A high-level government and business delegation is in the US this week to present South Africa’s case for the extension of the Africa Growth and Opportunity Act (Agoa) beyond its September 30, 2015 expiry date, as well as for the continued inclusion of Africa’s largest economy as a beneficiary of the scheme.

Agoa, which was first introduced in 2000 and already extended once past what was initially meant to be a 2008 expiry date, offers duty-free and quota-free access to the giant US market across a wide range of products from qualifying African countries.

African governments are, therefore, strongly in favour of extending Agoa, while US President Barack Obama has offered his endorsement, saying in August that Agoa represented good business for both Africa and America.

However, Congressional approval would be required for any extension and US Trade Representative Ambassador Michael Froman has launched a formal public review of the scheme to assess its successes and highlight areas of possible improvement ahead of Congressional deliberations.

Questions have already been posed about whether, given South Africa’s relative development when compared with the intended beneficiaries, the country should not be “graduated” from the preferential scheme – questions that have intensified since the country’s inclusion in the Brics bloc of Brazil, Russia, India and China.

There are also concerns that, while South Africa is receiving non-reciprocal US trade preferences, the country has reciprocal relations with the European Union, which ensures superior market-access conditions to European companies than is the case for US firms. In fact, the point has been made that European carmakers, which export vehicles to the US from facilities South Africa, are among the largest beneficiaries of Agoa.

Obama himself, during his June visit to South Africa, highlighted the point when he called for a level playing field for US investors and exporters. During a joint briefing with President Jacob Zuma at the Union Buildings, in Pretoria, he said he wanted trade negotiators from both countries to “have a serious conversation about how we get a win-win formula”.

South Africa is the continent's largest non-oil-exporting beneficiary of America’s preferential market-access arrangements, with the US accounting for 8.75% of the country’s total exports, which include motor vehicles and parts, nonferrous metals, iron and steel, chemicals, and other mining products.

Two-way trade was valued at $15.1-billion in 2012 and showed a recovery to levels last achieved ahead of the global financial crisis. Exports to the US rose to $7.6-billion and imports to $7.5-billion.

At present, 98% of South African goods enter the world’s largest economy duty free, with Agoa accounting for 27% of that total – the balance enters duty-free under a Most Favoured Nation arrangement (58%) and the Generalised System of Preferences, or GSP (18%).

MAKING SA’S CASE

Speaking by telephone from Washington DC, Trade and Industry Minister Dr Rob Davies told Engineering News Online that a series of meetings had been planned with members of the US Congress and the Senate, as well as with influential think tanks and with officials from the administration, including Ambassador Froman.

Davies’ delegation included business leaders from companies falling under the banner of the American Chamber of Commerce in South Africa, which has officially endorsed the extension of Agoa, as well as South Africa’s continued participation.

The weeklong engagement was to culminate at a ceremony held at South Africa’s Washington embassy, where a new statue of South Africa’s first democratically elected President, Nelson Mandela, would be officially unveiled.

“One of our main arguments is that the trade relationship between the US and South Africa is growing . . . that the trade balance between the two sides is relatively even and it has the kind of features and characteristics of a mutually beneficial trade relationship,” Davies explained.

Preferential market access also remained a key component of South Africa’s efforts to address poverty and inequality, with government calculating the overall contribution of Agoa and GSP to total South African manufacturing gross domestic product at nearly 3% in 2010. The employment contribution, meanwhile, was estimated at 11%.

“We are also making a point of highlighting the regional integration arrangements – both the ones that we have and ones we are building – and the significance of maintaining a common set of relationships between the participants in those arrangements and the US.”

Excluding South Africa from Agoa “will reduce intra-African trade and regional integration”, as the Agoa rules of origin can help create value chains across the continent that support economic diversification and industrialisation.

Davies also used the visit to highlight the benefits for the US of Agoa, which he argued ranged from job creation to improved security and stability in Africa.

He cited a US information note presented ahead of the August Agoa Forum, held in Addis Ababa, Ethiopia, showing that the arrangement had created over 100 000 jobs in the US.

Also emphasised were the “goodwill” spinoffs towards the US and its companies in Africa, which could form the basis for a deepening of trade and investment relations at a time when many African economies were growing strongly.

US companies investing in South Africa, he argued, would derive direct commercial benefit and have a platform for expansion into growing markets in Southern Africa.

“In our view, we need to use Agoa as the basis to build a virtuous cycle of trade and investment that is mutually beneficial for South Africa and the US and supports regional integration in Africa.”