R40 billion and 500,000 jobs – there’s more at risk than you think

The National Association of Automobile Manufacturers of South Africa (Naamsa) says that it is vital that South Africa remain an eligible participant in the African Growth and Opportunity Act (AGOA) – with billions of rands in exports and thousands of future jobs on the line.

The group published its AGOA Research Report on Thursday (31 August), outlining the impact of AGOA on South Africa, and the automotive sector in particular.

AGOA is a non-reciprocal preferential trade programme that the US offers to 49 sub-Saharan African countries.

The Act is an extension of the US Generalised System of Preferences and subject to annual Congressional re-authorisation.

Notably, the newly added “AGOA products” include items such as apparel and footwear, wine, motor vehicles, selected additional automotive components, a variety of agricultural products, chemicals, and steel, amongst others.

South Africa’s participation and eligibility in the programme has come under serious question – not only just recently in the wake of rising tensions between the US and Russia (and South Africa’s not-so-subtle support of the latter), but for years, as the country’s global standing is much stronger than other participants.

According to Naamsa, South Africa was the continent’s largest beneficiary of AGOA in 2022, exporting a wide range of products, including vehicles to the US.

Total South African exports to the US amounted to R178 billion in 2022 while imports amounted to R134 billion. While South Africa is a net beneficiary to the tune of R44 billion, US business interests are also well represented in the country.

Generally, Naamsa said that the benefits stemming from AGOA for South Africa are much broader than the mere duty and quota-free access to the United States.

“It also stimulates opportunities for a chain of collaborative arrangements with manufacturing companies from sub-Saharan African countries to access the US duty-free,” it said.

“AGOA has created in the order of 85,000 direct jobs and 426,000 indirect jobs in South Africa (511,000 total).”

Thus, if South Africa is no longer eligible or is otherwise removed from the programme, it stands to lose out on, not only the beneficial export balance, but also thousands of future jobs that can be gained.

“Given the extension of South Africa’s value chains throughout the region and its positive impact on other economies on the continent via enhanced intra-Africa trade and regional integration, it remains imperative for the continent’s most advanced and regionally integrated economy to remain eligible in an extended AGOA,” Naamsa said.

AGOA expires on 30 September 2025, and the scheduled expiration makes the future of US-Africa trade relations uncertain, the group said.

Automotive sector

Speaking to the sector Naamsa represents in the whole equation, the group noted that the automotive industry has benefitted greatly from AGOA, and that South Africa’s continued inclusion in the programme is crucial for further growth.

South Africa has accounted for well over 99% of the African automotive sector’s exports to the US since AGOA’s inception, it said.

South African automotive exports to the US increased by 447.3% in nominal Rand terms between 2001 and 2022 under AGOA, while automotive imports from the US increased by 671.8% in nominal Rand terms, proportionally much more than exports over the same period.

This trade arrangement provided impetus for the domestic automotive sector’s vehicle export drive to the US, which increased from 853 units in 2000 to 14,873 units in 2001, a massive increase of 1,643.6%, Naamsa said.

In 2022 the US comprised the domestic automotive industry’s second largest export destination, sixth largest country of origin and second largest trading partner.

Total automotive exports to the US amounted to R24.1 billion, and total automotive imports from the US amounted to R18.3 billion in 2022.

Exports mainly comprised passenger cars, catalytic converters, engine parts and tyres, while imports mainly comprised original equipment components, passenger cars and a range of aftermarket parts.

Light vehicle exports in 2022 amounted to R15.3 billion, or 63.6%, of total automotive exports of R24.1 billion to the US.

“The automotive industry remains the bedrock of South Africa’s manufacturing sector, and its social and economic impact in the country’s economy continues to extend well beyond vehicle and automotive component manufacturing,” Naamsa said.

“AGOA’s extension and South Africa’s continued eligibility is crucial since it does support the continued growth and development of the automotive industry in South Africa.”

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