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Daily Maverick
9 hours ago
- Business
- Daily Maverick
After the Bell: Who's afraid of losing Agoa?
One of the great risks of the debate around Agoa is that it gives us something else to blame, when we should blame ourselves for our poor economy. And we must remember that it is not true that there is no cost to us from Agoa. One of the most boring discussions I've heard around our economy over the past five years has been posed as 'will we keep Agoa?' I hear it everywhere, even now, when US President Donald Trump has made it clear that he wants to tear up the entire trade rule book. I can understand why we keep hearing about it. There are certain sections of our economy that really benefit from it. Because of Agoa (the African Growth and Opportunity Act), they have been able to grow and employ people. And some of the arguments they can make about why Agoa matters to us are important. Free market access to the US is great for the car industry, and for our farmers. It means they are exporting goods produced here, earning dollars in return and basically importing jobs. People are employed, their kids are kept in good schools. You could argue that the entire community around Daily Maverick journalist Estelle Ellis and the rest of the Baywatch team will be badly hit if it all comes to an end. And that would be true. Farmers, too, had a bumper season exporting to the US in the first quarter of the year. They were able to increase the amount of goods they sent there dramatically in that quarter. When I first heard that, I thought, perhaps, like the Chinese (and I'm sure others), they had been rushing goods into US ports before new tariffs could come into effect. But that amazing agricultural economics guru Wandile Sihlobo told me on The Money Show on Monday night that this is not the case. It happened because our farmers have created a strong demand for their goods. And, like our car industry, we are basically importing jobs. But we should be aware that, despite these very loud and important voices in our national debate, this is not the end of the story. The Brookings Institute estimated nearly 18 months ago that 'In total, a loss of Agoa benefits would lead to a GDP decline of just 0.06%'. To put that into context, our GDP grew by just 0.1% in the first quarter of this year. At the same time, the South African Reserve Bank has generally said that load shedding was costing our GDP 2% every year. So it may matter, but only in the context of our complete inability to take action to grow our own economy. One of the great risks of this debate around Agoa is that it gives us something else to blame, when we should blame ourselves for our poor economy. And we must remember that it is not true that there is no cost to us from Agoa. In fact, a few weeks ago I was almost taken aback when an American investor (one of those wonderful people who travels the world, and is hugely interested and fascinated by it) asked me point-blank: 'Why do you all care so much about Agoa?' He even suggested that actually it went against our interests. This is because of some of the small print. If you look at the text of the Act that passed through the US Congress, the conditions of eligibility are designed to literally create African economies in the US mould. Of course, as we were so often reminded during the Lady R saga, it says that you must 'not engage in activities that undermine United States national security or foreign policy interests'. This is a wonderful stick for the US to beat us with. If it wants, it could define our opposition to Israel's genocidal war on the people of Gaza as 'undermining' US 'foreign policy interests'. To be clear, there is much in Agoa that is good. It mentions that workers must be protected, that there should be political freedom and things like that. But it is still a tool of foreign policy. Yes, Agoa is helping African countries to develop. But it is also a useful instrument of control. Agoa looks finished anyway. In reality, the US system of government appears to be giving Trump whatever he wants. So far, very few Republicans have spoken against his tariff policies. But the markets are speaking. And the fact that the bond markets have forced Trump to basically chicken out has given us the wonderful phrase Taco (Trump always chickens out). So, I do think we need to be less afraid of him. He is slowly being revealed as all bark and very little bite. What we really need to do is to find Americans who lose out if we cannot export to the US. The US citrus industry, for example, needs our oranges to keep the market interested in oranges during their non-growing season. And we should not forget those strange people who drive BMW X3s. The models sold in the US are only made here. And even if they are rubbish cars (who can forget Jeremy Clarkson having to throw the sound guy out of the car to go and push, even now it's still worth watching), there is still a lobby for them in the US. I think we need to stop worrying so much about Agoa.
The Citizen
a day ago
- Business
- The Citizen
Outlook for first quarter GDP not great
Economic data for the first quarter releases already seem to support the view that the economy did not grow, signalling bad news for GDP. The outlook for the first quarter GDP figures is not great, and economists say the economy probably contracted instead of growing. Crystal Huntley and Nicky Weimar, economists at the Nedbank Group Economic Unit, think that economic growth was likely stagnant during the first quarter. 'High-frequency statistics reflected stagnant economic activity over the first quarter.' 'Agriculture will probably be the star performer. In contrast, activity in mining, manufacturing, electricity, construction and trade relapsed, still held back by a difficult operating environment, aggravated by persistent inefficiencies in essential economic infrastructure and the stronger base in the first quarter.' They also do not expect that real gross domestic growth (GDP) is forecast to make any gains in the first quarter, slowing from 0.6% in the fourth quarter of 2024. 'Agriculture, transport and communications, finance, general government and personal services increased over the first quarter. However, while retail, motor trade sales and real income from accommodation and food services accelerated, wholesale sales fell, dampening the contribution from trade to overall GDP.' They point out that energy, mining and manufacturing contracted, driven by the return of load shedding, infrastructure failures and subdued domestic and global demand. ALSO READ: This is where we would be if SA sustained an economic growth rate of 4.5% Despite bad GDP outlook for first quarter, economy will grow in 2025 But it is not all doom and gloom, they say. 'We expect some acceleration in growth during the remainder of the year. The main boost will come from domestic demand, supported by firmer consumer confidence, sustained by a recovery in real household incomes driven by lower inflation and lower debt service costs due to lower interest rates. 'Despite minor progress on the structural front, operating conditions remain challenging and production costs high. The weaker global recovery will weigh on output, particularly given South Africa's elevated cost structures, underlying inefficiencies and significant infrastructure constraints. 'Accelerating structural reforms are the key to enhancing the international competitiveness of industries. This would enable the economy to grow faster and create more jobs without hitting supply bottlenecks, driving up costs and stoking inflation. 'Overall, we expect growth of 1% in 2025 and 1.5% on average over the next three years. However, the uncertain global environment and implicit collapse of the African Growth and Opportunity Act (Agoa) pose significant downside risks.' ALSO READ: Manufacturing PMI falls to lowest level since April 2020 — bad news for GDP Contraction of 0/1% expected for first quarter GDP Mamello Matikinca-Ngwenya, Siphamandla Mkhwanazi, Thanda Sithole and Koketso Mano, economists at FNB, say real GDP (not seasonally adjusted) grew by 0.9% compared to a year ago in the fourth quarter of 2024, up from 0.4% in the third quarter. 'On a seasonally adjusted (non-annualised) basis, the economy expanded by 0.6% in the fourth quarter, marking a modest rebound from a 0.1% contraction in the third quarter. Although there is uncertainty surrounding the notoriously volatile agricultural sector, and while it may perform relatively well, high-frequency data from other sectors suggest that the economy weakened in the first three months of this year compared to the last three months of 2024. 'We pencil in a quarterly GDP contraction of 0.1% (final estimate) for the first quarter, reflecting softer economic activity in higher-weighted sectors such as mining, manufacturing and trade.' ALSO READ: R466bn 'hit' as National Treasury lowers SA GDP forecast Medium-term outlook for GFP Over the medium-term, Huntley and Weimar expect the economy to recover in 2025. 'Our forecast is for growth of 1.0% for the year, averaging 1.5% over the next three years. South Africa's structural constraints remain pretty much the same, with only minor improvements from the previous year. 'Lower inflation and interest rates will provide impetus for demand. The outlook for agriculture is more promising for 2025. The La Niña rains boosted farmer sentiment. As of 30 April, the winter cereal planting intentions stood 1.1% higher than the production figures for 2024. 'Further optimism depends on better financial conditions for farmers given the lower interest rate environment, progress in controlling animal diseases and the hope that port improvements will continue.' They say this is reflected in the Agribiz confidence index, which improved by 11 percentage points from the fourth quarter to the first quarter. However, they say several structural and cyclical challenges remain. 'The livestock industry continues to grapple with animal diseases and elevated feed costs, while excessive rainfall in some regions raised concerns about crop quality, and while wine production is recovering, it remains below pre-pandemic levels. ALSO READ: Reserve Bank cuts repo rate thanks to lower inflation, stronger rand Downside risks for GDP 'Further downside risks emanating from the Trump administration's tariffs and the implicit end to Agoa, fractured geopolitics, port inefficiencies, poor rail and road infrastructure, crime, stock theft, worsening municipal service delivery, and ultimately, farm profitability. However, despite these headwinds, they forecast agriculture to grow by 10.3% in 2025 off last year's low base.' They also point out that after a relatively stable year, load shedding returned at the start of 2025, underscoring persistent vulnerabilities in the electricity system. 'Excess demand nearly doubled between 2020 and 2024, while Eskom's use of its compensatory load (including load interruptions, imports and open-cycle gas turbines) increased by 21%. 'Therefore, the reoccurrence of load shedding is unsurprising. Still, the situation has improved since the peak of the crisis in 2023. From 2023 to April 2025, excess demand dropped by 94%, manual load reduction by 95%, compensatory load usage by 65% and loadshedding by 94%.'
Business Insider
5 days ago
- Business
- Business Insider
South Africa tables 10-year LNG import deal with U.S., seeks trade concessions
South Africa has proposed a decade-long liquefied natural gas (LNG) import agreement with the United States as part of efforts to deepen bilateral economic relations and secure favorable trade terms. South Africa proposes a decade-long LNG import deal with the US to bolster bilateral economic ties. This agreement includes an annual purchase of 75-100 petajoules of LNG to stabilize South Africa's energy supply. The plan aims to reset strained relations and strengthen South Africa's strategic partnership with the US. The proposal, outlined in a ministerial statement signed by Khumbudzo Ntshavheni, Minister in the Presidency, signals South Africa's intent to purchase between 75 to 100 petajoules of LNG annually from the United States, the world's largest LNG exporter. Ntshavheni said the deal would " unlock approximately $900 million to $1.2 billion in trade per annum and $9 billion - $12 billion for 10 years based on applicable price". This offer forms part of South Africa's broader strategy to stabilize i ts domestic energy supply while reinforcing its role as a strategic trade partner, particularly amid ongoing discussions about the future of the African Growth and Opportunity Act (AGOA). Reuters reports that the trade package was among the deals concluded at the White House during President Cyril Ramaphosa's recent visit t o Washington. The visit followed President Donald Trump's direct confrontation with Ramaphosa over allegations of discrimination against white farmers and concerns surrounding South Africa's land reform policies. In response, Ramaphosa initiated several trade and investment deals in a bid to repair and strengthen economic relations with the United States, after South Africa lost access to certain U.S. aid programs. The proposed trade package includes not only LNG imports but also a commitment to collaborate with the U.S. on energy technologies—particularly fracking—to help unlock South Africa's untapped natural gas reserves. Additionally, South Africa is seeking duty-free access for 40,000 vehicles annually and related automotive components, as well as quotas allowing 385 million kilograms of steel and 132 million kilograms of aluminium to enter the U.S. market without tariffs. These measures reflect Pretoria's wider push to reassert itself as a vital economic and strategic partner to Washington. U.S. dominates global LNG export market The United States, already the world's largest exporter of liquefied natural gas (LNG), is further expanding its global energy reach as part of President Donald Trump's pledge to " unleash American energy" by declaring an energy emergency. A key component of this strategy is the rapid growth of LNG exports. Although Africa has major LNG suppliers such as Algeria, Nigeria, and Egypt, South Africa has chosen to turn to the United States for its LNG imports. This move is partly aimed at appeasing the Trump administration and helping to reset the strained relationship between the two countries. Global Firepower ranks South Africa as the sixth-largest consumer of natural gas in Africa. According to preliminary data from LSEG, the U.S. exported a record 9.3 million metric tons (MT) of LNG in March 2024, surpassing the previous record of 8.6 MT set in December 2023. This surge was driven in part by the ramp-up of Phase 1 of Venture Global Inc.'s 3.2 billion cubic feet per day (bcfd) Plaquemines LNG plant in Louisiana, which is still under construction. According to data from the US Energy Information Administration, (EIA), while Europe, including Türkiye, remained the largest market for U.S. LNG, accounting for 53% of total exports or 6.3 billion cubic feet per day (Bcf/d)—demand in Asia saw a notable increase. The Asian share rose from 26% (3.1 Bcf/d) in 2023 to 33% (4.0 Bcf/d) in 2024. Exports to other regions, including the Middle East, North Africa, and Latin America, also grew significantly, climbing from 8% (0.9 Bcf/d) in 2023 to 14% (1.6 Bcf/d) in 2024.
IOL News
5 days ago
- Business
- IOL News
Farmer brain drain could be worse than export loss for SA agriculture
Financial and non-financial incentives must be upscaled to all farmers, especially the developing black farmers, to ensure farmers are committed and not persuaded by short-term political promises in the foreign countries, says the author. Image: File. While excluding South Africa from the African Growth and Opportunity Act (Agoa) would have dire consequences, the emigration of real Afrikaner farmers would be even more damaging to the agricultural sector and the rural economy. Since the departure of 49 white people, who are supposedly farmers, seeking refuge in the US, the country and the agricultural sector have been concerned with the potential Afrikaners exodus to the US. Interestingly, the departure of the 49 self-designated refugees to the US coincided with the NAMPO period, the biggest agricultural show in South Africa. For the past 57 years, NAMPO draws attention of farmers, traders, bankers, technocrats, and other service providers to gather in the Bothaville town and celebrate the grain harvest, appreciate new technologies and agricultural equipment, and welcome new research. The 2025 NAMPO event was particularly unique as it attracted the attention of top public figures and become a diplomatic channel to communicate a message to international communities. President Ramaphosa and Deputy President Mashatile visited the NAMPO event and received a warm and jubilant welcome from true farmers that affirmed their commitment to the country and their devotion to farming. Other prominent public leaders that visited this year's NAMPO event were Minister John Steenhuisen and the Deputy Speaker of the National Assembly, Dr Lotriet. The common message emanating from these visits was that there is neither ethnic cleansing nor Afrikaner extermination in the country. Essentially, they dispel the US decision to grant special refugee status to white Afrikaners on the basis of imaginary genocides in South Africa. How Important Is US and Afrikaners to SA Agriculture? Deducing from the messages of farmers and prominent public and private leaders who attended the NAMPO week, there is a solid consensus that farming communities and South Africans, as a whole, are united behind their rainbow nation flag and are opposed to the deluded decision by the Potus. While this may breed confidence and resilience that South Africans are well known for across the globe, it is also important to not lose sight of domestic structural and systematic pitfalls that fuel divisional views that subsequently taint the image of the country in the world. First, is the need to review the current agricultural growth strategy that depends on global demand and innovations while negating the need to build local capabilities on technology and research.\ Video Player is loading. 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Next Stay Close ✕ Agoa is important Agoa is one of the important trade agreements that enable South African farmers to produce and export products like fruits, nuts, wine, fish, and prepared foods. Without a doubt, access to the US market has been one of the critical growth factors for South African agriculture. The US accounted for 4% of South Africa's agricultural exports in 2024, suggesting it is not the largest destination market for farmers. However, looking at only trade data could be deceiving because the US's influence on South African agriculture goes beyond trade relations. When the US enacted Agoa in 2000, it aimed to strengthen trade, economic and political co-operation with African states. It is not a coincidence that the biggest companies providing seeds, agrochemicals, and technical services to South African farmers either originate in the US or at least have strong ties with US investors. This illustrates the interconnectedness and high dependency of South Africa's agriculture and food system on the global economy. While thinking global is important but acting local is vital to build resilience, sustainability and inclusivity. Second, it is the lagging development and transformation in the agricultural sector, which at times causes conflicts and division amongst farmers. On February 18, 2025, Minister Steenhuisen painted a concerning picture where he outlined that 90% of agricultural output is from white farmers. Slow transformation Wandile Sihlobo and Johann Kirsten in their book titled, 'The Uncomfortable Truth About South Africa's Agriculture' affirmed these figures and further highlighted the mushrooming divisions amongst farmer organisations. The slow transformation pace tends to portray white farmers, mainly Afrikaners, as the barriers to commercial agriculture which raises frustrations amongst other population groups which are yet to enjoy the full dividends of democracy. Behind these challenges are limited government support to farmers and decaying off-farm infrastructure and stringent market standards that proportionately disadvantaged black farmers. To resolve these challenges, government and private sector must put their hands on the deck to emulate the South African spirit of unity that was radiating in this year's NAMPO. This means the government must upscale its Comprehensive Agricultural Support Programme and the land reform. Private sector initiatives such as Metropolitan Collective Shapers, Karan Beef Emerging Academy and HortFin by Fruit South Africa, amongst others, must be promoted and encouraged to expand to all provinces in the country. These private and public programmes will encourage all farmers to work together to build a sustainable and growing agricultural sector. Through these collaborations, real Afrikaner farmers who may be considering emigrating to the US, would be able to realise that they will be foregoing centuries of hard work and investment in agriculture, thus making them to stay. Financial and non-financial incentives must be upscaled to all farmers, especially the developing black farmers, to ensure farmers are committed and not persuaded by short-term political promises in the foreign countries. Agriculture will strive through partnerships. Sifiso Ntombela is an agricultural economist. Image: Supplied Dr Sifiso Ntombela is the President of the Agricultural Economics Association of South Africa. He served as the Special Adviser to the former minister Thoko Didiza in the Department of Agriculture, land Reform and Rural Development. Contact details: sifiso@ BUSINESS REPORT
IOL News
7 days ago
- Business
- IOL News
John Steenhuisen warns of AGOA uncertainty, urges diversification of export markets
South Africa's Minister of Trade, Industry and Competition, Parks Tau, U.S. Trade Representative Jamieson Greer, and Minister of Agriculture John Steenhuisen after discussions on trade matters between South Africa and the United States Image: John Steenhuisen/X The future of South Africa's trade benefits under the African Growth and Opportunity Act (AGOA) remains uncertain, Minister of Agriculture John Steenhuisen has cautioned, saying the government is 'hoping for the best but preparing for the worst.' This comes despite President Cyril Ramaphosa's recent diplomatic efforts, including a high-level meeting with US President Donald Trump last week, where a South African delegation which included Steenhuisen sought to ease tensions and strengthen trade ties between the two countries. "Minister Parks Tau had already put on the table what I think is a very serious trade deal and I think it showed that South Africa is a serious country with a serious offer," Steenhuisen said. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ Ad Loading He noted that while discussions on AGOA were held, it was made clear that the agreement was ultimately 'a creature of Congress' meaning its renewal and terms lie in the hands of US lawmakers. "When we approached the subject of AGOA it was made very clear that is a creature of Congress and that we would have to engage with Congress, my personal view is that AGOA may still be on the boil but it is going to be different from the AGOA we know from the past," he told broadcaster Newzroom Afrika. Under the AGOA, South Africa has enjoyed duty-free access to the US market for a diverse range of products, including vehicles, citrus fruits, and textiles. This preferential trade status has been instrumental in boosting key sectors such as agriculture and manufacturing, contributing to economic growth and job creation. IOL previously reported that as tensions continue to rise between South Africa and the US, farmers who export to the US have warned that they will be hit hard if the AGOA)agreement is not renewed. "I think that is very clear from some of the tariff negotiations that are taking place between the two countries. It's very clear that this blanket tariff-free access will probably be a feature of the past but we remain to see what will happen with Congress. "I've adopted the view that we will hope for the best but prepare for the worst," Steenhuisen added. IOL Business Get your news on the go, click here to join the IOL News WhatsApp channel
