South Africa must reform to maintain US trade

South Africa’s government should not have played fast and loose with our relationship with the United States, says NICHOLAS WOODE-SMITH. He believes that the consequences could be nothing short of catastrophic for South Africans.

Even without the heavy-handed approach of the Trump administration, the ANC’s callous disregard for the interests of our most profitable trade partner was certain to eventually catch up to, and bite, us. And it’s South Africans who suffer.

The African Growth and Opportunity Act (AGOA) has been the symbolic sword of Damocles hanging over South Africa that analysts have been terrified the ANC’s behaviour has been threatening. Unfortunately, from hubris or sheer ignorance, government officials didn’t think AGOA would end.

That seems to be a vainer and vainer hope, and – despite what one may think about the current US administration or the US – AGOA has clear rules that countries must abide by in order to win preferential trade treatment and tariff-free access to the US market.

In 2023, South African exports to the US reached approximately $8.32 billion, with a quarter of these exports benefiting from AGOA. US trade supports approximately 426,000 jobs, with 93,000 directly relying on AGOA.

We maintain a profitable trade surplus with the US – one which keeps much of our economy afloat. Unfortunately, South Africa has clearly become ineligible for AGOA.

The first of AGOA’s requirements is that a country must be a market-based economy that protects property rights and enjoys minimal government interference (notably in the form of price controls, subsidies, and government ownership of economic assets).

While Trump’s portrayal of new expropriation legislation is not completely accurate, it would be a lie to pretend that the government now having the right to seize whatever property it wants on a whim isn’t a violation of private property rights. Additionally, while South Africa has a market-based economy, it is continually subjected to extensive government interference.

Dozens of race laws govern employment, business ownership, and who can do business with the government. These laws have been proven to enable mass corruption, while pushing minorities out of formal employment.

There are also price controls for fuel, with the Department of Mineral Resources and Energy regulating the price of petrol, diesel, and paraffin. Electricity prices are regulated by the National Energy Regulator of South Africa (NERSA), and Eskom’s monopoly prevents a free market price system.

Subsidies are rife, with the government using taxpayers’ money to fund often politically connected businesses with the justification of racial redress. When it comes to government ownership of economic assets, it exercises ownership over many companies, including SAA, SABC, Eskom, Transnet, Denel, and others.

Another requirement for eligibility is that the nation creates an environment “conducive to domestic and foreign investment”. Expropriation of assets threatens both foreign and domestic investment, while a host of regulations and corruption chase away all types of investors.

Another requirement – promoting the development of private enterprise – is also violated by the ANC regime, which is avowedly socialist and has created an environment where businesses are forced to deal with corrupt officials, overly-powerful unions, and race-based legislation that halts their ability to create jobs or function.

Most pertinently (and most assuredly the reason that South Africa will be kicked out of AGOA) South Africa is required to “not engage in activities that undermine United States national security or foreign policy interests”.

While Trump may be friendly to Russia now, South Africa’s tacit backing of Russia while it was under US sanction, including hosting military exercises with Russia and China – and very likely smuggling munitions to Russia using the Lady R – sent a clear message to Washington that we don’t care about our relations with them. Denying Taiwanese sovereignty and irrationally obeying the whims of Beijing has also placed us in the sphere of influence of China, the US’s fundamental rival.

South Africa’s positive relationship with Iran, and the rumours that it may be helping that country develop nuclear capabilities, also does nothing to endear us to the world’s current leading superpower. South Africa’s condemnation of Israel and accusations of genocide against the Jewish state at the International Court of Justice (ICJ) have threatened a US ally, while I believe they also violate another requirement of AGOA eligibility: members of AGOA must not engage in acts that support terrorism. In my opinion, by providing a smokescreen for Hamas to commit repeated acts of terror against Israel and trying to lump blame on the victim of 7 October 2023 and not the perpetrators, South Africa has supported terror.

South Africa needs AGOA and it needs US trade. It is of tantamount importance that the government change its ways and do everything in its power to retain eligibility to AGOA. Race-based legislation must be abolished, the new expropriation law must be overturned, and our ill-thought foreign policy decisions must be undone so that we can maintain our trade relations and not threaten to plunge hundreds of thousands of South Africans into destitution.