ZUKO APRIL | Ramaphosa should consider cost of losing Agoa deal

The last few weeks have been rather busy for the President of SA which has seen him send his special advisor in the Presidency, Sydney Mufamadi and one of his most consistent critics in the national assembly opposition benches, John Steenhuisen to the White House, to try and calm the waters with the US government over its cozy relationship with Moscow.

This is unprecedented from SA’s highest office, as in the past the impression was created of good relations with the US president, even though there were different approaches from each country in the ongoing invasion of Ukraine by Russia. The Biden administration seems to have run out of patience with Pretoria and Luthuli House, when it raised concerns about the “hostility with the governing party in SA” that called the Russian invasion of Ukraine a ”consequence of the US expansion of Nato” during its 2022 December conference.

At the centre of the Ramaphosa’s headache is the trade relations with the US that have in the last 26 years increased at an annual rate of 6.9%, with SA currently the 39th largest goods trading partner worth about R400bn. In terms of Agoa, SA is the second largest beneficiary in the Agoa agreement after Nigeria. Agoa has benefitted the motor vehicles and parts, citrus fruit, and wine and grapes sectors of the South African economy, among others. SA has had a trade surplus with the US and exports to the US have increased by 104% since 2000. On the other hand, even though Russian trade with SA has increase in the last financial year by 16.4%, it stands at $1.8bn. Comparatively, in terms of trade volumes and value, the US is by far a better trading partner to SA compared to Russia. Therefore, why would the Ramaphosa administration risk losing these benefits, especially the most sensitive and most beneficiary Agoa over its relationship with Moscow? It would appear the only logical explanation is historical, based on the military assistance Putin provided to the ANC liberation movement during the apartheid era.

Key to the Agoa agreement, is for all beneficiary countries to defend human rights. What the South African president’s current panic makes clear is that he seems to have realised that even though he has not violated human rights in his country his support for the Russian government’s invasion of Ukraine is seen by the US as not defending human rights, and is against another Agoa requirement, not to undermine US security or foreign policy interests. Clause (section 104.a.1. (F)(2) of the Agoa) allows the US president to declare eligible for membership a country that “does not engage in activities that undermine United States national security or foreign policy interests”.

In addition, the current agreement has a section that deals with the monitoring and review of the eligibility of SSA countries. The envisaged review can be initiated anytime to determine the eligibility of a country according to Section 104 (a) (1). The current Agoa agreement comes to an end in June 2025 but based on the out-of-cycle review, SA can lose its eligibility status any time.

Therefore, what are the options available to president Ramaphosa’s administration? It can put the interests of the country first, and ditch the Russian government, and this could save not only its relations with the US, but also secure thousands of South African livelihoods that are sustained through the Agoa trade agreement. Alternatively, the president can do what he has been doing by supporting the Russian government, and risk losing an important trading partner in the US.

This will definitely have a long term economic impact on a country that has 32.7% unemployment rate, and that is in desperate need of foreign direct investment. In that case, the unemployment rate would reach historic high levels and possibly go straight into recession with very high interest and inflation rates.

Dr. Zuko April writes in his personal capacity.