Agoa exclusion: What is South Africa really losing?

Economists say the direct impact on overall economic growth is likely to be small. As of 1 January 2027, South Africa will be excluded from the African Growth and Opportunity Act (Agoa) following an annual review of the country’s eligibility. The United States (US) announced this on Monday, 2 November, citing concerns over trade and investment barriers, corruption and US national security and foreign policy interests. Like South Africa, Rwanda will also lose its preferential access two years earlier than the trade agreement was supposed to end. Economists noted that the announcement is another setback in an already strained bilateral relationship between Washington and Pretoria, but they suggest that what South Africa is really losing out on may be less dramatic than the headlines suggest. Agoa’s contribution was limited Chief Economist at PSG Financial Services, Johann Els, noted that the direct impact on overall economic growth is likely to be small. “Less than 1% of our total goods exports currently enter the US under Agoa. This is not insignificant for the businesses and workers affected, but the bigger concern is the signal it sends to investors and the potential impact on confidence, investment and our broader relationship with the US,” he said. Chief economist at the Bureau for Economic Research (BER), Lisette IJssel de Schepper, highlighted that South African exporters can continue selling their products to American customers, but goods that currently benefit from Agoa could face higher import duties. “Importantly, much of Agoa’s benefit has already been eroded by the tariffs introduced during the second Trump administration. Certain vehicles and components, as well as metals, already face substantial sector-specific tariffs, while many other products are subject to additional duties of 12.5%. “Agoa does not remove these additional tariffs. What it can still remove is the ordinary most-favoured-nation (MFN) duty.” Normal tariffs to be paid outside Agoa De Schepper said exclusion from the trade agreement generally means paying the ordinary US import tariff on top of other applicable duties. These ordinary tariffs vary by product, but estimates suggest that the remaining preference amounts to around 3 percentage points on average. The additional tariff disadvantage is therefore considerably smaller than the increases South African exporters have already faced under the Trump administration. “Fortunately, some of South Africa’s largest exports to the US, including important platinum group metals, already face zero ordinary import duties. Losing Agoa would not introduce a new ordinary tariff on these products,” added de Schepper. Who stands to lose? The US accounted for around 7% of South Africa’s merchandise exports in 2025. However, de Schepper said this aggregate figure hides considerable differences between industries, products and individual exporters. “Automotive manufacturing has historically been a major beneficiary of Agoa, but much of its preferential advantage has already been undermined by the additional US tariffs.” Agriculture presents a more nuanced picture. South Africa’s agricultural exports to the US totalled approximately US$504 million in 2025, down by just 3% from 2024 despite considerable tariff uncertainty and periods of significantly higher duties. “This resilience partly reflects the adjustments exporters have already made, including changes to supply chains and investments in developing alternative export markets. However, performance varied considerably through the year, and the sector’s ability to absorb further shocks will depend on continued efforts to diversify markets and secure more favourable trading conditions. “The loss of remaining preferences could nevertheless be significant for particular products and producers. In agriculture, even relatively small changes in competitiveness can affect margins and employment across farms, packhouses and transport operations. “Similarly, the consequences for individual manufacturing plants and their suppliers may be substantial even if the aggregate impact on the economy is relatively limited. The real question is therefore not only how much export revenue South Africa might lose, but where those losses would likely occur and how much domestic economic activity and employment depend on them,” he added. Can other markets replace the US? De Schepper noted that diversifying South Africa’s export markets is sensible, but it is neither an immediate solution nor a reason to abandon established trading relationships. “South Africa exports very different products to different destinations. China and India predominantly purchase minerals and other commodities, while the US is an important market for certain manufactured and agricultural products,” he added. “There is also an important distinction between the benefits of diversification for the economy as a whole and its implications for individual industries and communities. Even if increased coal exports to India, for example, more than offset the loss of agricultural exports to the US in value terms, it would offer little immediate relief to a seasonal worker on a citrus farm in the Western Cape. “There are opportunities to expand agricultural exports to Asia and the Middle East, while regional African markets remain particularly important for manufactured goods. China, for example, introduced zero-tariff access for qualifying South African exports in May 2026, with negotiations under way to secure a longer-term trade arrangement through SACU.” What matters now? De Schepper said the direct, additional tariff shock from Agoa exclusion is likely to be considerably smaller than the disruption already caused by recent US trade measures. Its incremental impact on aggregate economic growth is therefore likely to be relatively modest, although the consequences for individual industries, workers and communities could be significant. The direct implications for inflation and the rand should also be limited, but a further deterioration in bilateral relations could weigh on investor sentiment and potentially affect the exchange rate. While the announced exclusion is set to take effect in January 2027, it does not necessarily rule out a future restoration of preferences. Such an outcome would depend on developments in the bilateral relationship and subsequent US eligibility decisions, making it difficult for exporters to plan around. “The priority must be to preserve and negotiate market access wherever possible, while developing new export opportunities. South Africa can also do much domestically. More reliable logistics, efficient ports, lower operating costs and a predictable business environment would improve exporters’ competitiveness regardless of developments in Washington,” he added. “However, expanding access to new markets also requires greater alignment between South Africa’s trade and industrial policies.”