The US government's decision to remove South Africa from the African Growth and Opportunity Act (Agoa) has sparked concern about potential job losses, but economists are downplaying the impact. The Office of the US Trade Representative announced that South Africa, along with Rwanda, will no longer be eligible for duty-free benefits under Agoa, effective January 1, 2027. The US cited concerns about barriers to US trade and investment, corruption, and threats to US national security and foreign policy interests.
Economists Duma Gqubule, Donald MacKay, Wandile Sihlobo, and Sam Koma told the Mail & Guardian that they were not surprised by the US move. Gqubule criticised the South African government for focusing too much on appeasing the Trump administration, saying that the country should instead focus on trading with other African countries. He suggested that South Africa start by looking at trade opportunities with neighbouring countries like Namibia.
MacKay echoed Gqubule's sentiments, saying that the benefits of Agoa were always small, averaging around 3.5% over the rest of the world. He predicted that some industries, such as agriculture, may experience pain, but overall, the impact would not be material. MacKay noted that the US had already imposed tariffs on South African cars, steel, and aluminium, which had a much greater impact than the loss of Agoa benefits.
Sihlobo said that the US decision was not unexpected, given that South Africa is considered an upper-middle-income country and had been urged to graduate from Agoa to a full bilateral trade agreement with the US. He noted that countries with trade agreements were not spared from drastic changes in US trade policy and that South Africa would face an additional Most Favoured Nation tariff of around 3.4% on top of existing tariffs.
The South African trading environment would not be catastrophic, Sihlobo said, citing the country's experience with higher US tariffs in the past. In 2025, the South African farming sector faced tariffs of around 30%, but agricultural exports to the US remained strong, totalling $504 million. Sihlobo said that some South African agricultural exporters had taken advantage of a 90-day pause in tariffs to export more volume.
Koma said that the US decision was a serious economic setback, but that it was not entirely unexpected. He called on the Department of Trade, Industry and Competition to execute a proactive economic strategy to cushion the effects of the decision. Koma expressed concern about the impact on jobs, saying that the decision had implications for the cash flow position of companies operating in key economic sectors.
Labour federation Cosatu expressed concern about potential job losses, citing examples of factories and companies in Cape Town, Atlantis, Malmesbury, and Tulbagh that had already experienced job losses. The federation said that the government must take steps to assist workers and farmers who would be affected by the loss of Agoa benefits. The US decision has called on the South African government to facilitate bilateral trade relations with the US, including leveraging the African Continental Free Trade Area, the BRICS bloc, and the G20.
Key points
- Economists downplay impact of US ending Agoa benefits for South Africa
- Labour federation Cosatu warns of potential job losses
- South Africa must find new markets to trade with, say economists
