South Africa’s expected expulsion from the African Growth and Opportunity Act (AGOA) need not be a death sentence to the country’s export prospects, African Continental Free Trade Area (AfCFTA) Secretariat secretary-general Wamkele Mene has said, calling on the domestic private sector to see it as an opportunity to bolster intra-African trade and diversify exports to other markets.

Speaking at an AfCFTA South Africa private sector roundtable breakfast session at the Nedbank head office, in Johannesburg, on February 28, he pointed to the example of Ethiopia, which was expelled from AGOA on January 1, 2022, forcing the country to pivot to alternative export markets.

Ethiopian news outlets reported in February that the consequence of this was that 18 foreign companies had to leave the country, costing 11 500 jobs, with industrial parks suffering a combined revenue loss of $45-million.

“Ethiopia was removed from AGOA and immediately afterwards pivoted their export markets, broadened their export base and diversified. Ethiopia, in that period, doubled their exports to China. These exports range over a number of sectors, including manufactured goods that are manufactured in the special economic zones in Ethiopia.

“This is what all of us, I believe, should work towards – a diversified export market through the AfCFTA. The private sector, is absolutely key in this endeavour,” Mene said at the event, which was hosted by the Department of Trade, Industry and Competition, in partnership with Nedbank and the AfCFTA Secretariat.

Over the past few weeks, tensions between the South African and US governments have caused concern, with US President Donald Trump issuing an executive order on February 7 to pull all US financial aid in response to, among other things, the South African government’s growing relations with Iran, ongoing criticism of Israel and support of Islamic terrorist group Hamas, and the signing into law of the Expropriation Act in December 2024 – an act which many in the Western world have described as an assault on property rights and, therefore, a disqualifying factor under AGOA.

Although South Africa’s expulsion from AGOA has not yet been formally announced, many political commentators are of the opinion that it is highly likely to occur soon unless the Expropriation Act is repealed or amended.

Under AGOA, South Africa has exported more than $55-billion in non-crude goods since the programme began in 2000.

According to US research organisation Brookings Institute, if South Africa were to be expelled from AGOA, big losses would be felt by the food and beverages, transport equipment, fruit and vegetable and leather and clothing sectors.

The automotive sector would also suffer significantly. South Africa has increased its automotive exports to the US from $195-million in 2000 to $1.6-billion, out of a total of $13-billion across all industries. Much of this was made possible by AGOA.

However, Mene said South Africa was not the only country under threat of AGOA expulsion, implying that there was reason to believe the entire programme might be scrapped altogether or otherwise redrawn with more reciprocation demanded by the US.

“It's most unfortunate, not just for South Africa, but for [all] African countries that benefit from AGOA, that [the current diplomatic] uncertainty has an impact on AGOA. Many countries in Africa benefit from market access in AGOA on a non-reciprocal basis. The signals that we are getting is that all of that will change. We should expect that we will be, as African countries, placed under very severe pressure,” Mene said.

However, he urged African businesses to see the rising protectionism being exhibited by the US as an opportunity to increase intra-African trade.

“This crisis is also an opportunity for us to explore new markets in Africa. If you consider the fact that Africa's exports under AGOA, since 2000, Africa's share of exports, reduced from 17% to 6%. [Meanwhile], from 2020 to 2024, Africa's share of exports to China increased from 3% to 14%,” he said.

Exports to China and other international markets remain options as the US backs out, although Mene said that intra-African trade was hampered by infrastructure challenges.

“The infrastructure deficit of close to $170-billion a year is a significant challenge and a constraint to intra-African trade. The cost of transport and logistics is also a challenge, as well as the cost of trade finance and non-tariff barriers, which the AfCFTA is well poised to target and solve. In confronting these challenges, we will have to leverage on the capital that exists in Africa,” Mene said.

He explained that AfCFTA had introduced several key instruments to facilitate business across Africa.

One such initiative is the Pan-African Payment and Settlement System, a digital platform that enables instant local currency transactions, eliminating the need for third-currency conversions and reducing the estimated $5-billion-a-year cost of currency convertibility.

He said this system would enhance trade competitiveness and support small- and medium-sized enterprises in cross-border transactions.

Additionally, the AfCFTA Adjustment Fund has been established with an initial capitalisation of more than $1-billion, with a target of raising $10-billion to support private sector expansion across the continent.

The fund is specifically directed toward businesses rather than government budgets, ensuring that African enterprises receive the necessary financial backing to transition and grow in key sectors such as energy and critical minerals.

Further, Mene said AfCFTA was working with the African Bank to establish a Continental Transit Guarantee Scheme, which would simplify the movement of goods by providing a single bond for transit insurance, rather than requiring separate policies for each jurisdiction. The bank has already committed $750-million to underwrite this initiative.

In addition, Mene revealed that AfCFTA has introduced harmonised local content requirements to create a uniform regulatory framework across Africa, reducing trade barriers and investment costs.

These rules apply to all traded products except in the textiles, clothing, and automotive sectors, where negotiations are still ongoing.

AfCFTA has also introduced a predictable electronic tariff book, which enables economic operators to identify with certainty what tariff applies to their product and in which market across Africa.

Mene emphasised that these measures would be essential to improving the ease of doing business and fostering economic integration across the continent.

SOUTH AFRICA

The rapid deterioration of US-South African diplomatic ties notwithstanding, Trade, Industry and Competition Minister Parks Tau said South Africa was well-positioned to lead African trade and benefit from the AfCFTA as the continent’s key logistics hub – despite the deteriorated state of the country’s rail and port infrastructure.

“By enhancing supply chain connectivity, we will unlock new business and investment opportunities, strengthen our export promotion efforts and attract global investors to the continent,” he said.

Tau said this strengthened logistical framework was expected to bolster export promotion efforts and attract global investors to the continent.

Further, he projected that by 2035, tariff barriers faced by South African companies would decline from 4.3% to 1.2%, while the cost of non-tariff barriers would decrease from 34.6% to 19.9%, significantly improving the ease of trading.

Tau further noted that the removal of trade barriers under AfCFTA could be expected to drive economic growth, with real income projected to increase by up to 3.81% and exports expected to rise by 17.6% across the continent.

He noted that, since the start of trade under AfCFTA in 2024, South Africa’s exports under preferential terms had shown steady growth, reaching R696-million between January 2024 and January 2025.

These exports span a diverse range of products, including mining equipment, appliances, food items, apparel, plastics, and electrical machinery.

The country’s primary export destinations within the AfCFTA framework currently include Ghana, Kenya, Egypt, Rwanda, Cameroon and Algeria. As more countries implement their tariff commitments, Tau said South Africa’s market access and trading partnerships across Africa would expand significantly.

“Despite the highly volatile and challenging global operating environment, African economies have shown remarkable resilience. Africa is emerging as a pivotal geo-strategic partner for the future.

“Given its abundant resource endowments and efforts by African countries to improve their macroeconomic fundamentals, this is positioning the continent as one of the most attractive, sustainable investment destinations in the world, as other countries establish more secure global supply chains.

“However, most African countries continue to grapple with high inflationary pressures, debt accumulation, as well as climate change associated extreme weather events,” Tau said.

Tau encouraged South African businesses to prioritise expanding the exports of their goods and services into the rest of Africa, rather than overseas, urging them to seize the competitive advantage offered by the AfCFTA. He said that early expansion would allow South African companies to establish themselves as leaders in key sectors across the continent.

“The AfCFTA is a game-changer for Africa’s economic landscape. It offers unprecedented market access, fosters industrialisation, and enhances competitiveness. South African businesses must position themselves strategically to take full advantage of this transformative agreement,” he said.

Tau emphasised the crucial role of private sector participation in driving economic integration and sustainable growth across the continent.

“The success of the AfCFTA depends on our ability to build competitive industries, enhance regional value chains, and ensure that businesses of all sizes can access new markets. This requires collaboration, innovation, and a commitment to fostering a thriving intra-African trade environment,” he said.