Comparing the effectiveness of the African Growth and Opportunity Act (AGOA) and Forum on China-Africa Cooperation (FOCAC) in South Africa: An application of Keynes' Macroeconomic Theory

Abstract

This study applies Keynesian macroeconomic theory in the ARDL model to compare the growth effects of the US's AGOA and China's FOCAC multilateral trading systems in South Africa from the first quarter of 2001 to the fourth quarter of 2022. The study uses South Africa's net exports with the corresponding partner as a proxy for each multilateral trading system. This quantification stems from the fact that South Africa's trade with the US and China has significantly improved since the establishment of AGOA and FOCAC in 2000. Our findings show that none of the multilateral trading systems contribute significantly to South Africa's economic growth. Rather, they appear to be used as strategic initiatives to gain access to mineral resources and facilitate the movement of mining machinery and other inputs into South Africa. To some extent, they are used as market-seeking initiatives, particularly FOCAC. It is worth noting, however, that the mineral resource preferences of these systems vary: while China prioritizes mineral products, the US prioritizes precious metals. This suggests that China and the US scramble for natural resources in South Africa, and possibly Africa in general, is complementary rather than competitive.