South Africa lobbies the US to extend Agoa

24 October 2014
Car manufacturing

South Africa is eligible for Agoa this year and also qualifies for textile benefits. (Image: Brand South Africa )

In August this year, US President Obama made a commitment to support the continuation of the African Growth and Opportunity Act (Agoa), a legislation that provides duty-free market access to the United States for qualifying sub-Saharan African countries.

Obama mentioned particularly South Africa, Nigeria and Angola, saying the US still does a lot of trade with these three countries. “We need more Africans, including women and small- medium-sized businesses, getting their goods to market,’ he said, addressing delegates at the US-Africa Business Forum in Washington.

South Africa had welcomed Obama’s comments, with Ambassador to the United States, Ebrahim Rasool, saying the US is the biggest source of foreign investment to the country. Since then, South Africa gone all out to woo leaders of the US Senate and House of Representatives to include South Africa when Agoa is extended. Agoa expires in 2015.

Agoa allows more than 98% of South Africa’s exports to enter the US duty-free. Agoa was approved by the US Congress in May 2000 to assist Africa’s sub-Saharan economies and to improve economic relations between the US and the region. Agoa has seen total African exports to the US more than quadruple, and US exports to sub-Saharan Africa more than triple, since its inception.

South Africa-US trade

The US is the second largest destination for South African exports after China, accounting for 7% of exports. It is by far the largest destination for South Africa’s automotive manufacturing sector, making up 21% of all vehicle exports and 42% of car exports.

Obama’s commitment has given South Africa impetus to lobby for Agoa to be renews for the country. On 22 October, Business Day Live reported that Rasool met the American Chamber of Commerce to discuss the way forward.

“The chamber is very supportive of having Agoa renewed for South Africa, even though American companies don’t benefit from it directly. To ensure that it gets renewed . we want to show the US that South Africa is giving something back to the US that will benefit American business,’ the chamber’s executive director Carol O’Brien had told the publication.

Doing business with South Africa

During the US visit, the chamber discussed the finer details of doing business with South Africa, which included the ownership element of black economic empowerment, local content requirements, labour laws and strikes, lack of policy and cohesiveness among different government departments, according to O’Brien.

South Africa is eligible for Agoa this year and also qualifies for textile and apparel benefits, according to the Office of the US Trade Representative. South Africa is the United States’ 39th largest supplier of goods imports in 2013. US goods imports from South Africa totalled $8.5-billion in 2013, a 2.2% decrease ($193- million) from 2012, but up 83% from 2003.

The five largest import categories in 2013 were: precious stones which includes platinum and diamonds ($2.6-billion); vehicles ($2.3-billion); iron and steel ($696- million); ores, slag, ash ($577-million); and machinery ($404-million).

South Africa exported agricultural products worth $253 million in 2013, and leading categories included wine and beer ($69 million); fresh fruit ($59 million); and tree nuts ($42 million).

South African exports to the US

South Africa was the US’s 36th largest goods export market in 2013. US goods exports to South Africa in 2013 were $7.3-billion, down 3.4% ($259 million) from 2012, but up 159% from 2003.

The top export categories for 2013 were: machinery ($1.6-billion), precious stones, mainly gold ($1.1-billion), vehicles ($1.0-billion), electrical machinery ($418-million), and optic and medical instruments ($362-million).

US exports of agricultural products to South Africa totalled $295-million in 2013 and the top categories included dairy products ($28-million), wheat ($25-million), planting seeds ($24-million), and poultry meat ($24-million).

Foreign direct investment

The latest data (2012) on US foreign direct investment (FDI) in South Africa was $5.5 billion, a 5.6% decrease from 2011. This FDI was led by the manufacturing and wholesale trade sectors. On the other hand, South Africa FDI in the United States totalled $1.5 billion in 2012, up 55.4% from 2011.

In 2012, the US and South Africa signed a Trade and Investment Framework Agreement (TIFA), which amends the United States-South Africa TIFA originally signed in 1999. The most recent meeting of the United States-South Africa Council on Trade and Investment was held in June 2012 in Washington D.C.

In addition, the US and the Southern Africa Customs Union (SACU), which includes South Africa, signed a Trade, Investment, and Development Cooperative Agreement (TIDCA) in 2008. The TIDCA establishes a forum for consultative discussions, cooperative work, and possible agreements on a wide range of trade issues, with a special focus on customs and trade facilitation, technical barriers to trade, sanitary and phytosanitary (SPS) measures, and trade and investment promotion.

SAinfo reporter

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