South Africa’s impending exclusion from the African Growth and Opportunity Act (Agoa) from Friday, 1 January 2027 will present challenges for exporters, particularly in the automotive and agricultural sectors, but is unlikely to derail the country’s broader trade relationship with the United States.
Source: Transnet National Ports Authority (2021). The Port of Durban handles containers, automotive imports and exports, break-bulk and agricultural commodities.
While the loss of preferential access could put thousands of jobs at risk, the economic consequences are manageable if government and business work together to identify alternative markets and trade opportunities, says NWU Business School economist Raymond Parsons.
He argues that the development should serve as a catalyst for accelerating export diversification, strengthening regional and international trade partnerships and improving South Africa’s global competitiveness.
"Although the loss of Agoa preferences is highly regrettable and the specific sectoral impact may be painful, the situation is manageable if the right market adaptations are made," Parsons says. "Addressing the negative economic consequences of losing Agoa preferences will therefore continue to require close collaboration between government and the relevant business interests to identify alternative trade strategies."
Despite the Agoa decision, non-Agoa trade relations with the US remain far more substantial, with the overwhelming bulk of SA’s exports to that country falling outside Agoa preferences, Parsons says.
"This trade then drives the vast majority of existing bilateral economic ties between SA and the US. The non-Agoa trade relationships are therefore reinforced by a robust footprint that goes beyond trade balances. The Agoa result still means that the core economic pipeline of trade and investment connecting SA and the US remains intact, and must continue to be nurtured."
Adapting to trade shifts
Nevertheless, Parsons says the exclusion reinforces two priorities for South Africa.
"First, SA must accelerate its market diversification strategy in a changing geoeconomic world that offers new opportunities. Enlarging and diversifying trade options includes expanding East Asian market access to growing economies there, as well as further leveraging economic opportunities through the African Continental Free Trade Agreement (AfCFTA)," Parsons notes.
"Secondly, the government must aim to make the domestic economy more internationally competitive by reducing the costs of doing business in SA. This in particular encompasses expediting logistics reform, especially in rail and port facilities, that will help to offset the Agoa loss by keeping SA globally competitive.
"Ultimately, South Africa's ability to absorb the impact of losing Agoa preferences will depend less on the loss itself than on how quickly it adapts," Parsons adds.
He argues that diversifying export markets, strengthening trade partnerships and addressing domestic competitiveness constraints will be essential to keeping exporters globally competitive and sustaining the country's broader trade and investment relationships.
