Existential threat facing R30-billion South African industry

The Tyre, Equipment, Parts Association (Tepa), has warned that local automotive component manufacturers will be severely impacted if South Africa is excluded from the African Growth and Opportunity Act (AGOA).

AGOA provides duty-free access to the United States (US) market to 49 sub-Saharan African countries for items such as apparel and footwear, agricultural products, chemicals, motor vehicles and automotive components, steel, and wine.

It has been a powerful tool for boosting exports of locally made products, particularly those in the automotive sector.

Since AGOA’s introduction in May 2000, South Africa’s automotive-related exports to the US have surged from a modest $151 million (R2.8 billion) to an impressive $1.6 billion (R30 billion) by the end of 2022.

Passenger vehicles dominate these numbers, but parts and accessories also accounted for a decent $62 million (R1.15 billion) in 2022. Of this, $42 million (R776 million) benefited from the Generalized System of Preferences, $1 million (R18.5 million) under AGOA, and $18 million (R333 million) without preference.

Economists have warned that South Africa may be removed from AGOA when the act is reviewed later this year after a spat developed between US President Donald Trump and South Africa.

Trump issued an executive order to cut all funding to South Africa following the signing into law of the controversial new Expropriation Act by President Cyril Ramaphosa on 23 January 2025.

Concerns remain that things could go further south from here, with AGOA being one of the key tools in the US’s arsenal should tensions escalate.

Dylan Petzer, national and central vice-chairperson of Tepa

The domino effect

Dylan Petzer, national and central vice-chairperson of Tepa, said it’s important for South Africa to remain part of AGOA as it would protect billions of rands in exports and numerous jobs for local citizens.

“AGOA has been a lifeline for equitable participation by South Africa’s automotive exports to the US, covering around 90 tariff lines under Chapter 87,” said Petzer.

“For Tepa members who supply tyres, automotive components, and repair equipment, the potential loss of AGOA is more than just an inconvenience – it is a direct threat to South African manufacturers and exporters wishing to compete equitably in the international market.”

He emphasised that many local auto component manufacturers have spent years cultivating working relationships with US buyers, relying on AGOA’s duty-free status to level the playing field.

Should this trump card suddenly be removed from the pack, it will not only impact these businesses but also have a knock-on effect on the economy as a whole.

“It is not just about losing market share – it is about the domino effect,” said Petzer.

“Our concern is that if exports drop, so does demand for locally produced rubber, manufacturing equipment, and logistics services. This will naturally result in factory downsizing, job losses, and wasted investments in meeting US safety and environmental standards. Add to this a substantial loss of tax revenue to the fiscus, and we have a recipe for a potential societal disaster.”

With the road ahead being foggy, and likely bumpy, Petzer said that Tepa members will explore alternative markets like the African Continental Free Trade Area and Europe to safeguard their livelihoods.

They will also investigate opportunities afforded by the shift towards green manufacturing and electric vehicle components within South Africa.

Tepa maintains that improved diplomatic relations between the governments of the US and South Africa, based on mutual trust and respect, will go a long way towards restoring stability on the export market front.

“Losing AGOA would be a significant blow, but our sector is resilient. This industry has faced tough roads before. The key to survival? Strategic agility, relentless advocacy, and a solid partnership between government and industry,” Petzer concluded.

“It’s time to buckle up because this ride isn’t over yet.”