Russia’s alliance with South Africa threatens automotive industry

Russia’s alliance with South Africa poses a significant threat to the country’s automotive industry, potentially resulting in the loss of R435 billion ($31 billion) in trade and 112,000 jobs. This development could also lead to South Africa’s exclusion from the African Growth and Opportunity Act (AGOA), a trade program that grants duty-free access to the United States market for numerous products from eligible sub-Saharan African countries.

According to John Steenhuisen, a member of the Democratic Alliance (DA) in South Africa’s Parliament, the friendly relations between South Africa and Russia during the ongoing conflict in Ukraine have caught the attention of US congressmen.

In June, these congressmen sent a letter to national security and foreign relations officials, urging them to reconsider South Africa’s position as the host country for the AGOA conference and questioning the country’s eligibility for the Act.

Steenhuisen expressed concerns about the potential repercussions of losing AGOA’s benefits, stating, “We are no longer the favorite of the southern-African region when it comes to trade, and South Africa’s economy is quickly being outflanked by our neighbors.” He also highlighted that South Africa’s exclusive access to key export destinations in the US, the European Union (EU), and the United Kingdom (UK) is no longer guaranteed.

The impact of losing AGOA’s privileges could be severe for South Africa. The US is set to review the list of AGOA-applicable countries, paying particular attention to South Africa’s alignment with Russia. Steenhuisen warned that if South Africa’s access to AGOA is revoked, it could result in the loss of 112,000 jobs in the automotive sector and wipe out R435 billion ($31 billion) in automotive trade.

South Africa’s automotive industry heavily relies on duty-free access to the US market, its second-largest export destination. In 2022 alone, South Africa exported R24 billion ($1.7 billion) worth of vehicles and components to the US, with BMW and Mercedes-Benz being the largest exporters. Additionally, South Africa has significant trade relations with Germany through EU-bilateral agreements, amounting to around R72 billion ($5 billion). Moreover, South Africa plays a crucial role in manufacturing right-hand-drive vehicles for the UK.

The total value of locally-produced vehicle shipments to the US, EU, and UK reached R175 billion ($12 billion) in 2022. Steenhuisen emphasized that much of this trade is reliant on AGOA and urged South Africans to recognize the interconnectedness of their jobs and the economy with global trade alliances.

Steenhuisen criticized the African National Congress (ANC) government’s alliance with Russia, questioning its economic rationale. He argued that sacrificing close to 77% of foreign direct investment stock from the EU, UK, and US, along with hundreds of billions of rands in trade, for a country that represents only 0.3% of South Africa’s trade is not economically viable.

As the US conducts its review of AGOA-applicable countries this week, South Africa faces a critical decision that could have far-reaching consequences for its automotive industry and overall economic stability.

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