With the US threatening to sever vital trade ties, South African businesses are on edge. Should Africa’s most industrialized economy prepare for a major economic and trade shake-up?
The African Growth and Opportunity Act (AGOA) was supposed to bring prosperity to African nations when it was signed into law in Washington in 2000.
South Africa was well-placed to benefit from the AGOA, which provides eligible countries with tariff-free access to US markets.
Not only had it recently become a democracy, the country also possessed the continent’s biggest and most industrialized economy, and had maintained links to the United States, even during apartheid.
Yet, 25 years later, US President Donald Trump has South Africa in his crosshairs, and the AGOAhas not yet been addressed.
Trump takes aim at South Africa
The Trump administration has threatened to cut all aid to South Africa over a recently passed land reform bill that he views as potentially harmful to the country’s white minority, who own most of the country’s farmland.
Separately, Republicans have called on Trump to punish South Africa for leading a case at the International Court of Justice accusing Israel of “genocidal” acts in its Gaza offensive, which Israel has denied.
Trump supporters have also accused South Africa of bowing to China’s demands to relocate Taiwan’s de facto embassy outside of the administrative capital, Pretoria.
AGOA membership comes up for review every year, and it is the American president’s call to renew the trade agreement or not. Even before Trump came to power, South African business leaders were concerned that the country’s AGOA membership was in jeopardy due to South Africa’s status as a BRICS nation, and its perceived orientation toward Russia and China.
“South Africa should prepare accordingly to not continue forming part of AGOA,” Chris Hattingh, executive director at the South African think tank Centre for Risk Analysis, told DW.
Trump’s foreign policy pivot already taking effect
By now, South Africa has felt the sting of Trump’s quickfire policies: the gutting of the development agency USAID has affected South Africans either employed by the agency’s assistance projects or those benefiting directly from them.
“It’s already playing out on thousands of people put on indefinite leave and most likely to lose jobs, particularly in the health sector, especially NGOs working in HIV and related programs,” said Mametlwe Sebei, president of the General Industries Workers Union of South Africa.
What is the AGOA US-Africa trade program?
While the Trump administration has cast the USAID shake-up as an effort to eliminate government spending, AGOA is primarily a trade agreement that has been criticized for being too friendly to American interests, as mostly raw materials are exported to the US.
“Even if AGOA is renewed, and perhaps a new form of AGOA is put in place, there are various items that might make it even more difficult for South Africa to form part of AGOA in the future,” Hattingh said, adding that automotive and agricultural sectors would be most negatively affected.
This is because Trump wants to introduce reciprocal tariffs on Washington’s trading partners, and has targeted steel and aluminum imports with tariffs.
South Africa’s auto industry under threat
AGOA has helped expand the auto industry in South Africa, where seven big carmakers operate: BMW, Ford, Isuzu, Mercedes-Benz, Nissan, Toyota and Volkswagen.
Under AGOA, Washington charges no tariffs on cars imported from South Africa, and motor vehicles account for 22% of South Africa’s exports to the United States, worth $1.88 billion (€1.79 billion) — behind only precious metals, according to government statistics.
For Billy Tom, head of the Automotive Business Council, a pivot in trade relations between Pretoria and the US, such as exiting AGOA, would damage South Africa’s growing auto industry and have “a huge knock-on effect on the country.”
“It would be sending a message to the continent, because if you think of the role South Africa plays in AGOA, it’s quite big,” he told the Agence France-Presse news agency.
Tom estimates 86,000 people are employed through AGOA, and about 125,000 people find work in related jobs as subcontractors or suppliers. South Africa’s automotive export industry was valued at nearly €1.2 billion in 2023.
“Most certainly there will be disruptions. Only one in four cars actually produced in this country are sold here,” said Sebei, adding that a “reorientation of the economy in quite a significant way” would have to follow.
US is South Africa’s second-largest trading partner
Some analysts see South Africa’s economic interests as expendable to the current US administration, even if the US is South Africa’s second-largest trading partner.
Daniel Silke, director of the Cape Town-based Political Futures Consultancy, said this early 2025 run-in with the US reminds South African leaders that policies have “consequences.”
“Our internal policies need to be better handled and there needs to be better communication,” he told DW. “South Africa will now have more scrutiny on our domestic policies than we’ve had since the days of apartheid.”
But he said the US still has vested interests, with about 600 US-based companies trading in South Africa.
“South Africa remains critically important from an African continental point of view. President Ramaphosa is the G20 for the year, that’s an important position. And South Africa is an entry point into the African continent for many US businesses as well,” he said.
“The more extreme scenarios wouldn’t really help the United States in the medium to longer term in terms of whatever geopolitical play she wants to have,” Silke added.
According to the US government, in 2024, the US exported almost $5.8 billion worth of goods to South Africa, while South Africa sent $14.7 billion to the US — the most critical product being platinum. South Africa’s trade to the US has grown steadily each year since 2018.
South Africa will join ‘scramble’ for new trading partners
South Africa’s two biggest parties, the African National Congress (ANC) and the Democratic Alliance (DA), have different approaches to foreign policy, but have to work together in the government of national unity.
Broadly speaking, the DA is more West-oriented, while the ANC enjoys decadeslong links with Russia and China from its time as a liberation organization. This has made reaching policy consensus on how to deal with broadsides from the US “complex,” according to Silke.
However, for Sebei, the standoff between South Africa and the US provides an chance for South African leaders to reassess their priorities regarding trading partners to save jobs, particularly in the auto industry.
“All of those industries can be repurposed to serve the interests of the country,” said Sebei. He suggested that South Africa’s government should invest more in higher value industries to create jobs and produce for local markets rather than export.
“That is a policy that I think any serious government would pursue. You need a government other than the current conspiracy of neoliberal parties meant to intensify and escalate neoliberal programs, privatizations and austerity measures,” said Sebei.
Silke pointed out that South Africa will just be one country joining the “scramble” for new trading partners to “make up the difference in lost trade to the United States.”
But he is optimistic that, from an economic perspective at least, that this may “push nations and regions to work more closely together and provide each other with the more favorable bilateral agreements.”
Thuso Khumalo and Okeri Ngutjinazo contributed to this article. Edited by: Keith Walker
Cai Nebe Producer, podcaster and reporter for DW Africa
