Who will chicken out in simmering Agoa battle?
The US is looking to wring more concessions out of the South African government after getting market access for US poultry in the local market, and a simmering battle over three pieces of local legislation could explode at any time.
At an event organised by the SA Institute of International Affairs and the US embassy in South Africa this week, Florizelle Liser, assistant US trade representative for Africa, said that the three bills, “according to our reading, would have a chilling effect on US businesses” based in South Africa.
About 600 US companies are doing business in South Africa.
The three pieces of legislation are the Expropriation Bill, the Protection of Investment Bill and the Private Security Industry Regulation Amendment Sector Bill.
Liser said that the US found one clause in the Private Security Bill particularly repugnant – the requirement for the cession of a 51% stake of foreignowned security firms to local investors.
She said that demanding the cession of a 51% stake amounted to expropriation, and the US was ready to fight this law.
Peter Draper, MD of Tutwa Consulting, said the US had a number of avenues to address its unhappiness about the Private Security Bill, including again threatening to withdraw South Africa’s African Growth and Opportunity Act (Agoa) benefits.
Of the concerns raised by the US, the security bill was the most serious and could open the door for security equipment companies to also have to concede a 51% stake, Draper added.
“If a US company has an asset expropriated, then the country involved will immediately be barred from Agoa,” he said.
The trade dispute could ultimately end up at the World Trade Organisation, or President Jacob Zuma could also send the bill back to Parliament, possibly after the local government elections later this year, Draper said.
In an attempt to placate the US and maintain its Agoa benefits, South Africa has agreed to a quota that would see the US export 65 000 tons of poultry to South Africa each year.
By March 15, South Africa needs to have put in place all the measures required for the free passage of the 65 000 tons of US poultry imports, otherwise South Africa’s Agoa benefits would again be at risk of being suspended.
However, Draper said the March 15 deadline was likely to be missed because the South African government’s window for reply to poultry import quotas was mid-April, and the state had made the US import quota conditional on poultry importers being supplied by BEE concerns.
“There are no black poultry importers in South Africa. It is going to be an intensive few weeks ahead,” Draper added.