/ 26 September 2023

Geopolitical conflict a big risk to Agoa extension, says Patel

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Minister of Trade, Industry and Competition Ebrahim Patel. (Photo by Gallo Images/OJ Koloti)

The division of the world into two camps is not in the interest of humanity or economic growth, Trade, Industry and Competition Minister Ebrahim Patel said on Tuesday.

He told parliament’s portfolio committee overseeing the department that geopolitical conflict posed a risk to the renewal or extension of the African Growth and Opportunity Act (Agoa), which gives preferential export access to United States markets to qualifying African countries but is due to expire in 2025.

Industry lobby groups in the US have argued that South Africa shouldn’t be classified as a “developing country” deserving of Agoa benefits and its inclusion has been questioned in recent months because of the Lady R Russian cargo ship incident and the country’s relationship with Russia.

Patel said many other countries could be under threat of exclusion from the trade pact should the world continue to be divided. The US Congress has not yet set a date for a decision on the future of Agoa. 

“South Africa has become a proponent of a multilateral system and there are significant voices in the US that recognise the importance of avoiding geo-political polarisation where countries are hardened to the point where they are ‘friendshoring’ — where you only procure from your friends and trade with your friends,” Patel said. 

“History over thousands of years has shown that human beings fared better when they engage across divides rather than retreat into their trenches and engage with each other only through war and fierce competition”. 

The minister said the risk of a more divided world stemmed particularly from the technology leadership race, pitting the US against China. He said there was a danger that one or more countries or blocs would begin to take a  short-sighted geopolitical view in their decision-making.

Patel told the parliamentary committee that two-way trade in both goods and services between South Africa and the US amounted to $25.5 billion in 2022, with America being South Africa’s second largest national export market, after China.

“We’ve made the argument for a world that needs to remain open and for trade that needs to be even across countries that have political differences,” Patel said.

“Openness is promoted by people trading with each other, investing with each other … African countries seek a renewal of Agoa as a key means to promote African industrialisation and market access to the US.”

He said another risk to the renewal or extension of Agoa was the US’s own domestic pressures. Over the past seven years there had been a significant move by the US towards re-industrialising its own economy. 

“There is a bigger focus on localisation now in the US. We’ve done quite a bit of engagement with American industry and political leadership to show how the economic relationship with the African continent is a critical part of America’s own re-industrialisation,” he said.

“America is dependent on critical minerals from other parts of the world and a big part of it is from the African continent. It’s not a one-way economic relationship where we only have access to the American market, it’s also one where historically the US relied on raw materials from the African continent.”

He said, for example, while Agoa helped South Africa get cars into the US, the trade pact also provided an opportunity for American companies to supply components to South Africa for the vehicles.

In July, a delegation led by Patel and Finance Minister Enoch Godongwana travelled to Washington to do damage control in the wake of a diplomatic spat unleashed by US ambassador Reuben Brigety’s allegation that South Africa loaded arms on Lady R last December.

The delegation argued that South Africa’s position as a gateway to the sub-Saharan region made it an important partner.

Patel said that should South Africa be kicked out of Agoa, regional development and neighbouring countries would suffer significant losses. 

“The truth is the example of Agoa’s success is often the example of South Africa. An integrated value chain ensures that the benefits of Agoa to neighbouring countries is often this regional value chain that South Africa takes part in. Botswana is an example; it exports more manufactured products via South Africa to the US,” he  said. 

Patel said he was confident of a strong working relationship with the US. “The Agoa forum is an important symbolic forum to show that we are able to not only protect what we have but we want to scale up our relationship with the United States to even more investment, trade and technology partnerships”.

South Africa is to host the Agoa summit forum from 2 to 4 November, which will bring together the governments of the US and eligible African countries and representatives from key regional economic organisations, the private sector, civil society and labour.

Participants are expected to discuss how to strengthen trade and investment ties between the US and sub-Saharan Africa and how to promote resilient, sustainable and inclusive economic growth and development.