South Africa’s perplexing foreign policy matched by that of US

South Africa’s perplexing foreign policy is matched by the US. South Africa wants to be neutral or non-aligned, but the US also needs South Africa under its wing with the African Growth and Opportunity Act (Agoa) as it tussles with China over Africa.

Economic research group, Oxford Economics Africa, warns that South Africa’s foreign affairs faux pas have been adding up and the chickens have now come home to roost with the continuation of preferential trade with the US under Agoa hanging in the balance after the US accused South Africa of supplying arms to Russia.

South African exports to the US under Agoa represented roughly 3.0% of South Africa’s total merchandise exports last year and the direct trade impact related to the potential loss of Agoa membership would be most regrettable, the group says. However, the effects of broader sanctions would dwarf these trade consequences.

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South Africa’s relations with the US remains strained after the US ambassador to South Africa, Reuben Brigety, accused his host country of supplying arms to Russia by loading them on a sanctioned Russian merchant vessel that docked at Simon’s Town in December.

White House asked to punish SA

Oxford Economics Africa says the claims are difficult to rebut and the damage to the country’s reputation will not easily be repaired. Now lawmakers of both political parties in the US sent a letter to the White House expressing their concern about South Africa hosting the 2023 Agoa forum later this year.

The letter, obtained by The New York Times, also called into question South Africa’s future Agoa eligibility, with the review process for 2024 underway. The financial markets’ reaction has been muted and the South African rand in fact has clawed back all of its recent losses following Brigety’s press conference.

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News outlets focused on South African trade relations in recent weeks. Oxford Economics Africa points out that despite South Africa-US relations reaching a new low, the collective West remains South Africa’s most important trading partner.

SA’s biggest trading partners vs foreign policy

“IMF data shows that South Africa’s biggest trading partners in 2022 were the European Union (21.7%), China (9.4%), the US (8.8%) and Japan (6.9%). In comparison, exports to Russia are minuscule, representing only 0.2% of total goods exports.

“On average, the value of South African goods exported to the US in one month is more than three times the value exported to Russia during a year. In fact, South Africa exported more goods to the island nation of Madagascar (R4.98 billion) than it did to Russia (R4.62 billion) in 2022.

Agoa forms part of US trade legislation and was signed into law in May 2000. Under the terms of the US Generalised System of Preferences (GSP) and Agoa, 36 sub-Saharan African beneficiary countries are granted non-reciprocal duty-free access to US markets for approximately 6 500 goods.

Additionally, Agoa also provides a broader framework for joint partnerships with the US. In 2015, Agoa was extended for 10 years and is set to expire at the end of September 2025. Between 2016 and 2022, South Africa generated R18.3 billion in revenue from exports to the US under these concessional terms.

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The group says as sub-Saharan Africa’s largest exporter to the US, South Africa can be seen as drawing disproportionally more value from the Agoa arrangement than other less-developed nations. Before the war in Ukraine, some officials questioned whether it was fair that South Africa remained part of Agoa considering the relatively advanced state of the economy.

“South African foreign policy is perplexing, to say the least. The government added international relations to its long list of self-inflicted problems. Pretoria insists that it is neutral or non-aligned on the Russia-Ukraine war, but South Africa’s cozy relationship with Russia has made this position untenable.”

An arrest warrant from the International Criminal Court (ICC) for Russia’s President Vladimir Putin has created a major headache ahead of a Brics summit to be hosted by South Africa in August.

No swift and punitive sanctions

The group says despite the South African government’s compromising stance, it is hard to imagine that the West would levy swift and punitive sanctions against South Africa, akin to what has been imposed on the likes of Iran or Russia.

“Trade ties with South Africa are unlikely to be severed multilaterally, as Western leaders might consider alternative, more targeted measures. Although diminished, the domestic economy remains Southern Africa’s economic anchor.”

Oxford Economics Africa says while Agoa boosted economic growth and promoted economic and political reform in beneficiary countries, the arrangement has also improved US economic relations in the region.

“With the US and China set to continue their tussle over Africa, it can be argued that South Africa’s ongoing Agoa membership is important for US relations with the continent more broadly.”