This week, the US House of Representatives passed a bill that seeks to extend the African Growth and Opportunity Act for an additional three years. AGOA, as it is commonly referred to, is not a trade agreement but rather an Act of Congress, first enacted in 2000, that provides qualifying African countries with preferential market access in the US. It is premised on the idea of “trade, not aid” as a means to provide economic opportunities to developing economies on the African Continent by exempting them from paying import tariffs for qualifying products exported to the US. To receive this benefit, African countries must showcase progress towards upholding human rights, promoting a market economy, meeting labour standards and building strong institutions, amongst other aspects. Importantly, a beneficiary country may be disqualified if the criteria are not met or if it is deemed to undermine US foreign interests. South Africa was a significant beneficiary of AGOA until it expired in September 2025, and we exported large quantities of agricultural products under this regime. Around 70% of SA’s agri exports to the US entered under AGOA, saving hundreds of millions of rand in duties. Overall, about 22% of SA’s total trade with the US (all sectors) is covered by AGOA. South Africa is the largest non-oil beneficiary of AGOA. The mere fact that the House has moved to extend AGOA to end 2028 is a positive development in an otherwise gloomy geopolitical environment. However, there are a couple of vital, contextual issues that should temper our excitement.
First and foremost, adoption by the House does not make it law…yet. The next step will be for the upper house, also called the Senate, to consider either passing it as is or possibly amending the bill. If amended, the Senate and House must then agree on a compromise version, whereafter it must be signed into law by the President or can be vetoed by him. A veto is not expected, as the renewal has strong bipartisan support. Only then will AGOA be extended. There were previous calls to explicitly exclude South Africa from AGOA on political grounds, but fortunately these did not make it through the House of Representatives. However, we are not out of the woods yet. The benefits of AGOA are included in the Act passed by the legislative branch of the US government, but it provides the Executive (the President) authority to determine each country’s eligibility. Eligibility reviews can take place on an annual basis or out of cycle (ad hoc), and we witnessed Uganda, the Central African Republic, Gabon and Niger removed 2 years ago by the previous US administration. South Africa’s inclusion has been in the spotlight since 2014 for economic reasons. Despite not being a developed country, we are seen as a middle-income country, and arguments have been made in the past that South Africa has ‘graduated’ out of AGOA. Whilst we were able to successfully negotiate inclusion in 2015, the same arguments are likely to surface again when eligibility is considered. It is difficult to judge what impact the perceived political tension between South Africa and the United States will have. One certainty is that South Africa is not a least-developed country, and we are also a market for US exporters. There are therefore voices that want South Africa to rather negotiate a reciprocal trade agreement whereby preference is also given to US exports in the South African market.
Secondly, AGOA is important, but it does not ‘overrule’ the 30% ‘liberation day’ tariffs. Prior to August last year, non-AGOA or non-FTA exporters to the US would pay ‘Most Favoured Nation’ import tariffs when exporting to the US. For most agricultural products, this is between 3% & 4%. Those countries that export goods qualifying under AGOA are exempted from the MFN rates. However, the ‘liberation day’ tariffs are derived from a completely different policy instrument within the US, namely security powers afforded to the President and exercised via an Executive Order from the White House. To make a long story short, if AGOA is extended and South Africa remains part of it, we will pay 0% (AGOA) + 30% (liberation day tariff). Until AGOA is extended or if South Africa is excluded, we will pay 3-4% (or the tariff line-relevant MFN rate) + 30% (liberation day tariff). The only way for South African products to avoid the 30% tariff would be for the President of the US to amend the tariff for South Africa or for a specific product to be exempted. We know that negotiations are underway between South Africa and the US, but the likelihood of a preferential outcome for South Africa is not very clear at present. Fortunately, a number of agricultural products were exempted from the tariffs in November last year, but this did not come about as a result of negotiations. Instead, the US decided unilaterally to exempt certain products on a global basis that they cannot produce locally in sufficient quantities so as to ease inflationary pressures on their consumers. Whilst Agbiz has since motivated for more agricultural products to be exempted, it remains at the discretion of the US.
In conclusion, the move by the House of Representatives to extend AGOA is certainly a ray of light in an otherwise gloomy geopolitical environment. Unfortunately, however, the impact for South Africa is largely symbolic. Real, substantial tariff relief for exporters will only be achieved if the US reduces the 30% liberation day tariffs so that we can achieve parity with competitors in the Southern Hemisphere.
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