South Africa’s planned removal from the African Growth and Opportunity Act (AGOA) could create difficulties for technology startups that have no direct connection to the goods trade covered by the programme. The concern is that worsening relations between Pretoria and Washington may influence how American venture capital firms assess risk, timing and opportunity in South Africa.
AGOA is a trade preference arrangement focused on goods exports. It does not directly regulate venture capital investment in technology companies. However, the fallout from the decision could still be felt by businesses that rely on international funding, particularly in a market where overseas investors are important sources of growth capital.
Why the impact could extend beyond exporters
The United States remained Africa’s largest source of foreign venture investors in 2024, according to the African Private Capital Association, a trade body representing investors in African markets. That makes the attitude of US-based funds significant for South African startups seeking to develop products, expand into new markets or build larger teams.
South Africa has already attracted backing from prominent American investors. In 2022, gaming company Carry1st secured a $20 million Series A extension led by Andreessen Horowitz, a US venture capital firm. The deal illustrates how international funding can support companies operating from South Africa, even when their products and services are aimed at the broader African market.
| Indicator | Detail |
|---|---|
| AGOA’s main focus | Goods exports |
| US position in African venture investment | Largest foreign source in 2024 |
| Carry1st funding in 2022 | $20 million Series A extension |
Investor caution may arrive before formal restrictions
Jeff Miller, chief executive of South African investment and venture capital firm Grovest Investment Holdings, said the first effect could be a more cautious investment process rather than an immediate ban on technology funding. His assessment is that investors may take longer to make decisions and apply greater scrutiny because of the negative sentiment associated with the AGOA withdrawal.
“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,”
For a startup, slower decisions can matter almost as much as a rejection. Young companies often depend on funding rounds to maintain operations, hire staff and continue product development. A delay may leave founders with less certainty about how long their available cash will last. The source material does not indicate that US technology investment in South Africa has been formally restricted, but it does highlight the possibility that investors could become less willing to move quickly.
Miller said foreign investors consider several issues when deciding whether to back a company. These include the country’s political environment, the movement of capital, the rule of law, administrative red tape and tax consequences. He also identified Black Economic Empowerment requirements as a factor that can complicate investment decisions when the relevant processes are not clear to investors.
Uncertainty can influence investors beyond the US
The potential effect may not be limited to American funds. Negative sentiment in the United States could influence the way investors from other markets view South Africa, particularly if they interpret diplomatic tension as a sign of wider uncertainty. For founders, that could mean explaining not only their technology and commercial prospects, but also how the company will manage the country-level risks attached to its operating environment.
South African startups are therefore facing a question that goes beyond whether their products qualify for AGOA benefits. Their ability to attract capital may also depend on how international investors judge the country’s broader political and economic relationships. Until the consequences of the planned removal become clearer, the immediate risk identified in the reporting is a potentially more selective and slower funding environment for local technology companies.
