Thaw in SA-US relations a relief for Ramaphosa

President Cyril Ramaphosa’s ANC government may be on a sliding popularity trajectory if we believe the latest poll by the Social Research Foundation on April 10, which projects a slump in the party’s popular vote to 37% leading up to the general election on May 29 with the DA at 25% and former president Jacob Zuma’s new uMkhonto we Sizwe (MK) Party at 13%.

Polls of course can be notoriously misleading and erroneous.

Those pertaining to South Africa’s prevailing electoral landscape characterised by a beauty parade of fragmented factions, dysfunctional parties, dodgy donors, and bad actors, are no exceptions.

One metric though which is a cause for some relief for Ramaphosa, irrespective of the pollsters, is the thaw in Pretoria’s relations with the Biden administration, especially in the vital areas of tariff-free trade access and foreign direct investment flows from the US to South Africa under the African Growth and Opportunity Act (Agoa) – a landmark, bipartisan law that has formed a bedrock for US trade with sub-Saharan Africa (SSA) for more than two decades.

The fact that a cross-party group of US senators led by Chris Coons, a Democrat, and James Risch, the top Republican on the Senate Foreign Relations Committee, successfully introduced the Agoa Renewal and Improvement Act of 2024 on April 11 in the US Senate without singling out South Africa is a victory for US-South African diplomacy and realpolitik.

The act originally enacted in 2000 was due for renewal on September 30, 2025, with participating African leaders calling for a further 25-year extension.

The reauthorisation of Agoa, strongly supported by President Biden, renewed the legislation for 16 years, to 2041, with the aim of helping African accession countries to implement strategies to take advantage of the act’s provisions subject to its strict eligibility criteria but more relaxed trade volume metrics.

Agoa countries, for instance, are now subject to two-year eligibility reviews instead of the previous one-year scrutiny.

In the aftermath of the eruption of war in Israel/Gaza and South Africa’s filing a case with the International Court of Justice (ICJ) to investigate Israel “for committing genocidal acts in Gaza”, a handful of pro-Israeli US congressmen called for Pretoria’s suspension from Agoa and a review of bilateral economic relations.

There were fears that South Africa would be ‘punished’ for daring to humiliate Washington’s arch ally, Israel, in the court of international opinion.

A draft Agoa Renewal Act of 2023 for instance, introduced by Senator Coons last November as a precursor to the 2024 act, “mandated an immediate out-of-cycle review for South Africa”, one of the biggest beneficiaries of the Agoa programme. That provision notably has been jettisoned in the Agoa Renewal and Improvement Act of 2024.

The stakes are high for both the 30-odd Agoa-acceded countries and the US. Agoa provides eligible SSA countries with duty-free access to the US market for over 1 800 products, in addition to over 5 000 products that are eligible for duty-free access under the WTO’s Generalised System of Preferences programme. According to the latest data from the US Trade Representative's office, US imports from Agoa countries totalled $28.6 billion in 2023 (about R543bn), slightly down from the $30bn in 2022.

In contrast, US exports to the Agoa countries were almost half at $14.5bn in 2023 – down from the $16.5bn in 2022. The share using the Agoa mechanism marginally declined from $10.2bn to $9.7bn for the same period.

The trade balance under Agoa is heavily in favour of the African countries increasing from $13.5bn in 2022 to $14.1bn last year.

President Biden maintains that “Agoa is facilitating private sector led economic growth across SSA by increasing the competitiveness of African products, diversifying African exports, and enabling the creation of tens of thousands of new, quality jobs in Africa.

The benefits are felt on both sides of the Atlantic: Agoa fosters a more competitive environment for US businesses operating in sub-Saharan Africa. In so many ways, Africa is the future – and so when Africa succeeds, the whole world succeeds.”

It is no secret that the US is also keen to help wean Africa off dependence on Chinese investment and imports by lowering the cost of trade, encouraging investment, and building bridges with the African Continental Free Trade Area (AfCFTA) that will cover 54 countries and a 1.4 billion consumer market.

The US in 2022 for instance overtook China as South Africa’s largest export market. The total export value of South African goods to the US through the Agoa mechanism amounted to R47.4bn in 2022. South Africa is home to more than 600 US companies.

With the Chinese economy overheating due to a collapse in the real estate market and a declining GDP growth outlook from an estimated 5.2% in 2023 and a projected 4.6% in 2024 and 4.1% in 2025, according to the January 2024 IMF World Economic Outlook Update, Beijing’s African economic forays may indeed be tempered out of economic necessity.

Not surprisingly, African demands for more favourable terms under Agoa, including longer repayment periods, a widening of the tariff-free goods universe, and even the curious concept of US “negative” tariffs has been increasing.

The reality is that US-South African bilateral relations have seen a flurry of positive diplomatic activity since the beginning of this year, despite differences over the geopolitical tensions in the Middle East, Eastern Europe, and the South China Sea.

In February, Ramaphosa hosted a bipartisan US congressional delegation and stressed that Agoa “continues to present significant value to Africa’s industrialisation, integration, and the diversification of the continent’s economies. Agoa provides a platform for US investors to participate in the opportunities presented by AfCFTA.”

In March, US Deputy Secretary of the Treasury Wally Adeyemo was in South Africa for a five-day visit.

His message was conciliatory to the point: “An important facilitator of our economic relationship is the Agoa, a cornerstone that provides African companies and workers from 32 countries duty-free access to our market for more than 7 000 products. South Africa has consistently been among the top beneficiaries of this arrangement. Because of Agoa, over $3bn of South African exports to the US entered duty-free last year. This benefit represents the American commitment to a strong economic relationship with South Africa, and to economic integration with other countries in Africa.”

Ramaphosa left the political nuances of the Pretoria-Washington axis to his respected Minister of International Relations and Co-operation, Dr Naledi Pandor, who a week later

was jaw-jawing with US officials during a working visit to Washington.

This compartmentalised approach to US-South African bilateral relations may suffice for now. It is the known unknowns – the fallout of the final ICJ ruling, any future out-of-cycle review by Congress of Pretoria’s Agoa’s eligibility, and the outcome of the US presidential elections in November –that tantalisingly leave room for future uncertainties in the Pretoria-Washington axis.

* Parker is an economist and writer based in London

Cape Times