I will eat my hat if we get to the end of 2025 and SA still benefits from the African Growth and Opportunities Act (Agoa), the US legislation giving preferential access to the American market for most African states. Agoa is not a trade agreement and although valuable I believe the cost of the preferential access is beginning to outweigh the benefits. The decision our politicians need to make is if we are better of waiting for the axe to fall or whether we should choose the time and terms of our exit. I don’t believe grovelling before President Trump will accomplish anything. Trump seems determine to punish South Africa for things we mostly haven't done, but in a world untroubled by facts, this doesn’t seem to bother the First Citizen.

Before we hit the panic button, let’s look at the Agoa facts.

What do we export to America?

Around half of what South Africa exports to America is rocks on ships (minerals). This is the same to most of the world apart from Africa. We export less to the US than we used to, with our total exports having dropped 21% over three years to $8.5 billion, taking the US down to about 7% of our exports. Although our exports have dropped, our exports under AGOA have grown, largely because we are selling more cars to the US (Agoa). Exports under Agoa account for 48% of all exports to America, up from 33% in 2022.

The 7% of our exports to America equates to 0.44% of their total imports for 2024. We are literally a rounding error. Add the rest of Africa and we are still below 1%. This is why Agoa is so politically powerful. No matter what the US does with Agoa access, it has no ability to impact the US market one way or the other.

What is the cash value of Agoa I hear you ask? Around $134 million per year in duties saved by American importers. Not nothing, but hardly material either. These benefits are highly concentrated (11 companies account for 70% of the benefits and two of those are in the auto industry).

Automotive - 42% of our Agoa exports (subsidised)

42% of Agoa’s benefits went to the automotive industry, saving the car buyers in America $47 million in duties in 2024. One local car producer accounts for 73% of those benefits and two make up 94%. Because the import duties on cars into the US is only 2.5%, the benefit is commensurately small. If we lost our benefits, between the producers and the buyers, they would eat the 2.5% duty (the EU pays the 2.5% and still moves cars in volume). A far bigger risk is that Trump looks at our 25% customs duties on cars from America and decides that cars from SA should also pay a 25% tariff. He calls this reciprocal tariffs, but most experts call it insanity.

Aluminium - 13% of our Agoa exports (subsidised)

The next biggest category is aluminium (mainly unwrought, so primary not fabricated aluminium). This is a business which made sense in the 90's when SA was awash in cheap electricity and so getting investors to build power-hungry businesses to consume the excess power made sense. So much sense in fact, that they received their electricity at a hefty discount, and still do. SA doesn’t have the bauxite required to make aluminium, so this is imported, our electricity is added, and the aluminium billets are exported. 25% of our aluminium goes to America, so this is not immaterial. It is rumoured that Hillside pays 17 cents per kWh for electricity, while the rest of us pay around R1.95 per kWh. For reasons which make no sense, the actual size of the discount is kept secret. But Hillside consumes around 5% of SA’s power, which if in doubt, is a lot.

If Trump pushes to tariff up to 25% for everyone, then we will lose some volume to local producers, but there is nowhere near enough capacity to take up the slack and its not obvious there will be a rush to invest in more smelters. The current nameplate capacity in America is around 650 000 tons a year, although only 50% of this is used. The new Century Aluminium will add 428 000 tons to the system when completed. It will also be paid $500 million in subsidies from the Department of Energy, so that certainly makes the investment a lot more appealing.

America imports around 4 millions tons of aluminium a year. Putting up a smelter takes years. Century will break ground this year and finish in 2030, so when Trump increases the aluminium tariffs to 25%, capacity doesn’t magically appear. The price of aluminium in the US will shoot up. Agoa here makes no difference. As far as I know, South African exports of aluminium attract the 10% duty imposed by Trump in 2018 and trade still flowed.

Iron & steel - 8% of Agoa exports (subsidised)

9% of our steel exports go to America, but much of this is produced by the mini-mills, who receive R8.5 billion per year in subsidies. They will call for more if Agoa goes, but then they always call for more. There is way too much steel capacity in the market, which is the problem to be addressed. Much of that capacity ends up being dumped in foreign markets, the US included.

Fruit and nuts - 6% of Agoa exports (not subsidised)

6% of our exports our fruits and nuts and here the pain will be real, although the rand value is much smaller. Our top three exports under Agoa are all subsidised, but our agricultural goods are not and this is a very big difference indeed. It is an indictment on South Africa’s competitiveness, that our top three exports to the US are all subsidised.

Our Agoa choices

Our options are stark:

Grovel and hope Trump takes mercy on this shit hole country (don’t hold your breath)
Panic and scream until our Agoa benefits are removed
Plan an orderly exit from Agoa and start the process of withdrawing under our own terms.

I know which option I prefer.

Donald MacKay is founder and chief executive of XA Global Trade Advisors. MacKay has been advising local and foreign companies on global trade issues for more than two decades. X handle: XA_advisors; email: donald@ xagta.com; website: xagta.com. The views in this column are independent of Business Report and Independent Media.

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