As the African Growth and Opportunity Act (Agoa) comes up for potential renewal before its expiry in 2025, naamsa | The Automotive Business Council and the Automotive Industry Export Council (AIEC) have released a research report motivating for an extension to the trade preference programme.

Agoa has since 2001 allowed for duty- and quota-free exports from eligible sub-Saharan African countries into the US. It is an extension of the US Generalised System of Preferences and is subject to yearly congressional re-authorisation.

Some of the latest added Agoa products include items such as apparel and footwear, wine, motor vehicles, selected additional automotive components, certain agricultural products, chemicals and steel.

naamsa says in the report that Agoa has become a powerful symbol of the commitment the US and Africa have made to one another’s prosperity.

The industry body believes Agoa has served as a bedrock of trade relations between the two regions and helped to support regional integration, particularly the development of regional value chains – through Agoa’s rules permitting cumulation among programme beneficiaries.

South Africa was the continent’s largest beneficiary of Agoa in 2022, having exported R178-billion worth of goods to the US, while imports amounted to R134-billion.

In particular, South Africa has accounted for 99% of the African automotive sector’s exports to the US since Agoa’s inception. The South African automotive industry, for one, has been a major beneficiary of Agoa, with substantial two-way automotive trade having taken place between the two countries.

naamsa motivates that there is substantial evidence that the various trade arrangements enjoyed by South Africa, such as Agoa, substantively secured, strengthened and enhanced the domestic automotive industry’s trade flows.

In 2022, the US comprised the local automotive industry’s second-largest export destination, sixth-largest country of origin and second-largest trading partner.

Total automotive exports to the US amounted to R24.1-billion in 2022, while total automotive imports from the US amounted to R18.3-billion.

Exports mainly comprised passenger cars, catalytic converters, engine parts and tyres, while imports mainly comprised original-equipment components, passenger cars and a range of aftermarket parts.

Light vehicle exports in 2022 amounted to R15.3-billion, or 63% of total automotive exports. 

South African automotive exports to the US increased by 447.3% in nominal rand terms between 2001 and 2022 under Agoa, while automotive imports from the US increased by 671.8% in nominal rand terms over the same period.

This trade arrangement provided impetus for the domestic automotive sector’s vehicle export drive to the US, which increased from 853 units in 2000 to 14 873 units in 2001 when Agoa started being implemented, a massive increase of 1 643.6%. 

The import duty on passenger cars into the US is 2.5% ad valorem and on commercial vehicles 25% ad valorem, while US consumers benefitted through duty savings on vehicles and selected automotive components to the value of R400-million in 2022.

“Agoa has helped to expand the US as a significant automotive export and import market for the South African automotive industry. In turn, many leading multinational corporations actively participating in the South African economy regard the country as an ideal location for any company aspiring to reach the continental market more effectively,” naamsa and the AIEC state.

naamsa says investment expenditure by original-equipment manufacturers increased by 33% from R1.5-billion in 2000 to R2.08-billion in 2001.

With Agoa expiring on September 30, 2025, it makes the future of US-Africa trade relations uncertain, the AIEC and naamsa say, adding that Agoa’s extension and South Africa’s continued eligibility thereto is crucial for continued growth in the automotive industry.

The organisations go as far as to say that the Auto Pact developments in Africa, led by South Africa, to establish regional automotive hubs and value chain integration in the various regions under the framework of the African Continental Free Trade Area (AfCFTA) Agreement, will be adversely affected should Agoa or South Africa’s continued eligibility be discontinued.

The AfCFTA Agreement also presents an opportunity to enhance regional trade by forming a single market and should also contribute to the continued successful implementation of Agoa should it be extended – including increased imports from the US into more African countries.

It also stimulates opportunities for a chain of collaborative agreements with manufacturing companies from sub-Saharan African countries to access the US duty-free.

naamsa and the AIEC estimate Agoa has created about 85 000 direct jobs and 426 000 indirect jobs in South Africa through expanded value chains throughout the region and its positive impact on other economies on the continent.

The organisations conclude that continued access to the US market is more important than ever, and that the benefits stemming from Agoa to South Africa span broader than mere duty- and quota-free access into the US.