The US government's announcement on November 2 that it intends to end South Africa's eligibility under the African Growth and Opportunity Act (Agoa) from January 2027 has significant implications for the country's economy. Approximately $1.7 billion in South African exports benefited from Agoa preferences in 2025, representing roughly 1% of the country's global exports. While the national economy might withstand the adjustment, particular exporters and workers could face substantial losses. The consequences of losing Agoa benefits are widely recognised, but a less examined difficulty lies in the relationship between the negotiations and the decisions businesses must make while awaiting their outcome.
Agoa is not a conventional trade agreement in which two governments exchange tariff concessions to secure a defined outcome. It is a preference programme with eligibility requirements extending beyond commercial market access, allowing the US government to consider governance, trade barriers, national security and foreign policy interests. The US government's objections to South Africa require different responses, including addressing agricultural restrictions, corruption, and foreign policy disagreements. South Africa has legitimate reasons to regulate agricultural imports, pursue industrial development and maintain an independent foreign policy, but legitimate objectives do not make every restriction defensible.
The South African government maintains that it has offered concessions beyond its earlier commitments and that the American administration has raised additional concerns during negotiations that began in 2025. However, an offer is not necessarily sufficient merely because it has been made, and bilateral concessions cannot guarantee Agoa eligibility. The South African government must weigh the domestic costs of further concessions without knowing whether they would materially alter Washington's decision. American authorities must assess eligibility against requirements that cannot necessarily be satisfied through trade negotiations alone.
Uncertainty might therefore persist even as both governments continue to engage. For businesses, the consequences begin before withdrawal takes effect. An exporter considering a supply contract with an American customer must calculate future tariffs and the profitability of additional production, while an investor contemplating expansion must assess demand over several years. Neither can postpone every decision until the governments reach agreement. A known tariff increase can be incorporated into commercial calculations, although it might make production uncompetitive.
An uncertain tariff regime creates a different problem: businesses must prepare for several possible outcomes without knowing which will materialise. Some may delay expansion, shorten contracts or reconsider their exposure to American customers. These responses can begin before preferences are withdrawn. The government's diversification efforts are important but cannot immediately replace predictable access to an established market. New opportunities do not automatically translate into customers, commercial relationships or comparable profit margins.
Businesses differ in their capacity to adjust to the loss of Agoa benefits. Those with limited financial reserves might be less able to wait for alternative markets to develop. The US government also faces a question about effectiveness: its legal authority to withdraw preferences does not establish that doing so will change the conduct it opposes. Economic pressure might impose costs on exporters and workers without resolving the underlying disagreements.
For South Africa, the corresponding responsibility is to distinguish policies worth defending from those warranting reform, while explaining how affected businesses and workers will be supported. Governments can continue negotiating without a clear endpoint, while businesses cannot indefinitely postpone decisions about customers, investment and employment. The longer the talks continue without a credible prospect of resolution, the more businesses must plan for a future without Agoa preferences.
Key points
- The US government's decision to end South Africa's Agoa eligibility could result in substantial losses for particular exporters and workers.
- The South African government must weigh the domestic costs of further concessions without knowing whether they would materially alter Washington's decision.
- Businesses must prepare for several possible outcomes without knowing which will materialise, and some may delay expansion, shorten contracts or reconsider their exposure to American customers.
