OPPORTUNITY KNOCKS ANALYSIS
How to protect SA’s access to Agoa — but not the Mashatile way
Making US businesses lobby Congress to keep South Africa in the Agoa trade agreement, as suggested by Deputy President Paul Mashatile, would not be helpful – and it might even backfire. There is a better way.
South African Deputy President Paul Mashatile recently met representatives from a number of American businesses operating in South Africa. In his remarks, he set out a series of priorities (although not actual policy changes or implementation mechanisms) intended to make South Africa more competitive internationally, and more business-friendly.
If all these ideas became real, they would certainly help make the case easier for businesses considering future foreign investment in South Africa — or for the expansion of existing business investments.
It certainly would be a rare foreign (or domestic one, for that matter) business that would rise in opposition to such things as cutting red tape or reducing the time to register business start-ups or the expansion of one-stop government shops. (In this, he was clearly envious of what he had seen during a visit to Rwanda.)
It almost goes without saying, of course, that major changes in ways of doing business can easily become hotly contested arenas. One only has to think about the policy battles over a shift towards renewable energy for electrical power generation and away from those heavily polluting, coal-fired power stations. Many oxen inevitably will be gored in such a transition — and those oxen have some serious, tenacious political heft.
But beyond an array of useful ideas and policy approaches, one idea discussed by the Deputy President is more than a little problematic, and that came about during his discussion of the specifics of US-South Africa political and economic relations.
Acknowledging their importance (as he certainly should, and the need to maintain them), he noted the South African government has been making efforts to convince (or, more honestly put, to lobby) the American government to head off the possibility of South Africa losing its eligibility under the African Growth and Opportunity Act, or as it is usually called by its initials, Agoa.
Agoa provides duty- and tariff-free access for thousands of African products into the massive American market, thereby giving those exports a competitive edge. By the time the current act expires in 2025, Agoa will have been in place for a quarter of a century and important parts of the South African economy have positioned themselves to benefit from Agoa’s provisions.
In fact, among all African nations, South Africa has been especially successful in making use of this legislated preferential access, moving such value-added products as automobiles and auto parts and processed agricultural commodities into the US market. By contrast, most other nations have largely made use of Agoa for primary commodity exports.
The statistics say that Agoa has generated at least 65,000 direct jobs in South Africa, and many more partially benefit by being suppliers, contractors and subcontractors to direct exporters. Beyond the question of the impact of Agoa access, American businesses operating in South Africa more generally result in something like 10% of the country’s total GDP.
Read more in Daily Maverick: Warning shot fired – top US congressmen urge Biden to move Agoa forum away from SA
What the Deputy President proposed was that US businesses operating in South Africa should make a concerted effort to lobby the US Congress (and presumably the executive branch) to keep South Africa within the Agoa fold when the periodic review takes place. The problem is that this idea tackles the wrong challenge – and might even make things worse.
The problem is one of politics, not economics.
There are three questions here.
First, is the possibility that such a direct push by American businesses with interests in South Africa to preserve trade benefits for that nation might easily give rise to criticism this was a back-door version of getting businesses to act as lobbyists for a foreign government, but without their registering as such.
Given the protectionist timbre of much national feeling, especially among those in Congress, and a growing reluctance to grant unilateral trade benefits to foreign nations, businesses would likely feel reluctant to enter such a fray on behalf of one country — South Africa — for fear of attracting criticism of their activities more generally, especially where such activities are more important to them than their presence in South Africa. (It may be useful to recall that back in the 1980s, several US companies simply chose to divest from relatively small operations in South Africa, rather than attract criticism that could harm their other international operations through secondary boycotts.)
It is also possible that this idea from the Deputy President may represent a kind of deeper misunderstanding on the part of some South African officials about the place or weight of business in American politics.
Perhaps they believe in a way that is a faint echo of old-school Marxist theory that business ultimately calls the shots in America and that politicians will bend to the will of business leaders in a way reminiscent of an America that has long passed into history.
Perhaps, too, they have taken too much to heart the old axiom by the former head of General Motors, Charlie Wilson, who once said, “What’s good for General Motors is good for America,” such that business leaders just have to push a button or two and congressmen and women will come to heel.
Second, and even more important, is the need for the South African government to realise that the problem it must confront concerning Agoa is not primarily an economic one — it is a political and international relations one based on their actions vis-a-vis their relationship with Russia.
It is not something that is going to be magically fixed by a statement from a committee of business leaders. Instead, it will depend on South African international relations policy choices.
The South African embrace of Russia as evinced through joint naval exercises amid the ongoing invasion of Ukraine, a succession of high-level, very friendly bilateral government meetings and visits to (and from) Russia, South Africa’s votes in the UN that declined to condemn the Russian invasion of Ukraine, and the continuing mystery of the Lady R and Waterkloof cargoes have, collectively, given rise to a very palpable sense among American legislators (and officials) that South Africa is not a neutral nation in the face of the present conflict, despite the repeated mantra from the Union Buildings that it is.
Read more in Daily Maverick: Biden administration shares concerns of US Congress over SA’s perceived support for Russia
Moreover, expectations that Russian President Vladimir Putin may attend the upcoming BRICS summit in Johannesburg in August as an honoured guest, despite the International Criminal Court’s indictment of Putin as a war criminal, may easily add further anger and frustration about South Africa’s international stance in the current hostilities.
Accordingly, the current questions hanging over South Africa’s participation in Agoa are not primarily economic disputes, and so they are not ones American business leaders can dispel on behalf of South Africa, no matter what they might say in their submissions.
Instead, what would help would be changes in both the rhetorical quality of South Africa’s statements as well as its actions in dispelling the growing sense that it is far from neutral with regard to this invasion.
Especially now that Russia has publicly announced it will no longer honour the UN and Turkish-brokered deal that allowed grain shipments from Ukraine to the world’s grain markets and consumers (and especially those in developing nations and for the UN’s World Food Programme), South Africa could make it clear that such an abrogation is a violation of trust that will have devastating effects on some of the poorest nations on the African continent. Accordingly, such a decision must be reversed forthwith.
Moreover, if the multi-nation African peace mission to Moscow and Kyiv is to have meant anything at all, the warring nations must restate their intentions to re-embrace the Budapest Accord of 1994 that firmly established the sovereignty and borders of the two nations, thereby re-establishing the status quo ante.
Further, South Africa must articulate the need for hostilities to cease, a return of troops to the status quo ante’s borders, and an agreement under UN auspices to enter into negotiations over the future status of any disputed territory, as well as appropriate security arrangements for the future. Reparations might be too difficult to discuss at this point, but that nettle will eventually have to be grasped.
Statements like those would go a long way towards restoring South Africa’s bona fides as an officially neutral nation in word and deed in the conflict, and they would certainly be understood that way by members of the US Congress and officials in the Biden administration. (Such a stance might well encourage Vladimir Putin to stay home and send a deputy to the upcoming BRICS meeting as well in order to avoid embarrassment.)
The best role for business
Third, and this goes to the heart of how businesses can best interact with government, the best course for businesses and business associations active in South Africa must surely be to promote and encourage government policies that can enhance growth and improve the climate for business success, even as they simultaneously support policies designed to enhance the wellbeing of all of a country’s citizens.
Therefore, businesses — foreign and domestic — need to find ways to work closely with government on concrete, consequential things that can help with reaching these goals.
It is true there have recently been efforts to bring the various South African business federations together to work in tandem with government in dealing with what may sometimes be seen as intractable problems facing South Africa. This is, however, taking place in a landscape where there is still some distrust by government towards business — something that may also be a hangover from when the old regime was being consigned to history.
Bringing the business sector together with government to deal with problems such as unemployment, poverty, a huge gap between rich and poor, deindustrialisation, dispiriting educational results, collapsing social services and government’s public corporations, and a persistent energy crisis might well make the best possible argument that South Africa remains true to the purposes of Agoa in improving Africa’s economic and political circumstances.
Instead of punishing it by casting it out of Agoa’s privileges, the country would again be seen as a model for such cooperation.
Perhaps it is useful to turn the clock back nearly 50 years ago to recall the way businesses responded to the explosion of black anger and dissatisfaction that became obvious in the aftermath of the Soweto Uprising of 1976.
Clearly shaken by those events and the growing concern things might spin out of control in the face of business insouciance and government intransigence, Harry Oppenheimer of Anglo American and De Beers, together with Anton Rupert, chivvied the business community into establishing the Urban Foundation to address the circumstances of South Africa’s growing urban black population and their demands for a fuller, fairer share of the country’s economic and political spheres.
As noted by Michael Cardo, author of the new Oppenheimer biography, in order to forestall the possibility of a violent revolution, this Urban Foundation “sought to improve the living conditions of township dwellers and to anchor a stable, propertied black middle class in the cities. This, Oppenheimer hoped, would give black people a stake in the economy, lay the groundwork for an orderly political transition, and foil violent regime change”.
Such a sustained joint commitment, now, under different but possibly equally testing circumstances – bringing business and government together closely to address the country’s ills – would also be an important message to those in America considering removing South Africa from the list of eligible nations under Agoa that South Africa should remain a part of it.
This points us towards thinking about how foreign business groups can make a real difference in speaking to American government structures.
The representations should focus on how Agoa has helped Africa as a whole (and how it can help it further if the act is renewed in some form in 2025). Crucially, for the feelings of contemporary American politicians, the argument must be how the act’s provisions contribute to the American economy by encouraging a more prosperous, stable group of countries that can welcome American exports and investments — and that means jobs for Americans.
But turning foreign businesses operating in South Africa into what effectively would be shills for the current government and apologists for its miscues and bad policy choices, is not the right path.
It will not be particularly effective in reaching Congress and it might even backfire in the context of the current political climate. There are different approaches and they should be taken instead. DM