The potential loss of access to the African Growth and Opportunity Act (AGOA) is a looming concern for South Africa’s agricultural sector, particularly as it stands as the top African agricultural exporter to the US. The AGOA, a unilateral trade preference program established by the US in 2000, allows eligible sub-Saharan African countries to export goods to the US duty-free. Under this agreement, South Africa has benefitted greatly, with two-thirds of its agricultural exports enjoying tariff-free access to the US market. Since its inception, the country has exported over $7 billion worth of agricultural products to the US, including citrus, fruit, nuts, avocados, and beef.
A November 2023 report by the Brookings Institution analyzed the possible effects of an AGOA exit for South Africa, estimating that the impact on the country’s GDP would be minimal—about a 0.06% decline. However, while the total GDP effect might seem small, certain regions heavily reliant on agricultural exports could be more significantly affected. The Western Cape, in particular, benefits most from AGOA, with almost half of the country’s agricultural exports to the US coming from this province. Other provinces such as Mpumalanga, Gauteng, and KwaZulu-Natal also stand to lose if preferential trade access under AGOA is revoked.
Despite the possibility of economic loss, the message to stakeholders in South Africa’s agricultural sector remains one of resilience and adaptability. While the US’s trade policy may shift, there are opportunities to diversify markets and explore alternatives. The most concerning immediate issue is the potential impact of the “liberation day” tariffs, which could increase costs for South African exporters. If the US withdraws from AGOA or imposes tariffs, South African goods could become less competitive, leading to a decrease in exports.
The three main scenarios that could unfold in the event of AGOA’s expiration focus on how tariffs might be distributed across the supply chain. One possibility is that South African producers and US importers could share the burden of the duties, resulting in little change for the US consumer but reduced profits for both suppliers. Another scenario might involve the South African producer absorbing the entire cost to remain competitive, but at a lower profit margin. A third, less likely option, is that the full tariff burden would be passed onto the US consumer, which could lead to a loss of market share for South African exports, particularly with the added “liberation day” tariffs.
To navigate these challenges, South African agricultural exporters must be proactive, understanding the tariffs that apply to their products and working closely with importers to ensure continued access to US markets. Developing new trade relationships is also crucial. Exploring trade opportunities with markets like Canada, the European Union, and the UK could offer viable alternatives. South Africa has existing trade agreements with these regions, offering preferential access for its goods. On the African continent, expanding trade with other African countries through regional agreements like the SADC Protocol on Trade and the African Continental Free Trade Area (AfCFTA) could also provide new opportunities.
Furthermore, international relations could open up new avenues for exports. As tensions between the US and Russia evolve, there may be opportunities for South African agricultural products to find a market in Russia. The upcoming G20 summit in Johannesburg also presents an opportunity to forge new business relationships and explore untapped markets.
Regardless of what happens with AGOA, the agricultural sector in South Africa should focus on building a diversified portfolio of markets and maintaining strong relationships with both existing and potential trading partners. Whether in the US, Europe, or Africa, maintaining competitiveness and adaptability will be key to overcoming any challenges posed by shifts in global trade dynamics.
