Can either party afford to simply ignore trade opportunities between the two countries, including those facilitated through the African Growth and Opportunity Act (Agoa) as an instrument for market access to sub-Saharan African countries?
Much has been said about South Africa’s non-aligned position in relation to Russia’s war in Ukraine. Some assertions neither represented South Africa’s official foreign policy nor factual analysis based on credible insights.
The world has noted the misplaced commentary, opinions and rhetoric that was, at a point, fuelled by a bipartisan group of United States lawmakers, who issued a letter demanding that the Biden administration punish South Africa for its alleged support for Russia. At the core of the arguments contained in the letter, dated 9 June 2023, are concerns or allegations, about South Africa’s eligibility to continue receiving trade benefits from the US within Agoa.
In terms of this legislation, the US creates an opportunity for market access to qualifying sub-Saharan African countries, by providing duty-free access to the US market, provided they fulfil certain conditions. South Africa is one of the biggest beneficiaries of this piece of legislation, with its exports to the US through Agoa, estimated at more than $3 billion in 2022. Importantly, the US is South Africa’s third-biggest trading partner, with Germany being second and China occupying the lion’s share.
South Africa’s diplomatic relations with Russia date back to 28 February 1992, preceded by a common purpose of defeating apartheid during the days of the struggle for liberation. According to International Relations Minister Naledi Pandor, “That level of historical friendship” was strengthened by “cooperative partnerships for many, many years”. It is inconceivable therefore, that South Africa, as Pandor puts it, would become “sudden enemies on the demand of others”, adding “while we are friends with many all over the world”.
From an economic perspective, the South African Revenue Services indicates that South Africa recorded a preliminary trade balance surplus of R6.9 billion in March 2023. This surplus is attributable to exports of R192.2 billion and imports of R185.3 billion. The US, as the third largest trading partner to South Africa, with 7.7% of South African goods exported to the US. On the reverse, South Africa imported 8.2% from the US. Therefore, trade relations between South Africa and the US cannot be taken lightly and both countries would benefit, as they are now, from a recognition that this is a mutually beneficial relationship.
An analysis of key exports during the year 2021 alone shows that South Africa exported $14 billion worth of goods to the US, mainly platinum ($6.98 billion), vehicles ($798 million), and gold ($687 million). Furthermore, for nearly three decades, South Africa’s exports to the US have increased at a yearly rate of 6.9%, from $2.46 billion in 1995 to $14 billion in 2021. With South Africa remaining the largest producer of platinum in the world by a significant margin, and production amounting to an estimated 140 metric tons in 2022, there is no doubt that the country’s contribution to trade between itself and the US will remain critical for both parties in the long term.
In terms of Agoa, South Africa boasts a complex rail network of about 31 000 track kilometres (20 900 route kilometres) over which commodities are railed, without which, the movement of goods and services in the Southern African Development Community region becomes difficult. Transnet Freight Rail is the largest railroad and heavy hauler in Southern Africa, of which about 1 500km are heavy haul lines. Its rail infrastructure represents about 80% of Africa’s total, again signifying the country’s position as a key role player in facilitating trade and investment in Southern Africa.
Like any other country, it is beneficial for South Africa to maintain a healthy trade relationship with its key markets, and this should not compromise South Africa’s (or any other country’s) sovereignty in terms of its foreign policy. The key is to strike the balance between trade, investments and bilateral relations in a mutually beneficial and sustainable manner.
Dr Brett Lyndall Singh is a medical doctor, chief executive of AOM Group and a scholar at the Tsinghua University Vanke School of Public Health in Beijing, China. He is the chairperson of Global Value Chains Working Group of the South African National Healthcare Products Masterplan.