South Africa runs the risk of being excluded from the African Growth and Opportunity Act (AGOA) due to its friendly relations with Russia whilst it is waging a war in Ukraine, putting at risk R435 billion in automotive trade, equal to 16.5% of the country’s total GDP, according to Democratic Alliance (DA) MP John Steenhuisen.
The AGOA Act provides eligible sub-Saharan African countries duty-free access to the United States (US) market for over 1,800 products.
With the Western nation imposing heavy sanctions on Russia, US congressmen in June wrote a letter to national security and foreign relations officials calling for South Africa to no longer be the host country for the AGOA conference as well as raising questions regarding South Africa’s position in the Act, as per a BusinessTech report.
“We are no longer the favourite of the southern-African region when it comes to trade, and South Africa’s economy is quickly being outflanked by our neighbours,” said Steenhuisen.
“The incentive to grant South Africa exclusive access to our key export destinations in the US, the EU, and the UK is no longer guaranteed”
A R435-billion decision
The US is set to review the list of AGOA-applicable countries this week, taking a particular interest in South Africa’s alignment with Russia.
“Should South Africa’s access to AGOA be revoked as a consequence of its allegiance to Russia, 112,000 jobs in the automotive sector and R435 billion in automotive trade could be wiped out,” said Steenhuisen.
South Africa could immediately lose duty-free access to its second-largest export market, the US, which was responsible for R24 billion of vehicle and component exports in 2022 with BMW and Mercedes-Benz being the largest exporters to the Western economy.
Moreover, South Africa enjoys in the region of R72 billion in trade between it and Germany through European Union-bilateral trade agreements, and it is also a key manufacturer of right-hand-drive vehicles for the United Kingdom.
Locally-produced vehicle shipments to all these countries alone equaled R175 billion in 2022.
“Much of this trade is reliant on AGOA,” said Steenhuisen. “South Africans need to realise that our country’s jobs and the security of our economy are intrinsically linked to trade founded on global alliances.”
“The ANC’s alliance with Russia makes no economic sense if it means sacrificing close to 77% of foreign direct investment stock in South Africa in recent years from the European Union, the United Kingdom, and the United States, including hundreds of billions of rands in trade, for a country with whom our trade is only around 0,3%,” concludes Steenhuisen.
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