The US has grown to be South Africa’s fifth-biggest export market for vehicles, behind the UK, Germany, France and Japan. That’s thanks, in part, to the African Growth & Opportunity Act (Agoa).
Last year, South Africa exported 20,566 light vehicles to the US, resulting in an automotive trade surplus with that country of R6bn.
As it is, South Africa’s automotive industry forms an integral part of international supply chains, exporting products to 152 countries. However, it’s not as simple as just shifting automotive exports originally destined for the US to another destination, says Mike Mabasa, CEO of automobile manufacturers’ body Naamsa.
Investment and export-allocation decisions are taken at automotive companies’ head offices (some outside South Africa) and they depend on trade agreements, logistical factors and the strategic business approaches of the original equipment manufacturers (OEMs).
“The impact of losing any preferential trade arrangement is much broader than just potential short-term export losses,” Mabasa explains. “Uncertainty about trade arrangements affects the long-term view and decisions of OEM head offices [as to] where to allocate export-orientated investments.”
“Loss of US exports would be very damaging,” says Renai Moothilal, director of the National Association of Automotive Component & Allied Manufacturers of South Africa.
Without Agoa there are large-scale exports at risk, including some for new-energy vehicle platforms being assembled here
— Renai Moothilal
The US is also the second-most important market for South African-made original auto components after Germany. Last year, South Africa exported R8.8bn worth of components to the US, from R7bn in 2021, according to the Automotive Industry Export Council.
“Without Agoa there are large-scale exports at risk, including some for new-energy vehicle platforms being assembled here,” says Moothilal. “While vehicle exports to the US have trended down, components have grown. The US has become proportionately more important for both internal combustion engine and electric vehicle exports.”
The growth of South Africa’s citrus industry is rated as another one of Agoa’s success stories. Citrus exports to the US under Agoa almost doubled from 60,000t in 2020 to 112,594t in 2022, when they earned R1.6bn.
At present only citrus from the Western Cape and Northern Cape is shipped to the US. This sustains about 35,000 local jobs from the farm level through the rest of the supply chain, according to the Citrus Growers Association of South Africa (CGA).
The furore over South Africa’s participation in Agoa couldn’t have come at a worse time for the industry, as US officials are considering expanding access to citrus exports from other South African provinces — a move that would create additional jobs and bring in billions more rand in revenue.
“Should South Africa be removed from Agoa, thousands of rural jobs would be affected and billions of rand in export revenue will be lost,” says CGA head Justin Chadwick.
Being dropped from Agoa would also severely dent the industry’s expansion plans. It aims to produce an additional 45-million 15kg cartons over the next five years, potentially growing to 260-million cartons by 2030. This would sustain a further 100,000 jobs and generate an additional R20bn in annual revenue, the CGA estimates.
“However, critical to achieving this is ensuring there are enough overseas markets to absorb this growth in exports,” Chadwick explains. “Losing the US as a key market, which clearly offers major potential for future expansion, would have a negative impact on this trajectory as well as on growers and the livelihoods they support.”
Losing duty-free market access to the US would immediately erode the competitiveness, and market share, of local exports, adds Bureau for Food & Agricultural Policy economist Tinashe Kapuya.
“This will have a knock-on effect on farm incomes and employment at a time when South Africa is in desperate need to retain and create more jobs.”
Wolfe Braude, manager at agricultural business chamber Agbiz Fruit, says that with new trade agreements with Asian or Middle Eastern markets still many years away, it is in South Africa’s best interests to preserve access to traditional markets such as the US.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.