South Africa’s key industries, including mining, automotive manufacturing, and agriculture, could suffer if trade and investment ties with the US weaken.
Image: Se-Ann Rall / Dominic Naidoo / Independent Newspapers
Our economic relationship with the United States is facing mounting uncertainty after US President Donald Trump threatened to cut funding to South Africa due to concerns over the recently legislated Land Expropriation Bill, raising concerns over trade, investment, and aid that support key industries and public services.
While South Africa does not rely on US financial assistance for survival, the broader economic ties between the two nations are far more significant than direct aid alone. If these ties weaken, the effects could be felt across multiple sectors, potentially leading to job losses, export declines, and financial instability.
According to the United States Agency for International Development, South Africa received $439,899,509 (R8.225 billion) in aid in 2023 and $323,415,440 (R6,047 billion) in 2024.
One of the biggest beneficiaries of this funding ($220 million in 2023) was the President’s Emergency Plan for AIDS Relief (PEPFAR), which provides life-saving HIV/AIDS treatment to millions of South Africans.
If this funding were to be cut, public health programs - particularly in rural and underprivileged communities - would face severe challenges. Reduced funding could limit access to medication, disrupt treatment centres, and undermine healthcare support systems that millions rely on.
Yet, while the potential loss of aid is concerning, the real economic risk lies in trade and investment. The US is one of South Africa’s largest export markets, purchasing billions of rands’ worth of minerals, wine, fruit, and manufactured goods each year.
In 2022, South Africa exported R292 billion worth of goods to the US, accounting for roughly 6% of the country’s GDP. Major exports include platinum group metals (PGMs), gold, diamonds, chromium, manganese, wine, and citrus fruits. A disruption in trade relations could severely impact these industries, leading to decreased demand, falling revenues, and potential job losses.
One of the biggest concerns in the ongoing US-South Africa economic relationship is the African Growth and Opportunity Act (AGOA), a trade agreement that allows South African exports to enter the US duty-free.
South Africa is the largest beneficiary of AGOA, exporting goods worth around R65 billion, making it the largest US trade partner in Africa.
AGOA has been a lifeline for key sectors, including automotive manufacturing, agriculture, and mining. The South African automotive industry, for instance, benefits from duty-free exports of vehicles to the US, supporting thousands of jobs at manufacturers like Ford and BMW.
If South Africa were to lose AGOA privileges, these exports would face steep tariffs, making them less competitive in the US market. This could lead to factory closures, retrenchments, and broader economic instability.
Agriculture would also be hit hard, particularly in the citrus and wine industries. South African farmers rely on tariff-free access to the US market to maintain profitability.
If new trade barriers were imposed, it could reduce demand for South African produce, causing ripple effects in the farming sector, where thousands of workers depend on seasonal exports.
Similarly, South Africa’s mining sector, which supplies key minerals to the US for steel, battery production, and electronics manufacturing, could face declining orders and reduced global competitiveness.
Beyond trade, US investment plays a crucial role in the South African economy. American businesses operate in sectors ranging from automotive and technology to finance and energy, providing thousands of jobs.
If diplomatic tensions escalate and US companies begin to reconsider their investment strategies in South Africa, the economic consequences could be severe. Reduced investment would likely lead to job losses, business closures, and a slowdown in economic growth.
This, in turn, could affect the strength of the rand, which has already shown volatility, dropping to as low as R19/dollar following recent diplomatic disputes. A weaker currency would drive up the cost of imports, fuel, and essential goods, further straining South African households already battling rising inflation.
While South Africa has alternative trade and investment options, moving away from US economic partnerships would not be easy or immediate. China remains South Africa’s largest trade partner, with strong economic ties in infrastructure, mining, and energy, but shifting exports away from the US would take time.
Other potential markets, such as BRICS nations (Brazil, Russia, India, China) and the European Union, could provide some relief, but they do not offer the same favourable trade terms as AGOA.
To navigate this growing uncertainty, the South African government must act decisively.
Diplomatic engagement with US officials will be essential in preventing AGOA suspension and securing ongoing trade agreements.
At the same time, South Africa needs to broaden its economic partnerships to reduce dependence on any single country. Strengthening ties with Europe, China, and African markets, alongside domestic economic reforms, could help attract alternative investors and create long-term stability.
Ultimately, while South Africa does not depend on US aid to survive, its economy is deeply intertwined with American trade and investment. Losing access to AGOA, experiencing trade restrictions, or seeing a decline in US investment could have far-reaching consequences.
As tensions continue, South Africa’s economic policymakers face a difficult balancing act—maintaining diplomatic independence while ensuring that political disagreements do not jeopardise economic growth, investment, and job security.
IOL