DION GEORGE: As government cosies up with Russia, SA faces loss of generous Agoa

The SA economy teeters on the brink of collapse. The growing electricity crisis, rampant inflation and a failing government getting in the way of growth is likely to result in recession this year. Amid this gloomy outlook, the Africa Growth & Opportunity Act (Agoa), a cornerstone of SA’s contemporary economic framework, is up for renewal in 2025.

This generous preferential trade agreement with the US provides tariff- and quota-free access to US markets for a vast array of products without any reciprocal requirements. Yet instead of leveraging Agoa towards a permanent preferential trade agreement, the ANC government has placed Agoa’s renewal in jeopardy.

The lack of progress on security-related recommendations was the primary cause for SA’s addition to the Financial Action Task Force (FATF) greylist in February. In particular, little progress was made on intercepting financial flows for the financing of terrorism or implementing sanctions on identified individuals. The government was either asleep at the wheel or not interested in protecting the interests of SA’s battling households.

The looming Agoa renewal decision faces an even bigger obstacle. The government has abandoned its so-called non-aligned foreign policy, failing to grasp the reality that trade policy is foreign policy. By supplying weapons and ammunition to Russia the government has firmly nailed its colours to the mast and fuelled the war on Ukraine.

The US will clearly not tolerate this betrayal. This, and SA’s participation in war games with Russia and China, has sent a clear negative signal to the US legislators, who will decide the future of SA’s participation in Agoa.

After President Cyril Ramaphosa sent his special envoy to the US, finance minister Enoch Godongwana proclaimed in parliament that Agoa is not at risk, and departmental spokesperson Clayson Monyela advised the parliamentary committee on international relations & co-operation that the US relied on Sasol for its energy security and would therefore retain Agoa. Both claims have no substance in reality and are the statements of a government hopelessly out of touch with reality.

US legislators were due to visit SA in August, but have postponed until November, given Russian president Vladimir Putin’s possible presence in SA for the Brics summit at that time. Brics has not benefited SA and its expansion is purely an attempt to replace the dollar as the world’s reserve currency and facilitate Russia’s sanctions evasion.

Agoa is a linchpin for SA’s economy, bolstering trade relations and fostering economic growth; stimulating economic activity and facilitating the expansion of automotive, manufacturing, and agricultural industries, among others. Losing Agoa’s preferential trade terms would hold significant deleterious consequences for the SA economy. In the absence of Agoa, SA exporters would face heightened barriers to entry to the US market, triggering a significant contraction in export volumes, reduced investment and subsequently job losses.

Instead of having to rely on the continual renewal of Agoa, SA should be looking to the future and considering permanent arrangements beyond Agoa in the form of a strategic trade and investment package or free trade agreement. Enhanced market access, reduced trade barriers and fostering innovation would facilitate high-quality job creation, technology and skill transfers, and solidify a mutually beneficial economic partnership between SA and the US, establishing a stable platform for long-term growth.

This vision takes inspiration from Kenya’s ongoing negotiations with the US, where the pursuit of a comprehensive agreement promises to catalyse a new era of economic co-operation between Africa and the West. Kenya and Zambia have showcased the value of active engagement in lobbying the US Congress, highlighting the need for SA to follow suit in maintaining and strengthening trade relations with the West.

The proactive approach employed by these nations has not only safeguarded their existing trade benefits but also facilitated the exploration of new avenues for co-operation. Cultivating strong diplomatic ties and nurturing mutually beneficial relationships are essential components of a thriving, internationally competitive economy.

Despite government’s blunders, it is crucial for the US and the international community to differentiate between the ANC and SA when evaluating the country’s eligibility for Agoa and other trade benefits. There are other voices in SA, of those who cherish democracy, freedom the rule of law and human rights. Losing the benefits of Agoa when we need them most would be a form of sanctions on the people of SA, rather than on its uncaring government.

Strong relations with the US are paramount, as these ties underpin SA’s economic wellbeing and global standing. Regrettably, the ANC has failed to grasp the gravity of this relationship, jeopardising the nation’s credibility and pushing us closer to alienation. The scenario echoes the final years of the apartheid era, when the regime’s contradictions led to its inevitable collapse. Thirty years after our first democratic elections, that time has arrived for the ANC.

• Dr George is DA shadow finance minister.