The extension of the African Growth and Opportunity Act (AGOA) and South Africa’s continued eligibility is crucial for establishing regional automotive hubs and value chain integration in Africa, which has the potential to create “millions of jobs” in the future not only here but across the entire continent, said Naamsa, the Automotive Business Council, in its AGOA research report released on 31 August.
“The Auto Pact developments in Africa, led by South Africa, to establish regional automotive hubs and value chain integration in the various regions under the framework of the African Continental Free Trade Area [AfCFTA] will be adversely affected should AGOA or South Africa’s continued eligibility be discontinued,” it said.
“The AfCFTA could also play a major role in AGOA’s path forward as it will enhance regional trade by forming a single market and will create millions of jobs across the continent.”
AGOA provides duty-free access to the United States (US) market to 49 sub-Saharan African countries for items such as apparel and footwear, agricultural products, chemicals, motor vehicles and automotive components, steel, and wine.
“AGOA has become a powerful symbol of the commitment the United States and Africa has made to one another’s prosperity. Since its inception in 2001, AGOA has served as the bedrock of trade relations between the US and sub-Saharan Africa, specifically in the support of regional integration and the stimulation of regional value chains through AGOA’s rules permitting cumulation among programme beneficiaries,” said Naamsa.
“The continuity of AGOA, via extensions up to 2025, strengthened trade relations and improved the scope of employment creation, industrial growth, and development in Africa, especially in
South Africa.”
The act is scheduled to expire on 30 September 2025, with the future of US-Africa trade relations hanging in the balance.
Ford Ranger plant, Silverton
A major market
South Africa was the largest beneficiary of AGOA in 2022, exporting R178 billion to, while importing around R134 billion of goods from, the US in 2022.
The domestic automotive industry has by far enjoyed the most benefits from the trade agreement since its inception, accounting for over 99% of the African automotive sector’s exports to the US, with the act also incentivising investment in the country and enhancing private sector activity and economic growth.
Between 2001 and 2022, South African car exports to the US increased by 447.3% in rand terms, while automotive imports increased by a much larger 671.8%.
Illustrating the scale of AGOA’s impact, vehicle shipments from local manufacturers to the Western nation jumped from 853 units in 2000, to 14,873 units in 2001, a massive increase of 1,643.6% in just one year.
“There is overwhelming evidence that the various trade arrangements enjoyed by South Africa, such as AGOA, substantively secured, strengthened, and enhanced the domestic automotive industry’s trade flows,” said Naamsa.
“AGOA stabilised and expanded the US as a significant automotive export and import market for the South African automotive industry.”
Toyota Corolla Quest, Corolla Cross, Fortuner, Hiace, and Hilux plant, Prospecton
In 2022 alone, the US was the local automotive industry’s second-largest export destination and trading partner, and the sixth-largest country of origin for passenger vehicles, with exports amounting to R24.1 billion and imports to R18.3 billion.
These exports mainly comprised passenger cars, catalytic converters, engine parts, and tyres; while imports took the form of original equipment components, passenger cars, and a range of aftermarket parts.
While exports have slightly declined in recent years due to manufacturers such as BMW and Mercedes-Benz opening factories on US soil, the trade relations still help to sustain 85,000 direct jobs and 426,000 indirect jobs for local citizens, which are potentially at risk should AGOA not be extended or South Africa be disqualified.
BMW X3 plant, Rosslyn
The cornerstone of South Africa’s manufacturing sector
The automotive industry is the largest within South Africa’s manufacturing sector, accounting for a substantial 21.7% contributing 4.9% to the country’s GDP in 2022.
This comprised 351,785 vehicle and R70.3 billion worth of component exports, as well as vehicle and original equipment component imports to the tune of R207.7 billion.
“The benefits stemming from AGOA for South Africa are much broader than the mere duty and quota-free access into the US. It also stimulates opportunities for a chain of collaborative arrangements with manufacturing companies from sub-Saharan African countries, to access the US duty free,” said Naamsa
“Given the extension of South Africa’s value chains throughout the region and its positive impact on other economies on the continent via enhanced intra-Africa trade and regional integration, it remains imperative for the continent’s most advanced and regionally integrated economy to remain eligible in an extended AGOA.”
Keyword: “Millions of jobs” across African car industry at risk – South Africa the deciding factor