Alarm bells have been rung about South Africa’s preferential access to US markets under the African Growth and Opportunity Act (AGOA) following a tweet by US President Donald Trump on Wednesday where he referenced land seizures and alleged wide-scale killing of farmers in South Africa.
In terms of section 104 of the act, sub-Saharan African countries eligible for AGOA have to commit to protecting private property rights.
AGOA, which came into effect in May 2000, provides trade preferences for quotas and duty-free entry to the US for certain goods.
The South African government was since due to meet US government officials in Pretoria over the tweet which Department of International Relations and Cooperation Minister Lindiwe Sisulu called "false information".
Mills Soko, associate professor of International Political Economy at the UCT Graduate School of Business warned that Trump’s personal views have a “massive bearing” on US policy.
“In fact, his views increasingly constitute policy. And his tweets always signal what policy the US administration will implement, as it's been the case with countries such as Turkey, Iran, Venezuela, Germany, China and Canada, which have been on the receiving end of US economic sanctions and trade warfare,” Soko said in a Facebook post.
AGOA under pressure
AGOA is already under pressure as SA’s poultry producers are taking legal action to demand the Department of Trade and Industry rescind the 2016 agreement to allow US chicken imports as they believe the tariffs imposed by Trump on steel and aluminium in May, breach AGOA requirements.
Soko said that the AGOA agreement is a unilateral US arrangement which the US can withdraw if it deems it necessary.
“There are powerful interests in Washington who do not regard South Africa as a typical African country and who think our country must be excluded from AGOA benefits because it is not poor,” Soko said.
"SA has an 80% trade surplus with the USA, thanks largely to AGOA. But AGOA is conditional on 'respect for property rights'. The US conservative anti trade lobby has long-wanted SA kicked out of AGOA benefits - could they leap on EWC as a way to get it?" Stuart Theobald, co-founder of financial research company Intellidex, tweeted on Thursday.
SA's trade surplus widened to R12bn in June 2018, its largest in six months. The US was one of its most important trade partners, coming in at 7.0% of total exports.
Urge Trump action
In an editorial on Monday a rightwing think tank in Washington, the Cato Institute said South Africa is in breach or is about to breach a number of requirements for membership of AGOA and Trump “should act by issuing a preemptive warning to the South African government”.
In an early morning statement on Friday, the Department of International Relations and Cooperation (Dirco) said officials met the US Charge d'Affaires to indicate to Washington that the process of land redistribution is being worked through in Parliament and that “President Trump's tweet serves only to polarise debate on this sensitive and crucial matter”.
Pretoria said that the US Charge d'Affaires committed to relay the message to Washington.
The rand weakened as much as 2% against the US dollar on Thursday however the local unit’s weakness was also due in part to dollar strength with the Bloomberg Dollar Spot Index gaining 0.7% - the biggest increase since June 14.
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