South Africa’s trading ties with the US via the African Growth and Opportunity Act (Agoa) has created hundreds of thousands of jobs and billions of rand in trade.
THE AUTOMOTIVE sector this week warned that South Africa must not lose its trading ties with the US via the African Growth and Opportunity Act (Agoa), which has created hundreds of thousands of jobs and billions of rand in trade.
This as the future of the trade pact is uncertain.
Absa said recently in its South Africa quarter three 2023 Quarterly Perspectives that it was an upside risk to the economy should South Africa lose the Agoa deal.
“Allegations made by the US Ambassador in May that South Africa supplied arms to Russia generated an adverse market reaction and fanned concerns about potential sanctions and expulsion from the Agoa trade arrangement. While sanction-related concerns have abated, the country’s participation in Agoa is a political decision and there is uncertainty about its future given the country’s stance on the Russia-Ukraine war.“
The Automotive Business Council (ABC) released an Agoa Research Report, conducted by the Automotive Industry Export Council (AIEC) and administered from the Naamsa Corporate Office, this week.
It said Agoa expires on September 30, 2025 and the scheduled expiration made the future of US-Africa trade relations uncertain. The lingering post-Agoa relationship with African countries remained undefined.
It said Agoa’s extension and South Africa’s continued eligibility was crucial since it did support the continued growth and development of the automotive industry in South Africa.
Moreover, the domestic automotive industry had not just been earmarked as one of the key drivers of industrialisation in South Africa, but also on the African continent.
Agoa boosts SA trade and the economy.
The Agoa report said South African automotive exports to the US increased by 447.3% in nominal rand terms between 2001 and 2022 under Agoa, while automotive imports from the US increased by 671.8% in nominal rand terms, proportionally much more than exports over the same period.
The report warned auto pact developments in Africa, led by South Africa, to establish regional automotive hubs and value chain integration in the various regions under the framework of the African Continental Free Trade Area (AfCFTA) would be adversely affected should Agoa or South Africa’s continued eligibility be discontinued.
“The automotive industry remains the bedrock of South Africa’s manufacturing sector and its social and economic impact in the country’s economy continues to extend well beyond vehicle and automotive component manufacturing. This trade arrangement provided impetus for the domestic automotive sector’s vehicle export drive to the US, which increased from 853 units in 2000 to 14,873 units in 2001, a massive increase of 1,643.6%,” it noted.
The benefits stemming from Agoa for South Africa were much broader than the mere duty and quota-free access into the US.
It also stimulated opportunities for a chain of collaborative arrangements with manufacturing companies from sub-Saharan African countries, to access the US duty free.
Agoa has created in the order of 85,000 direct jobs and 426,000 indirect jobs in South Africa.
AECI said South Africa was the continent’s largest beneficiary of Agoa in 2022, exporting a wide range of products, including vehicles to the US.
Total South African exports to the US amounted to R178 billion in 2022 while imports amounted to R134bn. US business interests are well represented in South Africa.
“Most of the leading multinational corporations actively participating in the South African economy regard the country as the ideal location for any company aspiring to reach the continental market more effectively, both from a cost and logistical point of view,“ AIEC said.
Vehicle exports from South Africa to the US have declined over recent years since the same models by BMW and Mercedes-Benz are now being manufactured in both countries and are therefore no longer exported in large volumes. The 20,566 vehicles exported from South Africa to the US only comprised 0.14% of the total 14.23 million vehicles sold in the US and 0.72% of the total 2.86 million passenger cars sold in 2022.
Naacam
Meanwhile, in other news, the sector got a boost after the Minister of Trade, Industry, and Competition, Ebrahim Patel, welcomed investment pledges worth more than R4.6 billion made by 16 automotive component manufacturers and suppliers at a conference hosted by the National Association of Automotive Component and Allied Manufacturers (Naacam) in Pretoria this week.
This investment, which Minister Patel described as a “strong vote of confidence in the South African Economy,” would support more than 10,000 jobs.
David Masondo, the deputy minister of Finance, also said at Naacam this week that the government is set to unveil fiscal measures to support companies producing electrics vehicles in October.
“However, whatever the proposals on a new set of incentives to spur the production of NEVs (New Energy Vehicles), we should bear in mind that this comes at a time when the fiscus is particularly stretched, making it difficult to put resources towards every priority,” he said.
The measures to support the growth of NEVs should aim to complement the extensive policy support the government has already provided in previous decades, through preferential market partnerships such as African Growth and Opportunity Act; the EU-SA Economic Partnership Agreement; and the Automotive Production and Development Programme (APDP), Masondo said.
– BUSINESS REPORT
