South Africa's exclusion from the Agoa program does not mean the end of US trade

Economists suggest that South Africa's upcoming exit from the African Growth and Opportunity Act (AGOA) is unlikely to have a significant direct impact on the country's overall economy. However, according to Johann Els, a senior economist at PSG, this decision raises broader concerns regarding investor confidence and trade relations with the US.

On Monday, the US notified Congress of its intention to cease South Africa's compliance with the trade preference program starting January 1, 2027, which will lead to the cancellation of duty-free access for relevant South African export goods.

Nevertheless, the volume of trade that actually benefits from AGOA is significantly smaller than South Africa's total exports to the US. The loss of preferential access does not mean that South African goods cannot enter the American market; instead, the relevant products will lose their duty-free status and will be subject to applicable import tariffs.

Els noted that in 2025, about 7% of South Africa's goods were exported to the US, amounting to approximately $16.5 billion. Of this amount, about $1.6 billion came under AGOA preferences. This constitutes roughly 10% of exports to the US, but only 0.7% of South Africa's total merchandise exports, he added. He emphasized: 'Although the absolute figures may seem significant, the share of our total exports directly affected is relatively small.'

Not Such a Big Problem?

Els also stated that 'this does not mean that all of South Africa's exports to the US will suddenly face new tariffs or disappear. Exports will continue, but some goods will become less competitive.' He advised South Africa not to confuse its status as a major beneficiary of AGOA with the share of its own exports dependent on this program.

Annabel Bishop, Chief Economist at Investec, also anticipates a limited national economic effect but views the vulnerability differently. According to her estimates, 7% of South Africa's exports go to the US, with about half of these shipments, mainly agricultural products, being duty-free.

Donald McKay, founder and CEO of XA Global Trade Advisors, called the additional effect of losing AGOA relatively minor. McKay noted that more than half of what South Africa sends to the US consists of precious metals and minerals, which are not regulated by AGOA and are not subject to tariffs. Thus, the products affected by the loss of preferences represent a relatively small subset of exports.

McKay added that the country has already experienced a significant trade shock due to US national security tariffs imposed on certain goods. He opined: 'I do not think we will see something like mass job losses.' He also added that he would obviously prefer the continuation of AGOA for South Africa, believing that the loss of this program would not change the economy.

Investor Confidence

Despite the limited direct trade exposure, Els pointed out that the wider implications could be more significant. He noted: 'The more serious issue is the signal this sends to investors and the potential impact on confidence, investment, and our broader relationship with the US.'

Els stressed that the concern relates to the possible impact on business confidence, investment, and diplomatic ties between the two countries. The US administration cited practices by South Africa that it describes as non-compliant with AGOA eligibility criteria, including barriers to American trade and investment, corruption, and threats to US national security and foreign policy interests.

The Department of Commerce, Industry, and Competition stated on November 2 that the government had presented additional concessions to address US concerns and expressed regret that the US was now raising new issues that were not the basis for discussions since the beginning of negotiations in 2025.

Diversification

Bishop argues that disruptions caused by changes in US trade policy and geopolitical tensions have already prompted companies to adjust their trade links. Pointing to the growth in trade between developing economies, Bishop reported that South-South trade interaction is increasing by about 8% according to the United Nations Conference on Trade and Development.

Bishop also noted that the private sector has responded to tariff uncertainty by restructuring supply chains, finding alternative markets, and outpacing imports.

Dr. Ernest van Billjon, Dean of the Research Faculty at IMM Graduate School, reported that many exporters have been diversifying over the last one or two years in anticipation of exiting AGOA and have already opened markets in other regions. According to Van Billjon, bilateral trade with the US last year amounted to $24.1 billion compared to $55.6 billion with China. The Department of Commerce, Industry, and Competition estimates bilateral trade with the US in 2025 at $28.8 billion.

Keep Moving Forward

The Department stated that the government will continue to promote trade and investment with the US while accelerating the diversification of its export markets, including the African Continental Free Trade Area, India, the European Union, and China.

Van Billjon named Europe as an obvious first destination for seeking new markets, noting that total trade with the EU has grown by 44% over five years, and the African Continental Free Trade Area offers scale provided corridors and borders function. He emphasized that AGOA was a useful advantage, not the foundation of South Africa's trade. He also mentioned that this is one of several simultaneous disruptions, including tariff changes, closure of shipping routes, and geopolitical upheavals, and that firms that know their exposure and have other outlets will fare best.

Els concluded that the direct impact on overall economic growth will likely be small, but the broader consequences for business confidence, investment, and relations with the US deserve more attention.

South Africa expressed dissatisfaction with the recent demands imposed by the United States in the context of trade negotiations, even after Pretoria made concessions in response to Washington's announcement regarding the possible exclusion of the country from the African tariff-free trade program.

Parks Tau, South Africa's Minister of Trade, lamented that the United States introduced new issues at this time, stating that these were not considered during the negotiation process that began in 2025.

Jamieson Greer, White House representative for Trade (USTR), communicated Washington's intention to withdraw South Africa and Rwanda from the African Growth and Opportunity Act (AGOA). According to the France-Presse agency (AFP), concerns include issues such as customs barriers, investment, rule of law, and political pluralism.

The USTR specified that the exclusion is due to allegations of corruption and threats to US national security or its foreign policy interests related to South Africa.

AGOA is a fundamental agreement that facilitates access for various African products to the North American market without customs duties, being of extreme importance to South Africa, considered the most industrialized economy in Sub-Saharan Africa.

On Thursday, South Africa had expressed the expectation that Washington would make a positive decision regarding the country's maintenance in the trade agreement between the United States and the African continent, but this hope did not materialize.

This Southern African country has been targeted by the government led by Donald Trump for months, which accuses the country of persecuting Afrikaners, descendants of white European colonists, since his return to power. Furthermore, there was a restriction on issuing entry visas to the United States.

The United States remains a vital trade partner for South Africa, with more than 600 American companies operating in the territory, generating approximately 134,600 jobs.

Sectors such as automotive and agriculture (especially citrus) are particularly impacted by AGOA. AFP reports that in 2025, Naamsa, the South African automotive industry association, estimated that there were 86,000 jobs directly linked to AGOA in the automotive sector and 125,000 if suppliers were included.

It has been announced that South Africa will be excluded from the African Growth and Opportunity Act (Agoa) in 2028, which represents another blow to the country's already strained trade relations with the United States.

However, economist Vandile Sikhlobo, the president's envoy for agriculture and land, stated that this decision does not mean the complete closure of the American market for South African products. He warned that access will remain, but with slightly higher tariffs, refuting claims of a total trade ban.

The White House's decision not to extend South Africa's status as an Agoa beneficiary in 2028 means that exporters may face an additional Most Favored Nation tariff of around 3.4% on top of existing US tariffs. For goods currently entering the American market at the 'Day of Liberation' rate of 12.5%, this will raise overall tariffs to 15.9%, further reducing their competitiveness.

Sikhlobo believes that while the changes are complex, they do not necessarily have to be catastrophic. In 2025, South African agriculture faced tariffs of about 30%, yet still exported approximately $504 million to the US market, which was only 3% less than the previous year. Exports subsequently grew by 56% between the first and second quarters of 2026, reaching $123 million, largely due to the reduction of tariffs from 30% to 12.5%.

The US accounts for about 4% of South Africa's agricultural exports, which include citrus fruits, berries, grapes, wine, fruit juices, apples, pears, and nuts. Nevertheless, Sikhlobo acknowledges that some sectors will feel the impact more than others. He insists on the need to manage the sentiment and narrative surrounding this issue effectively, calling for further diversification towards Asia and the Middle East, emphasizing that these regions are not replacements for established markets in the US, European Union, the UK, and Africa.

Sikhlobo also noted that since 2014, South Africa has been encouraged to transition from Agoa to a full bilateral trade agreement due to its status as an upper-middle-income country. However, complexities related to the Southern African Customs Union (SACU), along with efforts to maintain Agoa benefits, have hindered the conclusion of such an agreement.

In a statement released shortly after the announcement, AgriSA expressed concern over the loss of preferential access, warning that even a small tariff increase could have serious consequences for low-margin agricultural businesses. Although the overall size of the US market is a relatively small portion of South Africa's agricultural exports, certain sectors and regions are exposed to significantly greater risk.

The US accounted for 28.85% of South Africa's peach exports in the 2025/26 season, and citrus producers in certain regions have long-standing commercial ties with American buyers. AgriSA warns that higher duties could affect profitability, export orders, and future investments, leading to consequences for packing houses, transport operators, farm workers, and rural suppliers.

The organization emphasizes that the additional tariff burden will vary depending on the product, making it vital to provide product-specific recommendations to exporters and their American clients. AgriSA welcomed diplomatic contacts led by Minister of Trade, Industry and Competition Parks Tau, but stated that negotiations must be supported by practical domestic reforms, including more efficient ports, enhanced biosecurity, expedited export certification, and faster access to alternative markets.

CEO Johann Kotze stated that the priority is retaining American clients, managing additional costs, and protecting agricultural investment and rural employment. AgriSA also wishes for South Africa to explore a more predictable long-term trade order with the US, rather than relying indefinitely on unilateral preferential access.

Meanwhile, the Solidarity union adopted a much more confrontational stance, blaming President Cyril Ramaphosa and Minister of International Relations Ronald Lamulo for South Africa's exclusion. Jaco Kleinhans, head of Solidarity's public relations department, who met with White House representatives just days ago, claims that the government ignored repeated warnings about the deterioration of diplomatic relations with Washington.

He specifically highlighted Lamulo's remarks during his September visit to the US, describing them as undiplomatic and damaging to efforts to preserve South Africa's trade preferences. Kleinhans stated: 'The government, Lamulo, and Ramaphosa must bear full responsibility for this exclusion. Ordinary workers and industries will now pay the price for political negligence.'

According to Kleinhans, 'Solidarity' helped secure Congressional support last year for a two-year extension of Agoa until the end of 2028 and is currently negotiating with American lawmakers about a possible further ten-year extension. However, the annual review of beneficiary countries remains a White House decision.'

Kleinhans asserts that 'Ramaphosa's and Lamulo's antagonism towards Trump and the White House made it impossible for the Trump administration to keep South Africa in Agoa.' 'Solidarity' fears that the economic consequences could go far beyond agriculture, particularly affecting the automotive industry and other export-oriented sectors, potentially jeopardizing thousands of jobs. The organization calls on the government to immediately restore relations with Washington and states that it will continue to engage with American officials to mitigate the fallout.

Despite differences in assessing responsibility and potential economic consequences, Sikhlobo, AgriSA, and 'Solidarity' acknowledge the importance of maintaining South Africa's commercial relations with the United States. For agricultural exporters, the immediate task is not whether they can continue selling goods in the American market, but whether they can remain competitive after the disappearance of preferential tariffs.