South Africa can ill afford exclusion from the African Growth and Opportunity Act (Agoa) – an issue that has yet again raised its head.
According to Dawie Roodt, chief economist at the Efficient Group, it is far better to be careful of the United States than to provoke it. Roodt said while American President Donald Trump was undoubtedly causing considerable damage with his trade war, countries like South Africa needed to remember the power of the US.
“Whether you like Trump or not, do not pull the tail of that tiger. You are going to get into trouble. I am very concerned that he is going to wake up one morning and tweet ‘South Africa has been excluded from Agoa’,” said Roodt. “If that happens it is going to be very damaging to our economy.”
He said underestimating Trump’s power or his unpredictability could be a costly mistake. There should also not be an expectation that Trump would follow diplomatic channels should he want to kick South Africa out of Agoa. Roodt said it was no secret that South Africa was close to Trump’s arch enemy China – not to mention the political tension with the US following its decision to raise import tariffs on steel and aluminium earlier this year.
According to Roodt all South African exports to America would be negatively affected if Agoa benefits were lost – including the auto sector and agriprocessing. At the same time the move would place the rand under even more pressure leading to higher inflation.
“I am very, very concerned about South Africa being kicked out of Agoa,” he said. That Trump was looking into South Africa was clear when in August he instructed US secretary of state Mike Pompeo to investigate the ongoing land expropriation without compensation debate and farm murders in South Africa.
In 2015/16 South Africa’s ongoing trade benefits under Agoa came under threat when then US President Barack Obama said certain agricultural products would be excluded from the trade deal unless a dispute between South Africa and America over poultry was resolved.
Whilst this crisis was prevented after much negotiation, the situation at present is slightly more concerning, possibly because of Trump’s unpredictability and seeming disinterest in Africa at large.
Whether you like Trump or not, do not pull the tail of that tiger. – Dawie Roodt
