Washington has notified South Africa of its intention to withdraw the country’s preferential trade access under the African Growth and Opportunity Act (Agoa) from January.
This is a setback for exporters, manufacturers, agricultural producers and the workers whose livelihoods depend on these industries. However, the bigger risk lies in how South Africa responds.
The Agoa decision highlights the reality that the country cannot build its economic future around factors it does not control. International trade arrangements, foreign policy shifts and changing political administrations can influence economic outcomes but they cannot form the basis of a long-term growth strategy.
The withdrawal of Agoa preferences will not end trade between South Africa and the US. South African products will have access to the American market but under less favourable tariff conditions.
Expanding value-added manufacturing
The development also highlights a structural challenge. While demand for South Africa’s raw materials remains strong, higher-value manufactured and processed products often face greater barriers in international markets. As a result, much of the value generated from South Africa’s resources is captured elsewhere through processing, manufacturing and related employment.
South Africa needs to address this by expanding value-added manufacturing, increasing industrial capacity and building industries that can compete across multiple export markets.
That objective is linked to the country’s broader growth challenge. With economic growth expected to remain around 1%, South Africa is not generating the investment, production or employment needed to reduce unemployment.
Sustainable growth requires stronger economic activity. This is where the focus should shift to factors in South Africa’s control.
The country can improve the efficiency of ports, ensure reliable electricity supply, strengthen freight rail operations, reduce regulatory obstacles and create conditions that encourage private investment. The focus should be on improving competitiveness rather than expanding protectionist measures or relying on state support for affected sectors. The priority must be to make South Africa a more attractive location for production, processing, exporting and investment.
Public-private partnerships
Public-private partnerships can help achieve this. Greater participation by the private sector can help mobilise capital, improve efficiency and accelerate delivery. Modernising rail and port infrastructure, expanding energy capacity and addressing municipal service failures should be priorities.
South Africa also needs to diversify its export markets. Diversification requires competitive products, reliable logistics, internationally recognised standards and businesses capable of competing in global markets. The same principle applies to foreign direct investment. Investors are more likely to commit capital when policy is predictable, regulations are consistent and infrastructure functions.
The Agoa decision also raises a broader question about the type of economy South Africa wants to build.
Economic resilience depends on productive businesses, value-added manufacturing, a competitive private sector and sustained investment.
Government should continue engaging with Washington, seeking alternative export opportunities and supporting industries affected by the Agoa decision. At the same time, it must address the domestic constraints that leave the economy vulnerable to external shocks.
South Africa has substantial economic potential. Realising that potential will require faster reforms, stronger implementation and a clearer focus on growth. The challenge is no longer identifying the obstacles. It is addressing them.
• Maarten van Doesburgh is an economist, head of economics at CPUT, CEO of Economics Investment Group and a regular commentator and business consultant on South Africa’s economic landscape, focusing on financial markets, policy and business strategy. vandoesburghm@cput.ac.za
- Washington has notified South Africa of its intention to withdraw the country’s preferential trade access under the African Growth and Opportunity Act (Agoa) from January.
- This is a setback for exporters, manufacturers, agricultural producers and the workers whose livelihoods depend on these industries.
- However, the bigger risk lies in how South Africa responds.
- The Agoa decision highlights the reality that the country cannot build its economic future around factors it does not control.
- International trade arrangements, foreign policy shifts and changing political administrations can influence economic outcomes but they cannot form the basis of a long-term growth strategy.
