Who pays for South Africa’s AGOA stand-off?

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 turned diplomatic tension into a commercial deadline. Pretoria has defended its concessions, questioned additional American concerns and emphasised alternative markets. Although both governments have reasons for their positions, neither has established a clear path from further negotiations to restored trade certainty.

Approximately $1.7 billion in South African exports benefited from AGOA preferences in 2025, representing roughly 1% of the country’s global exports. This figure measures qualifying trade rather than revenue that would automatically disappear, since the consequences depend on tariffs, profit margins and customers’ willingness to absorb higher prices. Withdrawal would not close the American market, and although the national economy may withstand the adjustment, particular exporters and workers could face substantial losses.

These consequences 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. Its eligibility reviews give American authorities considerable discretion over whether a country continues to receive benefits.

That structure matters because the US government’s objections to South Africa require different responses. Agricultural restrictions can be assessed against animal health evidence and market access rules, while corruption requires institutional reforms and credible enforcement. Foreign policy disagreements involve diplomatic choices that may not be amenable to commercial compromise. Addressing one concern therefore does not necessarily resolve another.

South Africa has legitimate reasons to regulate agricultural imports, pursue industrial development and maintain an independent foreign policy. However, legitimate objectives do not make every existing restriction defensible. Some measures may protect public health or productive capacity, while others could impose costs without demonstrable benefits. Reform should be assessed on its domestic merits rather than accepted or rejected simply because Washington demands it.

Corruption is similarly not a matter of sovereignty alone, since weak procurement controls and inconsistent enforcement damage South African institutions regardless of American preferences. Stronger accountability would serve domestic interests even if it did nothing to restore AGOA eligibility.

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. These claims deserve scrutiny: an offer is not necessarily sufficient merely because it has been made, and bilateral concessions cannot guarantee AGOA eligibility. However, the announcement identified broad categories of concern without specifying which South African actions were decisive.

The South African government must weigh the domestic costs of further concessions without knowing whether they would materially alter Washington’s decision. American authorities, meanwhile, must assess eligibility against requirements that cannot necessarily be satisfied through trade negotiations alone. Uncertainty may 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 may still 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, and businesses differ in their capacity to adjust. Those with limited financial reserves may 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 may 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. This does not require abandoning legitimate principles for market access, but it does require recognising that the economic consequences of defending those principles are borne unevenly.

The unresolved problem is therefore not simply whether South Africa can survive without AGOA, but whether negotiations covering fundamentally different disputes can deliver the predictability on which trade depends. 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. If an agreement eventually comes, there is no guarantee that all the customers, investments and jobs it was meant to protect will still be there.

* Professor Joseph Sekhampu is chief director of the North-West University Business School

** This article was lightly edited to comply with the DFA’s style.

*** The DFA welcomes diverse perspectives and constructive debate on issues affecting our community. The views expressed and claims made in this opinion piece are those of the writer and do not necessarily reflect the position of the DFA or its staff.