Follow-up meeting on African Growth and Opportunity Act (AGOA) incl outcomes of AGOA Forum (with Minister)

Meeting report

Opening Remarks

The Chairperson opened the meeting and welcomed everyone, including the Minister of Trade, Industry and Competition, Ebrahim Patel.

[At this time, the Chairperson lost connectivity as a result of load shedding. The Committee waited some five to six minutes until he was able to re-connect. Several Americans with an interest in AGOA were on the platform].

The Chairperson reconnected and invited Minister Patel to proceed with the briefing.

Presentation on the African Growth and Opportunity Act (AGOA) Forum
Minister Patel greeted all present. He recognised that the Committee had had quite a blistering programme as it tried to complete its work before the end of the current session of Parliament. In September 2024, the DTIC briefed the Joint Select and Portfolio Committees and representatives of the provinces on the planned AGOA Forum. He provided quite detailed information on a range of matters, including the economic relationship between the United States and South Africa, pointing out that AGOA was one of three mechanisms or routes to market for South African exporters to the United States and was due to expire in September 2025. He noted in that presentation South Africa's efforts to secure an extension of AGOA beyond 2025 and informed the Joint Committee meeting of the then forthcoming AGOA Forum in early November 2023. His intention in the current meeting was to build on that presentation and to take the information that had been provided at the last meeting as information that Members of the Committee would be familiar with. He would focus on a summary of the AGOA Forum and its outcomes.

South Africa hosted the 20th AGOA Forum in Johannesburg on 2 to 4 November 2023. It was the largest such Forum to date, drawing in US and African governments, the private sector, civil society and organised labour representatives as well as exhibitors, procurers, investors, observers and visitors to the exhibition. The Forum comprised 16 distinct platforms, with over 5 000 participants. Members of Congress from both Democrats and Republicans, including the Chairpersons and Ranking Members of the Senate Finance Committee and the House Ways and Means Committee, provided video messages of support for AGOA. At the Forum, members of Congress were represented by their chief trade councils and advisors. The AGOA Forum was officially opened by President Cyril Ramaphosa who called for an early and long renewal of AGOA. African countries advocated for an early extension of AGOA for at least 10 years from 2025 to 2035, with existing beneficiaries retained and made proposals to enhance AGOA, including the removal of US trade restrictions on African products that limited the use of AGOA, as well as product coverage expansion and reduction of red tape.

Outcomes of the Forum included broad support for the continuation of AGOA beyond 2025 by both African countries and the US. The role of AGOA in fostering regional value chains was emphasised. There was a commitment to improving AGOA utilisation rates by African countries to spread and deepen the impact of AGOA. Consideration was given to a two-stage approach, with the first stage being an early extension of AGOA and the second stage being further improvements to the provisions. African Ministers called for AGOA to include a development dimension about infrastructure and industrial development as well as technology transfer and to explore the opportunities to upscale investment, infrastructure and digital development.

The Forum showed a wide appetite for a continued AGOA and the Minister was struck by the enormous unity of purpose in the SA participants.

(See Presentation)

Discussion
The Chairperson called for questions and comments.

Ms C Murray (DA, Western Cape Legislature) thanked the Minister for honouring his commitment and briefing the NCOP on the AGOA Forum. She was interested in the discussions and agreements, particularly about agriculture, noting that it was a very important industry in her province where the provincial government was hoping to see growth. Had any new additions or removals to the proposed legislation been negotiated for the next renewal of AGOA? What steps would be taken in the legislation to broaden and support the agricultural sector? She had struggled to get clarity on the number of jobs on the line when it came to AGOA. She was particularly interested in the number of jobs in the Western Cape because the provincial Department of Agriculture had linked 140 000 jobs to AGOA. Could the Department or the Minister share numbers and figures?

Ms Murray was quite curious about the engagements with the United States. What specifically were the next legislative measures? It had been mentioned that the legislators would present the Bills. Who were those legislators and could Members be kept updated on the related congressional timelines? Were any concerns raised by the US counterparts on the inclusion of South Africa in AGOA and how were they addressed? With regards to Mauritius losing its membership, what were the chances that SA's membership could be revoked at a later stage and how would that risk be mitigated?

Mr A van der Westhuizen (DA, Western Cape Legislature) appreciated the extensive presentation by the Minister but queried an acronym used by the Minister which he took as referring to phytosanitary measures. Agricultural exports were not only determined by things such as the import tariffs on the other side, but some countries made it extremely difficult for South African farmers to export due to phytosanitary measures, where, for example, SA citrus fruit needed to be cooled for an extensive period, to very, very low temperatures, to safeguard those other countries against diseases such as the false coddling moth, although SA had been exporting fruit for decades to those countries and it seemed that the climatic conditions did not support South Africa's insects which, therefore, posed very little risk to those countries. When SA negotiated the terms of the agreement going forward, to what extent would SA be able to influence other barriers that might be put up and make it easier for Southern African countries to export to the USA? It seemed sometimes that phytosanitary measures were simply an effort to make life more difficult for exporters from South Africa.

He asked the Minister what his take was on the appetite of the US to include other export products that were not covered in the existing agreement with the USA.

Mr M Dangor (ANC, Gauteng) congratulated the Minister on a job well done in bringing the whole of Africa together with the US partners and bringing the South African national contingent together without the negative connotations that some people normally present in the foreign arena. They did not realise how it impacted negatively on South Africa, South African exports and South African business. He suggested that it was necessary to harmonise the protocols that had to be taken forward by the Africa Continental Free Trade Agreement, especially the African Ambassadors stationed in Addis Ababa, together with the African Ambassadors stationed in the US. He suggested that either the Minister or a delegation briefed by him should meet with all the blocs in Africa to explain the protocol to them and get them on board to take AGOA issues further.

Mr Dangor responded to the question about the citrus issue. He said Chairperson Rayi, himself and Mr Mmoiemang raised the same questions at the European Union (EU) Parliament where there was a certain degree of consensus around those issues. Europeans said something at the parliamentary level but did another thing at the executive level. When that report was ready, he suggested to the Chairperson, that the delegates should report on the entire European trip where they had addressed those matters.

The Chairperson noted the proposal.

Mr M Mmoiemang (ANC, Northern Cape) stated that the outcome of the summit confirmed the leadership provided by the Minister. Other people were trying to create an impression that AGOA was under threat, but there was nothing about that as a result of the leadership of the Minister. The critical thing for Mr Mmoiemang was how far the process had gone. As the Minister indicated, the extension of AGOA required a decision of the US Congress. It was important to get a sense of the legislators because the Minister indicated that the congressional advisors would brief senators and representatives on the outcomes of the Forum. It was important to get a sense of whether there was any cause for concern and if that process had not started. In terms of the benefit of the African Continental Free Trade Agreement, there needed to be an opportunity for AGOA to broaden the opportunities provided by that trade agreement. Would there be an opportunity for countries that were moved out of AGOA because of their domestic affairs, to be readmitted as part and parcel of AGOA?

Response by the Minister
Minister Patel responded, thanking the Members for some of their very warm comments. Of course with those things, success always required the effort of many, many different people and he recognised the enormous amount of work that had been done by SA’s partners from other African countries and the business community and organised labour. They had been there step-by-step, backing the efforts to get AGOA renewed and to get it renewed as soon as possible.

In reply to the questions raised by Ms Murray on agriculture, the Minister said that there was a session that had dealt specifically with agriculture, looking at what opportunities there might be to do more on the agricultural front. In addition to that, there was an opportunity where SA had representatives from the government, the private sector, and others were able to reflect on the agricultural opportunities. He had explored with representatives and various players in the US political establishment, whether there would be an appetite to expand on the number of products. With agriculture, to codify the issues, it would be things like sanitary and phytosanitary measures, market opportunities, partnerships that could be formed, how to ensure that technical standards were improved on the African continent, and also what could be done to promote food security on the African continent. Access to the US market was one of many instruments for agriculture, but it was also necessary to use more scientific methods of agricultural production and to build regional value chains. If there were drought in one part of the continent, there should not be populations in that area completely at risk. Value chains would provide opportunities to source agricultural products in other parts of the continent. So having a more coordinated, thoughtful approach to agriculture was one of the things that came up. They had given some thought to the possible steps to broaden agricultural products. He would come back to that.

On the jobs on the line, he had indicated in the previous meeting of that Committee, that there was no clear, simple methodology to calculate the number of jobs affected by a particular trade agreement. Sometimes trade secretaries and the private sector and governments did that to give a very general idea of jobs affected. As an example, he explained that if SA citrus fruit had an advantage of 5% in the US market because the tariff was 5% and if all else remained the same, one could calculate the likely impact if that tariff preference were removed. Ordinarily, it would mean the product would go into the country at a price 5% higher. One could do a sensitivity study in the US market to see whether there were major competitors, either domestic or exporters to the US market whose products were within a 1% to 5% price range of that fruit. If the products were significantly more than 5% more expensive than South African products, then the impact might be neutral, and the loss of that preferential tariff might have no impact. South African exporters could also cut prices to retain the market share but if the products were sold within the SA price range, exporters might face some stiff competition if SA lost the preference. The South African exchange rate also impacted prices and when the exchange rate weakened by more than 5%, then the competitive advantage on the US market rose by that percent. Conversely, if the Rand were to strengthen by 7%, then the price disadvantage in the US market would rise by 7%. The preference level and the exchange rate were just two factors; the sanitary and phytosanitary (SPS) measures were another. It was that range of factors that made it very hard to build a reliable model that could calculate what the impact would be on jobs in a given area. It was clear that South Africa would still be able to sell agricultural products without those preferences, but it was also likely that SA would not sell all of the products it currently sold which would have a negative impact on South Africa's agricultural exports, car exports and so on.

Minister Patel had previously stated that different players, such as agricultural players, banks in South Africa, and others had all done their estimates of what they thought the impact and loss of AGOA would be. He had shared with the Committee that AGOA had the previous year accounted for about 2% of South Africa's total exports which gave some context to the fact that it was a measure worth retaining and worth fighting to retain. There was no consensus between any two economists on what the impact on jobs would be. Figures in American reports varied greatly. Data from the South African private sector did not align with each other or with international studies. Every job in South Africa was worth defending and trying to retain and AGOA did provide an advantage in the US market, but there was no simple methodology to calculate the number of jobs or those that would be lost in a particular sector through the loss of the benefits of AGOA. The two legislators who would be involved with AGOA were John Kennedy and Chris Coons.

The Minister explained that the next steps were outlined in the penultimate slide: the representatives or advisors and counsellors to the senators and the house representatives would be briefing their committees and their members on the insights derived from the AGOA Forum. Further steps would be that more legislators were expected to put forward their own views on the extension and the terms of the extension. He and his team would monitor that until they reached critical mass, in other words, when the numbers of the views were known, then he would probably have a much better sense of the timeframes. The Washington ambassadorial corps of sub-Saharan African countries were engaging US policymakers and influencers to try to make their point about AGOA.

Regarding the concerns raised by the United States about South Africa's inclusion in AGOA, he had reported previous concerns to the Select Committee and to the Joint Committee of the NCOP and the Portfolio Committee in September 2023. Concerning the possible graduation of Mauritius, he had made the argument to the US government that it would not be appropriate to graduate Mauritius. The SA delegation had provided detailed technical arguments as well as policy arguments on why it would be inappropriate. South Africa did not have an immediate danger of its per capita income being cited. But again, exchange rates could determine how a country’s per capita income was calculated. The issue had been raised generally, also with the American administration, that there should be a rethink of the procedure around graduation. Currently, graduation is binary: in or out. There was no midway point. The team had raised with the American government the idea of a more nuanced and carefully thought-through graduation policy, which they were very interested in. On the possibility of SA’s membership being revoked, the Minister explained that the very nature of unilateral market access was that the US was able to, at any stage, decide to revoke the participation of any country in AGOA.

Moving on to Mr van der Westhuizen's questions, the Minister stated that the acronym "SPS" stood for sanitary and phytosanitary standards. It referred to animal health and plant health standards that were often used in international trade for two purposes legitimately, i.e. to ensure that populations and livelihoods remained safe from the possibility of disease and similar danger or challenges being extended from one locality to another. Sometimes SPS was misused and Mr van der Westhuizen had given a very good example of South African citrus fruits. South Africa has been expanding its citrus production over a number of years. One could go to a supermarket during the citrus season and the shelves are bursting with the most delicious citrus fruit one could find anywhere in the world, and it was South African. The Minister had shared that citrus fruit with several European political representatives, including more than one head of state; they had generally concurred that it was excellent. However, SA’s citrus fruit production was beginning to challenge the dominance of traditional players in the market. Spain was the world's biggest exporter of citrus fruit; South Africa had become the world's second-biggest exporter of citrus fruit. He believed that it was for that reason that, following a campaign led by Spanish farmers, SA had faced more and more protectionist tendencies around citrus fruit in the European Union. Initially, authorities had identified something called the ‘CBS citrus black spot’ as the ostensible reason for wanting, firstly, to monitor and then limit South African citrus exports. Those parts of South Africa that had "black spot" were not given access to the European Union Market. Later, the authorities identified what they called “false coddling moth” as another reason to limit South African exports to European markets, introducing, about a year and a half ago, a set of measures that required SA citrus fruit to be cold stored from the time the fruit left SA ports, which added an enormous additional cost of about R4 billion. It was done to limit the competitiveness of South African citrus fruit. In the Minister's view, it was an absolutely clear and naked protectionist measure, not informed by science and not proportionate in terms of the trade rules.

SA was taking the matter up with the European Union and with the World Trade Organisation (WTO) at a meeting to take place the following year. It was SA's intention to ensure that at the WTO meeting the South African position regarding the misuse of sanitary and phytosanitary measures would feature on the agenda. That would be an opportunity to try to tighten the trade rules so that there was less scope for people to misuse the existing trade rules. That would require multilateral negotiations at the World Trade Organisation.

As regards the expansion of AGOA, Minister Patel had floated the possibility of gauging the appetite for expanding the number of products at the session with the US Congressional advisors. As an example, he spoke of beef products where the bulk of beef products were not covered by AGOA and pointed to parts of the African value chains that were not given preference. The US representatives advised that SA could raise the matter but it would take them some time to do the necessary impact studies to see whether the American domestic producers would be affected and, if so, to what extent they would be affected. The calculation SA needed to make in asking for a number of additional products to be added, was whether it would delay a decision in the US administration, and by Congress, to the extent that there was a danger of AGOA expiring without the matter having been resolved. The beef farmers in the US could mobilise against the extension of AGOA if they saw the addition of beef products as a danger. So that's one set of considerations to take into account.

The second set of considerations was that SA had floated the idea of a two-stage reform programme where in stage one, an attempt was made to extend the existing benefits, maybe with small tweaks. That had to be done expeditiously and early in 2024, and not wait until September 2025. A second phase would be improvements in AGOA, bringing in additional products and other important refinements. The Americans knew that SA was cautious, wanting to move rapidly and quickly on the extension of AGOA. Some products might be worth considering but there had not been a big public statement on those products because it was not in Africa's interest to get a number of lobbying groups in the US feeling threatened by the extension of AGOA. One had to be respectful of the economic interests of the United States, as farmers and workers also had interests to look after.

The Minister turned to the questions raised by Mr Dangor who had made an important point, which was how to harmonise trade arrangements within the African continent. There were a few aspects to it. The first aspect was lowering trade barriers between African countries to foster greater trade through the AfCFTA. Looking at his travel record in the last couple of years, Minister Patel said he had gone to other African countries significantly more regularly than he had gone to any other part of the world because so much of his work was to harmonise economic relations and trade. He hoped for an opportunity to make the case in December 2023 at a meeting and again the following year. In discussions with the African trade ministers from different regions most of the focus had been on rules of origin and the best de-risking strategy in an uncertain world. A good de-risking strategy was to increase the competitiveness of each country's sectors and to increase trade among African countries. Many of the challenges faced in markets in other parts of the world could be reduced by trading more with each other in Africa as the continent imported an enormous quantity of goods and that represented an opportunity for African producers to do more.

Minister Patel thanked Mr Dangor for reminding him of the engagement that South African parliamentarians had with the EU counterparts about citrus. He welcomed every effort made to help make the argument but even after that meeting, he had received some challenging comments from an economic interest group in the European Union.

Minister Patel responded to Mr Mmoiemang's question on the processes regarding an extension. From South Africa's side, it was very simple. AGOA was a unilateral market access, so there was nothing more SA needed to do at the level of legal modalities. If the American Congress approved the extension on the current terms, SA would simply utilise its existing framework. If changes were made by the United States that affected a technical standard for products or exclusion of products, that would be communicated to the market in South Africa. On the American side, the US Congress had a large number of legislative and other priorities it needed to look at and would consider trade agreements with other parts of the world (AGOA was not a trade agreement but a unilateral opening), the legislative programme on US domestic issues, the budget processes, and so on. SA could lobby Congress, but the decisions were taken there. Like the SA Parliament, each legislature had its own rules, but the key was to get the support of both the Republicans and the Democrats so that it was a bipartisan issue. In the same way, South Africans needed to have a common view on AGOA and be supportive of each other's efforts to promote the extension of AGOA. The US had not turned into a political football where one party tried to score points against the other party. That was very helpful because it meant that bipartisan support could be counted on. One Republican and one Democrat intended to propose AGOA legislation. They might have different views on the modalities, but both parties had expressed support for AGOA in public statements.

The Minister addressed Mr Mmoiemang's question on an extension of the cost and the risks of AGOA not being extended. He said that, as with any market access arrangement, the value of the access was important to different sectors in the economy but he would be working very hard to ensure that SA retained access. His team would also look at the measures that SA could take to try to address issues like the cost of compliance, which was linked to the question of sanitary and phytosanitary measures. His team could assist SA farmers to better understand the SPS, what they were and how to address the risk. The two Bills before the US Congress both envisaged a period longer than 10 years. One proposed a very lengthy extension even longer than the 10 years that African trade ministers proposed, but those were opening bids in the US Congress.

He commented very briefly on the remarks made about exclusion. Three or four countries were taken out of AGOA, of which one was added back in. Countries to be taken out were Uganda, the Central African Republic, Gabon, and Nigeria, although they were in AGOA until 31 December, and the reasons given by the US Administration were human rights violations and failure to make democratic progress. African ministers had urged the United States to engage with the countries and to find ways to address the concerns of both sides with a view to having those countries back in AGOA. One country, Mauritania, had been added back into AGOA. A country could be added back to AGOA, as long as it was a sub-Saharan African country and as long as the country had not been graduated out. If a country had been graduated out on the basis of the per capita income, under the existing rules, it could not be re-admitted, unless the per capita income rules changed. That matter had been brought up in the hope of moderating and refining the existing provision on graduation.

The Chairperson asked if there were any follow-up questions.

Ms Murray appreciated the Minister's explanation about why the jobs calculations could not be shared. She requested that he share the calculations that he did have about what was at stake regarding AGOA. The Minister had mentioned that a proposed graduation policy had been presented to his US counterparts: could he provide Members with more details, including when it would commence if implemented? Lastly, which industries were represented at the summit?

Minister Patel reiterated that his team had not done the calculation in that form, but he could make available information that he had shared previously that indicated the preference level and the products involved. He did it with caution, which Members would understand as multiple factors influenced whether SA landed a product in the United States. Under the existing rules, SA had guaranteed access to the US markets for all products, except products on which there was a prohibition, which should not be permitted under WTO rules. That access was obtained through the Most Favoured Nation (MFN) principle. So even aside from the preferential access, there would still be MFN access. However, MFN access was less favourable than AGOA access, so there was value in retaining the AGOA access. There were some challenges and certain products, such as African steel had been saddled with a very significant anti-dumping duty. It was introduced, not in the normal trade rules which would be an exceptional anti-dumping duty to take account of dumping, but via a provision in American legislation called Section 232, which was a US national security provision. SA applied via a permit to get access for South African steel and aluminium to the US market. Those permits were applied for annually. SA had had constructive conversations with the US on the permits which the Minister considered an uncommitted anti-dumping duty, although it was technically not that.

On the graduation policy, Minister Patel explained that because SA was negotiating with trading partners, he was cautious, as in any negotiations, about what he disclosed during the negotiations or there would never be any progress in trade negotiations. There was a convention that applied all over and that was, other than the public position of countries, negotiators took a very cautious approach. Regarding the graduation policy, SA did not want to put a proposal on the table that the US might not support. In informal discussions, SA had given the US an essential principle around graduation to consider. Technical arguments were raised in respect of Mauritius and also policy arguments. Essentially, when the US side indicated that they believed there was value in them revisiting a graduation clause, then SA would formalise it and pass it to the US. In normal trade negotiations, one party put the proposal on the table and the other one responded, and then the first party responded in turn, and ultimately, an agreement was reached. Because AGOA was not a trade agreement but a unilateral trade facility, the US would have carte blanche on the graduation policy. He elaborated on the principle behind that recognition, explaining that if one had a binary arrangement, one was fully in or fully out. There might be value in considering that, until a country reaches a certain per capita income, the country receives full benefits. As the society developed, and the per capita income increased, that country could get a truncated set of benefits, but not lose everything. The thinking was about a gradual step-by-step process, from being fully integrated into AGOA to, with time, slowly losing some of the benefits as the level of development rose.

The fundamental principle in the US legislation was that AGOA was intended for countries below a certain level of development. That was the cornerstone of the goal. It did not even cover the whole African continent. It only covered Sub-Saharan African countries and considered income. At the technical level, he pointed to some of the challenges with per capita income, particularly in societies with high levels of income inequality where the per capita income was not always a proxy for development. Economists would readily concede that if there were high levels of equity in a society, then the per capita income very often approximated a measure of aggregate welfare. Where there were huge inequalities, then the figure might simply be an average that did not describe a very large number of people. So the formal graduation policy was not on the table. There was engagement, and an exploring of ideas and at an appropriate moment, SA would put something on the table. However, if the signal were that there was no appetite to revisit the graduation policy, it would be put aside rather than delay consideration of the extension of AGOA.

Which three industries were represented? Minister Patel explained that no industries were represented in the formal sense of the word at the AGOA Forum itself, where the governments spoke to each other, and trade minister representatives were supported by technical experts from the departments and ministries. When necessary, they had technical expertise from a range of other departments or ministries. The American side had been represented by the United States Trade Representative, but she had very senior representatives from several different departments, such as the US Department of State, the US Department of Agriculture, the US Department of Commerce, and others. Several industries had exhibited products at the industrial exhibition and at the food fair that SA hosted. Several industries attended the private-sector forum and the Labour Forum was attended by trade union worker representatives. The voices of businesses were also reflected during policy discussions in the format of breakaway sessions on the health sector, on food and so on. Most sectors of the South African economy found an opportunity to play a part. Agriculture was there with a display of agricultural products, including quite a lot of food products. Representatives from the agricultural sector served on panel discussions and shared ideas. The mining industry participated in some of the discussions as did manufacturing, service sectors, telecommunications sectors, and the private sector. Business Unity South Africa, the BBC (Black Business Council) and BLSA (Business Leadership South Africa) participated in the private sector forum. Together they represented the entirety of organised business in South Africa and would have drawn members from just about every sector in South Africa, all your big industry associations in agriculture, mining, steel and so on would be members of one of those federations or business associations. The Minister had hosted the industrial sector and had tried to provide as many opportunities as possible for the voices of industries to be shared with trade ministers so that they had the benefit of their views when considering the matters on the agenda of the AGOA Forum.

The Chairperson commented that all Members would be monitoring developments, particularly in the US Congress. From time to time, he would invite the Minister to brief Members on the developments, although the Minister was welcome to approach the Committee with new developments. The Committee would not only be focusing on AGOA but also on all other international platforms where South Africa participated in trade discussions, such as the SA - EU discussions. In February 2025, the Committee would invite the Minister, and the Department to brief the Committee and the provinces on the MC12 (the WTO's 12th Ministerial Conference of 12 to 17 June 2022) The Minister needed to brief Members on the BRICS Forum, particularly on issues that related to trade and the provinces would be invited. He knew the President participated in the G20 and the Ministers were part of the delegation, so perhaps the Minister could brief the Select Committee, together with the provinces, on the discussions at the G20.

He asked the Minister for his closing remarks before he adjourned the meeting.

Minister Patel appreciated the opportunity to address the Committee and the representatives from the provinces. He would be rolling out more information. Virtual platforms would be used to try to reach more businesses and to focus on getting more opportunities for smaller businesses and women-owned businesses and bringing more young people into exports. Strengthening export efforts would help to create jobs in South Africa as it expanded the GDP. Profitable and well-functioning businesses increased investment in the economy and resulted in taxes that could help to pay for the health care, housing, education and other needs of South Africa's people.

The Chairperson thanked everyone who had attended the meeting. He was looking forward to seeing the Minister the following week to discuss the Company's Amendment Bills.

Closing Remarks

The Chairperson declared the meeting closed.