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South Africa is preparing to dispatch a delegation of government and business leaders to Washington in an attempt to retain the country’s preferential access to the world’s largest economy — but only after similar trips to China and Europe.
The urgent diplomatic maneuvering is part of a broader push to improve relations with the Trump administration. Last week, four congressmen in Washington led calls for South Africa to be excluded from the African Growth and Opportunity Act (AGOA), a trade platform that allows thousands of products from eligible sub-Saharan countries to enter the US market duty-free. Such a move, which analysts say looks increasingly likely, would deal a huge blow to South African firms ranging from car manufacturers to fruit exporters.
South African President Cyril Ramaphosa met with business groups last week to discuss how to dial down tensions with Washington, two business leaders who took part in the talks told Semafor, speaking on condition of anonymity because they are not authorized to talk to the media on the matter.
Khulekani Mathe, CEO of the Business Unity organization that represents South African companies, said his members are “concerned” about the country’s relations with its second-largest trading partner after China. “We have not been in this position before and things are significantly bad compared to past instances,” he said.
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Pretoria fears South Africa is vulnerable to “humiliation” if it sends a delegation straight to Washington without first going to China and Europe to garner support, the two business leaders told Semafor, saying it wants to strengthen its image as a government that enjoys the support of powerhouses elsewhere. The exact dates for the trips are not yet clear.
A spokesperson for South Africa’s government did not immediately respond to a request for comment.
South African Foreign Minister Ronald Lamola has also said the government plans to set up bilateral meetings with China and a number of other countries. ”(China said) that they are there in solidarity with us, and they stand ready to pledge support in terms of whatever trade relations and challenges that they can,” he told Reuters this week.
Step Back
The duty-free access to the US provided by AGOA has benefited a number of sectors, particularly South Africa’s automobile industry. Motor vehicles make up around a fifth of South Africa’s exports to the US and are worth an estimated $1.9 billion, putting them only behind precious metals.
Whereas the subsidies in South Africa’s automobile industry could cushion the blow of losing AGOA status, fruit and nut exporters — other big beneficiaries — would be hit particularly hard, say analysts. “Losing AGOA would affect the competitiveness of South African products as they would have an average 3% added to their price,” Wandile Sihlobo, chief economist at the Agriculture Business Chamber of South Africa, told Semafor.
US President Donald Trump signed an executive order on Feb. 7 freezing funding to South Africa over its new land expropriation law, claiming it targeted land owned by farmers from South Africa’s white minority Afrikaner group. Pretoria has denied the allegations, stressing that no land has been seized under the law that seeks to redress the legacy of apartheid rule: White South Africans own around 70% of private land despite making up only 7% of the population.
Sam’s view
South Africa is in a difficult situation as it seeks to avert the worst of Trump’s wrath. Losing AGOA would dent the country’s efforts to attract long-term foreign direct investment, and it would need to move rapidly to find replacement markets for its goods and services. The shift could cost tens of thousands of jobs and dent the government’s economic growth strategy.
AGOA has become a strategic asset South Africa does not want to lose, as the symbolism of its exit would create chaos for exporters in sectors like agriculture. But the biggest pain would come from US tariffs and sanctions, which Trump could capriciously introduce.
The move to solidify ties with Beijing and Europe seems wise, given the speed with which the Trump administration could move against South Africa. The US has made clear its disdain for Pretoria’s position on issues ranging from land laws to its position on Israel. The danger is that speaking to Beijing before Washington could be read as a sign of disrespect by Trump, deepening his irritation.
Room for Disagreement
“I don’t believe grovelling before President Trump will accomplish anything,” said Donald Mckay, CEO of Johannesburg-based research house XA Global Trade Advisors. “Trump seems determined to punish South Africa for things we mostly haven’t done,” said McKay, arguing that South Africa should instead initiate an exit from AGOA.
“The decision our politicians need to make is if we are better off waiting for the axe to fall or whether we should choose the time and terms of our exit,” he said.
Notable
- South Africa should radically “rethink” its relationship with the US because relations between the two countries are now in uncharted territory, argues the Institute for Security Studies think tank.
- Pretoria could turn to Russia or Iran to expand its nuclear power capacity, an approach analysts say could deepen South Africa’s rift with Washington.