South African business groups are pushing the government to make strong diplomatic efforts to ensure the country is not stripped of its duty-free access to the U.S. market.
A group of U.S. senators recently questioned South Africa’s status under the African Growth and Opportunity Act, citing Pretoria’s ties with Moscow. South Africa has invited Russia President Vladimir Putin to an August summit despite his invasion of Ukraine and his being wanted by the International Criminal Court.
Relations between Pretoria and Washington have so deteriorated in recent months that South African business groups are now scrambling to try and make sure the country isn’t kicked out of an important U.S. tariff-free program.
The war in Ukraine has divided the two countries after South Africa refused to condemn Russia’s invasion, even going so far as hosting Russian warships for joint military exercises earlier this year. In May, the U.S. ambassador to South Africa alleged the country had secretly supplied arms to Moscow — something Pretoria denies.
It is unclear whether Russian President Vladimir Putin will be attending the summit of the BRICS group of emerging economies in Johannesburg in August. His visit would place South Africa in a quandary. As a signatory to the International Criminal Court, it is obliged to arrest him should he set foot in the country.
The U.S. Congress is beginning to review the renewal of the African Growth and Opportunity Act, known as AGOA, with a decision expected by the end of the year. Some U.S. senators recently wrote a letter saying South Africa should no longer host an AGOA forum set for later this year. They also raised the prospect that the country could lose access to its trade benefits entirely.
Busisiwe Mavuso, CEO of Business Leadership South Africa, an independent association of some of South Africa’s largest businesses, said she was preparing a submission urging the U.S. to renew South Africa’s participation in AGOA.
“There’d be dire financial consequences if we were to lose this,” Mavuso said. “And loss of this trade relationship would mean billions of rand of economic activity as well as tens of thousands of jobs, which depend on those exports, would be lost. It would be devastating for employment, especially in a country where we’re currently sitting with 70 percent youth unemployment.”
Mavuso said South Africa is the largest single beneficiary country under AGOA, with 25% of the country’s exports going to the U.S. and nearly a billion dollars’ worth of exports to the U.S. in the first three months of this year alone.
Wandile Sihlobo, chief economist of the Agricultural Business Chamber of South Africa, said being removed from AGOA would have far-reaching implications, not just on the tariff side but in terms of investor sentiment.
“The AGOA benefits, there are certain industries that really enjoy those,” Sihlobo said. “In the absence of them there could be economic consequences, particularly in the automobile industry and of course the agricultural sector, specifically wine as well as the fruit sector.”
South Africa’s opposition Democratic Alliance, which has expressed strong support of Ukraine, is also worried the country could lose access to AGOA, said the party’s shadow finance minister Dion George.
“If the view is that South Africa is in fact not acting in the interests of the United States and may well be a threat to the national security of the U.S., then yes, of course that will become an issue and may very well be a factor in carving South Africa out of AGOA next year,” George said.
Spokespeople for the presidency and South Africa’s ministry of international relations did not reply to requests for comment. However, they have previously said there’s no evidence South Africa is going to lose access to AGOA, after President Cyril Ramaphosa recently sent a delegation to lobby U.S. officials.