AGOA participation hangs in the balance – Terence Corrigan - Biznews

Nov 08, 2023
Last week’s AGOA Forum – the high-level meeting on the African Growth and Opportunity Act (AGOA) promulgated in the United States in 2000 – was a matter of profound importance for South Africa, for two reasons.
AGOA participation hangs in the balance – Terence Corrigan - Biznews

The recent AGOA Forum, a high-level meeting on the African Growth and Opportunity Act, held substantial significance for South Africa. Minister of Trade, Industry and Competition Ebrahim Patel emphasised the vital relationship with AGOA, which contributes around $2.7 billion to the country’s economy. However, South Africa’s political climate, marked by property rights concerns and expropriation without compensation, raises doubts about its eligibility for AGOA. Geopolitical tensions with the US add to the uncertainty. Losing AGOA access could have dire consequences for job prospects in a country with a high unemployment rate.

Terence Corrigan

Last week’s AGOA Forum – the high-level meeting on the African Growth and Opportunity Act (AGOA) promulgated in the United States in 2000 – was a matter of profound importance for South Africa, for two reasons. 

One, it allowed the country’s government to take centre stage before an audience of global notables, and two, it provided a forum to discuss critical trade access into one of the most valuable export markets in the world.

As a rule, South Africa’s government relishes the first of these, while not always appearing to appreciate the second.

Fortunately, Minister of Trade, Industry and Competition Ebrahim Patel did at least understand the stakes. Speaking at a briefing on preparations for the summit, he described this relationship as ‘vital’, and was pleased to note the benefits accruing as a result of it. Indeed, he hoped to expand them. This has been the line that the South African government has taken on AGOA and was what it appealed for at the summit.

Patel was quite correct there. In 2021, exports related to AGOA were estimated to be worth some $2.7 billion, hardly small change for South Africa’s economy and particularly valuable for producers of such goods as automotive parts, which should be a key concern for the Minister given his commitment to ‘reindustrialising’ the country. South Africa’s farmers too – battered by failing infrastructure, competition from subsidised producers elsewhere, and a hostile policy environment – would be hard hit by exclusion from the initiative.

Indeed, retaining AGOA access is one of a vanishingly small number of issues around which the ‘social partners’ can actually find some of that consensus upon which official wishful thinking bases South Africa’s future. The president of perpetually revolutionary COSATU even headed a delegation to the US, while the federation put out a statement warning that ‘South Africa’s exit from AGOA would not only be a devastating blow to local jobs but also those throughout the region and thus further add pressure to an already unmanageable migration flow’.

Signs seem fairly propitious for South Africa’s ongoing participation. But there have also been warnings that this is not a given. 

AGOA is not a trade deal. It is a unilateral preference extended by the US to African countries. AGOA arose in part from thinking in the 1990s that Africa’s developmental problems had a lot to do with its poor governance record, and that durable solutions required integrating Africa as a value-adding part of the global economy (the ‘trade not aid’ mantra).

So, eligibility for AGOA was linked to governance criteria. Countries needed to show ‘progress’ in entrenching democratic systems and a market economy. The latter is one ‘that protects private property rights, incorporates an open rules-based trading system, and minimizes government interference in the economy through measures such as price controls, subsidies, and government ownership of economic assets’.

And for these reasons, a number of countries such as Mali and Zimbabwe have been ineligible for some time, and four countries – Uganda, Gabon, Niger, and the Central African Republic – are now having their participation terminated.

For South Africa, these provisions were always going to sit uncomfortably with its political class, given the latter’s profoundly statist outlook and messianic self-image.

Ironically, it was under the nominally reformist President Cyril Ramaphosa that this came into sharp relief. Despite Ramaphosa’s acknowledging the dire cost of the Zuma era (during much of which he served as Zuma’s deputy), his Presidency has been marked by the most sustained push against property rights since the adoption of the Constitution. This was, of course, expropriation without compensation (EWC).

This has been a theme in official policy since the end of 2017, and has been through various permutations: the proposed amendment to the Constitution, regulations in terms of the Property Valuation Act, and latterly the Expropriation Bill. These have had mixed fortunes, but what they portend – expanded latitude for the state to abridge people’s property rights – has remained constant.

Currently, the Expropriation Bill is before the National Council of Provinces. As the Institute of Race Relations has warned, this establishes a system of expropriation heavily tilted towards the state, that could prove a formidable weapon should a venal state authority seek to seize property.

And while this has been framed in a narrative of land reform – placing the farming economy most directly under threat – it is a principle with application elsewhere. Removing protections for private-property holding would be useful for the proposed National Health Insurance (one official publicly mooted the idea of nationalising medical aids’ reserves to fund it), or for raiding savings and pensions to keep the country’s mismanaged state-owned enterprises afloat. All of this has placed a dead weight on South Africa’s growth prospects.

This has not gone unnoticed abroad. At a recent Congressional hearing on South Africa, EWC was flagged as a threat, both to South Africa’s economic future and its democracy. Commented committee chairman Congressman John James: ‘There is no country in the world that has remained democratic after removing its population’s private property rights and I remain concerned about the ANC’s democratic drift away from constitutional rule.’

All of this should be a concern for South Africans hopeful of future participation in AGOA. And this is aside from the heightened tensions between South Africa and the US over geopolitics, most notably South Africa’s positioning regarding Russia’s invasion of Ukraine, and quite possibly over the current conflict in the Middle East. 

However it might happen, and with whatever justification, the costs of losing AGOA would be steep indeed. One can do little better than the argument Cosatu has made: ‘We cannot afford a single job loss with an unemployment rate of 42.6% and when 62% of young people struggle to find work.’ 

Indeed, the IRR has argued that South Africa cannot afford the stasis of the low growth path it is seemingly trapped on. Growth must be the overriding priority, and policies matched to achieve it. EWC is inherently anti-growth; in threatening AGOA, it might prove fatally so.

Terence Corrigan is the Publications and Projects Manager at the Institute of Race Relations

AGOA participation hangs in the balance – Terence Corrigan - Biznews

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