to 2026 current day and the reports suggest that only 250 000 jobs rely on AGOA so in 11 years they have managed on their own accord to lose 250 000 jobs. These industries should have been growing and not shrinking.
Over the years the US has started to fall way as one of the top two importing exporting trade partners for SA and this will drop even further once the AGOA membership has been cancelled. SA wine was a major beneficiary from this deal as SA were the only country with duty free wine flowing into the US.
We shall wait and see later this week what the markets will think of this as I expect the Rand will take a hefty knock. All those industries who established businesses here so they could tap into the US market duty free will be looking to move to neighboring countries in order to still receive these trade benefits.