South Africa’s deliberate elimination from the African Growth and Opportunity Act (AGOA) received’t solely have an effect on exporters, but in addition increase questions on how the nation’s worsening relations with the United States (US) would possibly have an effect on funding into its know-how sector.
While AGOA is a commerce desire programme masking items exports, the fallout from the choice may attain companies which have little direct publicity to the programme. For South African startups, one concern is whether or not deteriorating diplomatic and commerce relations may affect the urge for food of American enterprise capital traders.
US enterprise capital corporations are among the many worldwide traders backing African startups, with the United States remaining the continent’s largest supply of overseas enterprise traders in 2024, in accordance with the African Private Capital Association (AVCA), a commerce physique for African traders.
In 2022, South African gaming startup Carry1st raised a $20 million Series A extension led by US enterprise capital agency Andreessen Horowitz.
Jeff Miller, chief govt (CEO) of Grovest Investment Holdings, a South African funding and enterprise capital agency, warned that the diplomatic fallout may make US traders extra cautious about backing South African startups, even with none direct restrictions on know-how funding.
“My assessment is that the first effect would likely be greater selectivity and slower decisions, as a result of negative sentiment that the withdrawal of AGOA brings with it,” he advised TechCabal in an interview on Tuesday.
Miller stated overseas traders weigh a rustic’s political panorama, capital flows, rule of regulation, pink tape and tax implications. He believes Black Economic Empowerment (B-BBEE) necessities may current challenges.
“Uncertainty about these pathways can make an otherwise attractive investment harder to approve,” he stated.
He cautioned that worsening relations with Washington may add to the dangers American traders affiliate with South Africa. Negative sentiment within the US may additionally have an effect on worldwide investor confidence, probably influencing traders from different markets.
The warning comes after US President Donald Trump notified Congress and the governments of South Africa and Rwanda of his intention to terminate their AGOA eligibility from January 1, 2027. The notification, introduced on November 2, provides the international locations 60 days’ advance discover of the deliberate withdrawal.
In a statement, US Trade Representative Jamieson Greer stated the Trump administration was involved about “barriers to U.S. trade and investment, corruption, and threats to US national security and foreign policy interests.”
The assertion stated an annual interagency overview had discovered practices by South Africa and Rwanda inconsistent with AGOA’s eligibility standards. It didn’t announce restrictions on enterprise capital, know-how partnerships, or digital companies.
AGOA offers eligible sub-Saharan African international locations with preferential entry to the US marketplace for hundreds of merchandise. Its withdrawal straight impacts commerce in items, not the circulate of enterprise capital into know-how corporations. Any impact on startup funding could be oblique, by means of the broader funding local weather and the way traders interpret the diplomatic fallout.
South Africa’s automotive trade is among the many sectors most uncovered to the lack of AGOA advantages. TechCabal reported in February that autos and automotive elements accounted for greater than half of the nation’s $4 billion in AGOA-qualifying exports to the US in 2024, producing about $1.6 billion in export income.
The sector was already below strain from US tariffs, with the uncertainty round AGOA threatening export competitiveness and long-term funding planning. South Africa’s Department of Trade, Industry and Competition says the nation’s wider financial relationship with the US stays important.
According to the Department, 89% of South African exports to the US entered below strange World Trade Organization most-favoured-nation phrases in 2025, whereas about 10% entered below AGOA. The worth of AGOA exports fell from $4 billion in 2024 to $1.7 billion in 2025, representing about 1% of South Africa’s complete international exports.
Bilateral commerce reached $28.8 billion in 2025, whereas greater than 600 American corporations function in South Africa, supporting roughly 134,600 jobs.
Parks Tau, South Africa’s Trade, Industry and Competition Minister, sought to separate the AGOA resolution from the broader financial and diplomatic ties between the 2 international locations.
“This decision does not define the broader relationship between South Africa and the United States, however a solution depends on the willingness of both Parties to find solutions,” he stated in the identical assertion on Tuesday.
The authorities stated it can proceed pursuing US commerce and funding whereas diversifying export markets by means of the African Continental Free Trade Area, the European Union, the United Kingdom and Asia.
For South African startups, nonetheless, discovering different sources of capital could also be harder than diversifying export locations. Miller stated the US enterprise capital market has substantial capital and a higher urge for food for threat than different markets, making it an essential supply of funding for corporations looking for to scale.
“Whilst a good business should always find funding, the US market is a low-hanging fruit,” he said.
