South Africa’s Potential AGOA Exit: Economic Risks and Political Fallout

South Africa’s trade relationship with the United States is at a critical juncture. Growing tensions between the two nations under President Donald Trump’s administration could push South Africa out of the African Growth and Opportunity Act (AGOA)—a trade agreement that grants eligible African nations duty-free access to the US market for thousands of products.

Recent developments, including US aid cuts to South Africa and strained diplomatic relations, suggest that South Africa’s AGOA status is in jeopardy. Analysts believe that if the bilateral tensions remain unresolved, South Africa could exit AGOA as early as 2026.

What is AGOA and Why Does It Matter?

AGOA, set to expire in September, provides duty-free access to the US market for more than 1,800 products, benefiting South Africa’s agriculture, automotive, manufacturing, and mining sectors. Major South African exports, such as citrus fruits, wine, and vehicles, rely heavily on AGOA’s tariff-free benefits.

The agreement has supported approximately 250,000 jobs in South Africa. Its termination could force companies to restructure their operations, potentially leading to job losses and economic disruptions.

Economic and Regional Risks of an AGOA Exit

Economists warn that South Africa’s potential departure from AGOA could have wider consequences for regional trade. Given that South Africa is one of the largest beneficiaries of AGOA, its exit could prompt the US to reconsider AGOA’s existence for the entire African continent.

Gina Schoeman, an economist at Citigroup, stated,

“Our baseline view is that South Africa will exit AGOA, but we can’t say with certainty when this will happen.”

A well-planned exit strategy could mitigate immediate economic shocks, but uncertainty over trade agreements adds risk to investment decisions.

Political Turmoil and the GNU’s Internal Disagreements

Beyond US-South Africa tensions, political instability within the Government of National Unity (GNU) is further complicating matters. Budget disagreements between GNU coalition partners, particularly the ANC and DA, are raising investor concerns about South Africa’s economic future.

“If these disagreements persist, South Africa’s risk premium will increase, making it a less attractive destination for investors,” Schoeman warned.

Is Europe Stepping In?

While South Africa’s relationship with the US remains tense, the European Union (EU) appears to be strengthening ties with the country. Analysts suggest that the EU is looking for strategic allies in response to US foreign policy shifts, which could offer South Africa alternative trade opportunities.

“The EU is finding support in South Africa, as it navigates its own tensions with the Trump administration,” Schoeman noted.

Looking Ahead: What’s Next for South Africa?

With AGOA’s renewal deadline approaching and US-South Africa relations deteriorating, businesses must prepare for potential trade disruptions. South Africa’s future economic strategy may involve seeking new trade agreements with alternative partners, including the EU and BRICS nations.

At the same time, concerns are mounting over US reductions in global development funding, which could impact South Africa’s access to World Bank and IMF resources—both critical for economic reform.

As South Africa navigates this shifting geopolitical landscape, its government will need to carefully assess the risks and opportunities of an AGOA exit while maintaining economic stability and investor confidence.

Follow Joburg ETC on Facebook, Twitter , TikTok and Instagram

For more News in Johannesburg, visit joburgetc.com