Business lobby group Sakeliga has proposed amendments to the African Growth and Opportunity Act (AGOA) in the United States (US) which could be used to resist black economic empowerment (BEE) and other harmful laws in South Africa. Those who value non-racialism and free enterprise should support Sakeliga’s proposal.

Diplomatic relations between the US and South Africa are at an historic low. The US has long been unhappy with South Africa’s hostile business environment, its proliferation of race-based laws, and its cosying up to American adversaries, including China, Russia, and Iran.

Early in the second Trump administration, the US outlined its requirements for restoring healthy relations with South Africa.

These demands included, inter alia, exempting US firms from racially restrictive laws – such as those that impose racial requirements on ownership, hiring, and procurement – as well as securing private property rights by abandoning policies such as expropriation without compensation (EWC).

This puts the US government directly at odds with the African National Congress (ANC), which has maintained a stranglehold on foreign policy despite the formation of the Government of National Unity (GNU) in June 2024.

The ANC is unwilling to meet the US demands, which are fundamental to its policy agenda, guided as it is by a toxic ideological mix of racial nationalism and socialism. The ANC believes – rightly or wrongly – that it would lose much face by abandoning these policies.

However, if the diplomatic relationship is not repaired soon, South Africa is likely to be subjected to unilateral tariffs and other punitive measures from the US government. South Africa and the US are on a collision course, and ordinary South Africans will suffer as a result.

As a principled advocate of free trade, this concerns me greatly. It should concern you too.

AGOA Renewal

AGOA is US legislation, not a trade deal. First signed into law by then-president Bill Clinton in 2000, AGOA enables eligible African countries to access the US market tariff-free (provided they uphold free market principles and align with US security interests).

While AGOA participation benefits many African countries, US lawmakers on both sides of the aisle are beginning to question its relevance for advancing US interests on the continent. AGOA is a blunt instrument. African countries are either eligible or ineligible, making it difficult for the US to exercise leverage over beneficiary countries.

Moreover, many in Congress are critical of South Africa’s inclusion in AGOA, arguing that the agreement is not intended for a middle-income country, which is also routinely hostile to US interests. South African agricultural and manufacturing exporters benefit greatly from US market access, yet the US gets very little by way of return, they say.

While AGOA was recently extended until December 2026, it is currently under review by US lawmakers. It was against this backdrop that the United States Trade Representative (USTR) called for submissions on modernising AGOA in April.

Differentiated Approach

Sakeliga is an independent civil society organisation committed to “restoring economic order and flourishing communities in South Africa”. It has had great success in this mission, recording several significant court victories against racially restrictive laws and other intrusions on free enterprise.

In May, Sakeliga made a submission to the USTR, in which it argued for AGOA to move beyond its current binary framework (where countries are either in or out) towards a more “differentiated” approach.

Under this proposed revision to the AGOA framework, individual manufacturers or producers who adhere to market-based and ethical labour practices (such as non-racial hiring) could receive trade benefits.

“This could ensure that ethical, productive firms retain access to the US market and are not penalised for the actions of a non-compliant national government,” said Sakeliga in a statement. 

Under this proposed amendment, AGOA trade access could also be extended to subnational jurisdictions including provinces, municipalities, trade zones, and even individual entities that satisfy US requirements on property rights and trade policy.

Subnational differentiation could therefore enable opposition-controlled local or provincial governments such as those in the Western Cape to enter into favourable agreements directly with the US.

Sakeliga’s proposal would therefore mitigate the risk of a country’s exclusion from AGOA due to the conduct of its government. This would have specific relevance to South Africa but could also be applied to other African jurisdictions where adherence to US policy preferences is similarly uneven, for example in war-torn Ethiopia.

Changing Incentives

The wisdom of Sakeliga’s proposal lies in changing the incentive structure facing firms and sub-national entities, which currently face enormous pressure from the South African government to comply with its onerous laws.

A municipality could, for example, declare that although it is legally permitted to expropriate property for “nil compensation” under the new Expropriation Act, it will refrain from doing so, thus signalling its commitment to protecting private property rights.

South African firms that wish to conscientiously object to BEE could do so by publicly committing to non-racial hiring practices, thus ensuring preferential access to the US market. US port authorities could use existing mechanisms such as goods-of-origin rules or verified labour practices to screen imports from the South African market.

Trade-Offs

Of course, this approach is not without its risks.

If AGOA were to be amended as Sakeliga proposes, South African firms and sub-national entities may face hostility at home for trading with the US under these revised conditions. Petty reprisals are not beyond our politicians, although civil society groups such as Sakeliga, Solidarity, and the Free Market Foundation (FMF) would be ready to push back against any form of illegal victimisation.

While most businesses are understandably averse to conflict with the government, inaction would come with its own risks.

Totalitarian policies like the Employment Equity Act already impose rigid race and gender quotas on firms with fifty or more employees. Compliance with such policies would threaten the vital economic interests of significant sections of South African society.

On the current trajectory South Africa’s AGOA eligibility may very well be in jeopardy anyway, thanks to the actions of the central government. Entities that benefit most from the access that AGOA currently provides would have little to lose by supporting Sakeliga’s proposal, should it be adopted. Business owners would simply have to weigh the trade-offs and act according to their commercial interests.

South Africa’s foreign policy establishment represents a narrow ideological interest, not the so-called “national interest”. As relations between Pretoria and Washington continue to deteriorate, South Africans who wish to preserve healthy commercial and diplomatic dealings with the United States may wish to take this offramp.

Ansara is CEO of the Free Market Foundation.