AGOA: Why the silence on grave EWC risk? – IRR

EWC unambiguously violates “private property rights” in the universal sense of the term

AGOA: Why the silence on grave EWC risk?

5 November 2023

The AGOA Forum entered its final day in Johannesburg amid threats, fanfare, and big promises, but not a word from officials on either the US or South African side has been said about the risk of South Africa’s exit due to the Expropriation Bill’s provisions for expropriation without compensation (EWC).

To be eligible for the zero-tariff market access provided for by the African Growth and Opportunity Act (AGOA), the first requirement of this US law is that the African country seeking the benefit “has established, or is making continual progress toward establishing (A) a market-based economy that protects private property rights”.

The Expropriation Bill, which has been passed by the National Assembly and is expected to be signed into law before the next national election in 2024, disestablishes “private property rights” through EWC on an open list of grounds, including the seizure of title deeds on hijacked buildings, invaded land, and land that was bought primarily “to benefit from the appreciation of its market value”.

This unambiguously violates “private property rights” in the universal sense of the term, and according to US law. That puts South African exporters, and workers who depend on those businesses, at risk.

South Africa is by far the largest AGOA value-add beneficiary, particularly in manufacturing. According to the latest AGOA review, in “2021, the top sub-Saharan African suppliers to the United States were South Africa ($15.7 billion) [R285 billion], Nigeria ($3.5 billion), Ghana ($1.7 billion), Côte d'Ivoire ($1.2 billion), and Angola ($1.1 billion).”

Although US delegates appear to have issued no public warnings on South Africa’s removal from AGOA due to EWC in Johannesburg, US lawmakers in Washington have already raised concerns.

In a recent subcommittee hearing on US-South Africa relations, US congressman Jim Baird asked “how would you say the Expropriation Bill and mismanagement of the transport and power sector” will affect US-SA trade?

That question is answered by the plain text of AGOA requirements. It is also answered by AGOA biennial reports that have cited Zimbabwe’s broken “property rights” and “anti-market policies that hindered the development of efficient markets and a better investment climate” as contributing to that country’s ineligibility for AGOA benefit.

The committee chair, congressman John James, further called EWC a “disastrous policy” which would “destroy South Africa’s constitutionally protected private property rights”.

Moreover, the administration of US President Joe Biden has shown a hardline attitude to AGOA eligibility by removing Uganda, Central African Republic, Niger and Gabon from possible benefit this week.

South Africans should heed congressman James’ warning. “There is no country in the world that has remained democratic after removing its population’s private property rights.”

However, the simple question remains unasked at the AGOA Forum, where so many promises are being made of fruitful collaboration. How long can South Africa expect to remain in AGOA after the first case of EWC?

Issued by Gabriel Crouse, IRR Fellow, 5 November 2023