Economists suggest that South Africa's upcoming exit from the African Growth and Opportunity Act (AGOA) is unlikely to have a significant direct impact on the country's overall economy. However, according to Johann Els, a senior economist at PSG, this decision raises broader concerns regarding investor confidence and trade relations with the US.
On Monday, the US notified Congress of its intention to cease South Africa's compliance with the trade preference program starting January 1, 2027, which will lead to the cancellation of duty-free access for relevant South African export goods.
Nevertheless, the volume of trade that actually benefits from AGOA is significantly smaller than South Africa's total exports to the US. The loss of preferential access does not mean that South African goods cannot enter the American market; instead, the relevant products will lose their duty-free status and will be subject to applicable import tariffs.
Els noted that in 2025, about 7% of South Africa's goods were exported to the US, amounting to approximately $16.5 billion. Of this amount, about $1.6 billion came under AGOA preferences. This constitutes roughly 10% of exports to the US, but only 0.7% of South Africa's total merchandise exports, he added. He emphasized: 'Although the absolute figures may seem significant, the share of our total exports directly affected is relatively small.'
Not Such a Big Problem?
Els also stated that 'this does not mean that all of South Africa's exports to the US will suddenly face new tariffs or disappear. Exports will continue, but some goods will become less competitive.' He advised South Africa not to confuse its status as a major beneficiary of AGOA with the share of its own exports dependent on this program.
Annabel Bishop, Chief Economist at Investec, also anticipates a limited national economic effect but views the vulnerability differently. According to her estimates, 7% of South Africa's exports go to the US, with about half of these shipments, mainly agricultural products, being duty-free.
Donald McKay, founder and CEO of XA Global Trade Advisors, called the additional effect of losing AGOA relatively minor. McKay noted that more than half of what South Africa sends to the US consists of precious metals and minerals, which are not regulated by AGOA and are not subject to tariffs. Thus, the products affected by the loss of preferences represent a relatively small subset of exports.
McKay added that the country has already experienced a significant trade shock due to US national security tariffs imposed on certain goods. He opined: 'I do not think we will see something like mass job losses.' He also added that he would obviously prefer the continuation of AGOA for South Africa, believing that the loss of this program would not change the economy.
Investor Confidence
Despite the limited direct trade exposure, Els pointed out that the wider implications could be more significant. He noted: 'The more serious issue is the signal this sends to investors and the potential impact on confidence, investment, and our broader relationship with the US.'
Els stressed that the concern relates to the possible impact on business confidence, investment, and diplomatic ties between the two countries. The US administration cited practices by South Africa that it describes as non-compliant with AGOA eligibility criteria, including barriers to American trade and investment, corruption, and threats to US national security and foreign policy interests.
The Department of Commerce, Industry, and Competition stated on November 2 that the government had presented additional concessions to address US concerns and expressed regret that the US was now raising new issues that were not the basis for discussions since the beginning of negotiations in 2025.
Diversification
Bishop argues that disruptions caused by changes in US trade policy and geopolitical tensions have already prompted companies to adjust their trade links. Pointing to the growth in trade between developing economies, Bishop reported that South-South trade interaction is increasing by about 8% according to the United Nations Conference on Trade and Development.
Bishop also noted that the private sector has responded to tariff uncertainty by restructuring supply chains, finding alternative markets, and outpacing imports.
Dr. Ernest van Billjon, Dean of the Research Faculty at IMM Graduate School, reported that many exporters have been diversifying over the last one or two years in anticipation of exiting AGOA and have already opened markets in other regions. According to Van Billjon, bilateral trade with the US last year amounted to $24.1 billion compared to $55.6 billion with China. The Department of Commerce, Industry, and Competition estimates bilateral trade with the US in 2025 at $28.8 billion.
Keep Moving Forward
The Department stated that the government will continue to promote trade and investment with the US while accelerating the diversification of its export markets, including the African Continental Free Trade Area, India, the European Union, and China.
Van Billjon named Europe as an obvious first destination for seeking new markets, noting that total trade with the EU has grown by 44% over five years, and the African Continental Free Trade Area offers scale provided corridors and borders function. He emphasized that AGOA was a useful advantage, not the foundation of South Africa's trade. He also mentioned that this is one of several simultaneous disruptions, including tariff changes, closure of shipping routes, and geopolitical upheavals, and that firms that know their exposure and have other outlets will fare best.
Els concluded that the direct impact on overall economic growth will likely be small, but the broader consequences for business confidence, investment, and relations with the US deserve more attention.
