Withdrawal of US Aid will Increase Poverty in Southern Africa

Following President Donald Trump’s election for a second term, key announcements saw far-reaching changes to the United States of America’s (USA) development aid and trade policies. In January 2025, the Trump administration announced a three-month suspension of US development aid to realign spending on aid with national interests. However, this culminated in the closure of the US Agency for International Development (USAID) which had been in existence for more than six decades.

The aid cuts also affected a key global initiative, namely the US President’s Emergency Plan for Aids Relief (PEPFAR), introduced in 2003 to deal with the HIV/AIDS pandemic. While some aspects of development assistance have resumed following public outcry, the overall impact of aid cuts by the USA dooes not bode well for African countries.

According to an article published by South Africa’s Institute of Security Studies (ISS), the US government’s suspension of aid has the potential to force an estimated 5.7 million Africans into extreme poverty by 2026, and this number is likely to increase to 19 million by 2030. If this situation is not addressed, Africa will struggle to achieve the sustainable development goals (SDGs), particularly the reduction of extreme poverty for all by 2030 (SDG 1).

The precarious situation of African countries is exacerbated by trade protectionism, specifically the restrictive trade tariffs announced by President Trump. Trade tariffs are likely to undermine the duty-free access to the US market extended to African countries under the African Growth and Opportunity Act (AGOA). At present, 38 out of 54 African countries are eligible for AGOA. Most vulnerable are small economies like Lesotho, with exports concentrated in a few markets, including the USA.

Impact of US aid cuts on African countries

The aid cuts by the United States have cast a spotlight on the downside of overreliance on development aid. While other donor countries have played a critical role in Africa, the USA has provided a significant proportion of overseas development spending on the continent.US development aid has been wide-ranging, spanning education, health and human rights. However, the greatest concern with aid suspension has been in the health sector, especially the discontinuation of HIV/AIDS programmes. Here, many African countries have been heavily dependent on both USAID and the PAPFAR programme to support HIV/AIDS interventions.

Southern Africa is the most affected region, as it has the highest HIV/AIDS prevalence in Africa and globally. The world has seen significant progress in combating the HIV/AIDS pandemic since the US government initiated PEPFAR in 2003. With significant support from both USAID and PEPFAR , most countries in Southern Africa achieved remarkable progress in meeting the targets set by the Joint United Nations Programme on HIV/AIDS (UNAIDS).

Of particular significance are the 95-95-95 UNAIDS targets which postulate that for a country to effectively address the HIV/AIDS pandemic, 95 of HIV positive people must be tested and aware of their status, 95% of those who are HIV positive should be on antiretroviral treatment, while 95% should achieve viral suppression such that they cannot transmit the virus to other people.

At the time of PEPFAR suspension, many countries in Southern Africa, including Lesotho and South Africa, were close to achieving these targets. Despite economic challenges, available estimates indicate that Zimbabwe had already achieved these targets. A recent article by leading scientists published in the South African Medical Journal estimates that without effective transition plans, the withdrawal of PEPFAR funding in South Africa could lead to an estimated 601’000 HIV-related deaths and 565’000 new infections in the next 10 years. Ultimately, the impact of US trade restrictions and aid cuts on African counties will be uneven and differentiated. This will depend on economic resilience of each country and its capacity to mobilise alternative resources both internally and externally, for stop-gap measures and long-term solutions.

If South Africa sneezes, the whole region catches a cold

Although South Africa has one of Africa’s most industrialised economies, the country is still grappling with high levels of inequality, poverty and unemployment. This makes it susceptible to the precarious environment in global trade and development assistance. At present, unemployment in South Africa is estimated to be 32% while 19 million poor people rely on state social welfare transfers, costing the national fiscus 284.7 billion Rand per annum ($16 billion). Other African countries, particularly those without a comprehensive social security system, may see the social contract between governments and their citizens erode further.

The saying goes that when South Africa sneezes, the entire SADC (Southern African Development Community) region is likely to catch a cold. This is not only because the economies of the region are intertwined. South Africa also hosts the majority of immigrants from the SADC region. Statistics South Africa estimates that 83,5% of immigrants in South Africa are from the SADC region. The money they send home is crucial for the economies of their countries of origin. Economic decline in South Africa can lead to intense competition for economic opportunities between South Africans and immigrants from the SADC region, and the continent.

Trade or aid – or both?

As African countries are still trying to come to terms with the economic and social impacts of aid cuts, there have been growing calls for more focus on industrial policy and intra-African trade so as to grow local economies and reduce aid dependence. The current crisis provides an opportune moment for more investment in intra-African trade through the African Continental Free Trade Area (AfFCTA). To date, 48 of 54 countries have ratified AfCFTA.

Yet intra-African trade still faces significant obstacles. In Southern Africa, there has been friction between countries emanating from trade imbalances. Within the Southern African Customs Union (SACU) which only includes the five SADC countries of Botswana, Eswatini, Lesotho, Namibia and South Africa, temporary import bans on agricultural produce from South Africa were imposed by Botswana and Namibia.

In the broader SADC region, there has recently been uncertainty about Tanzania’s possible ban on agricultural produce, specifically bananas, from South Africa. In short, African countries are yet to fully leverage intra-African trade and unleash economic growth that will lessen dependence on development aid.

Considering the restrictive US tariff regime and the possible non-renewal of AGOA, it is imperative for African countries to redouble their efforts in pursing robust and win-win trade relationships with China, the EU and other regions. Unfortunately, most African countries have failed to prioritise industrial policies necessary to stimulate competitive export-oriented economies. Effective industrial policies are important for the promotion of value-addition and nurturing a globally competitive manufacturing sector.

EU and China closing the gap?

Contrary to the United States’ protectionist trade barriers and suspension of development funding, the EU has been strengthening its longstanding partnership with African countries. These have been implemented under the auspices of various economic partnerships with regional trade blocs like SADC, COMESA (Common Market for Eastern and Southern Africa) and ECOWAS (Economic Community of West African States). Such partnerships agreements or trade facilitation programmes with regional blocs or individual countries signal a positive trajectory in EU-Africa relations.

The March 2025 EU-South Africa Summit held in Cape Town had positive outcomes. South Africa is set to benefit from a 4.7 billion Euro ($5,4 billion) investment package from the EU bloc which will target key sectors, infrastructure corridors to stimulate regional trade, digital networks and connectivity. Also, the pharmaceutical industry is set to benefit from 700 million Euro ($800 million) of the EU investment package – a timely investment considering setbacks in the health sector in the aftermath of the US aid cuts.

In Lesotho, the EU has earmarked of 10 million Euro ($11 million) for key sectors like renewable energy and strengthening the country’s civil society. Zimbabwe is also set to benefit from duty free export arrangements with the EU and this is likely to provide some respite to the country following decades of economic decline. The positive steps in the EU-Africa partnership are an important countervailing force to the adverse outcomes of trade protectionism and trade wars.

On its part, China has been pursuing partnerships with individual countries, and through the Forum on China-Africa Cooperation (FOCAC) - a key platform through which China has sought to redefine cooperation with Africa. In its dealings with African countries, China has prioritised large infrastructure projects through its Belt and Road Initiative. However, commentators have raised concerns about the levels of debt associated with Chinese projects. The debt trap has been a key constraint to sustainable development in Africa. Zambia –currently undergoing debt restructuring – is going to be an important test case. After decades of economic crisis, Zimbabwe has also been engaging key international partners, including the EU, on debt restructuring.

Will the US lose influence?

The US suspension of development funding and imposition of trade tariffs are a major setback, particularly for developing countries. Multilateralism, based on mutually beneficial trade agreements, is the only chance for a more prosperous world. African countries should continuously pursue trade and development partnerships with multiple countries and or regional blocs including China and the EU bloc.

The US remains a key player in global development and trade. Yet the uncertainty created by its abrupt changes to long-standing trade and development aid policies risks undermining its credibility as a reliable partner in global affairs.