AGOA: a pie in the sky?

SHARE   |   Monday, 14 November 2016   |   By Ditiro Motlhabane
AGOA: a pie in the sky?

The euphoria that engulfed the business community over the announcement of an extension of African Growth and Opportunity Act (AGOA) is slowly dying a natural death, as evidenced by the paltry attendance on Monday at a validation workshop of a national response strategy. Attendance by the business community and other stakeholders paled in comparison to multitudes that had turned up in April for an AGOA workshop to kick-start the development of the National Response Strategy. The strategy was developed by the Ministry of Investment, Trade and Industry (MITI), Botswana Investment and Trade Centre (BITC), Business Associations, Civil Society groups and all other Industry representatives, with the support of the USAID Southern African Trade and Investment Hub.

Despite the low turnout, US Embassy Economic and Commercial Specialist Goitseone Montsho said they are confident that Botswana will work hard to ensure that common economic objectives between the two countries are met through the programme. She said considering the nine years remaining in the current opportunity, this is achievable, and the sooner this is done the better. She said Botswana is a valued partner to the USA and the latter has committed efforts to support economic growth as essential for the continuity of sustained bilateral trade relations of the two countries. AGOA is the cornerstone of US trade policy towards sub-Saharan Africa. It presents a tremendous opportunity for Botswana. It is a platform on which Botswana could find its competitive advantages and develop those industries that have the potential to do well and establish strong market linkages with businesses in the USA. The U.S. Government wants Botswana to take advantage of AGOA to establish and build sustainable business whose trade links will outlast the AGOA program itself. Despite the availability of over 6 400 products for duty-free export to the US, only about two local companies have accessed AGOA, since inception in May 2000.

AGOA benefits include Duty-free treatment to more than 6,400 products (with at least 35% African value-added): including 1,800 tariff lines in addition to the standard 4,600 through the General System of Preferences (GSP).  Under a Special Rule (“Third Country Fabric” provision), lesser-developed countries can enjoy an additional preference of duty-and quota-free access for apparel made from fabric of any origin. Botswana and Namibia are eligible through a special exception. Among the sub-Saharan African countries, Lesotho is the number one exporter of apparel to the US under AGOA. Lesotho has established one of the largest textiles and garment manufacturing industry in sub-Saharan Africa, following the development of a National AGOA Response Strategy to improve and up-scale the implementation of AGOA. The strategy was also aimed at establishing a diversified manufacturing sector. Botswana is developing her own strategy, to support development of industries that will benefit from AGOA before it expires in 2025. The strategy also addresses issues of implementation, which was identified as a major hindrace at government enclave. Perhaps to prevent further failures, the strategy was developed by a team of experts from different sectors working with consultant George Makore.

Noting the current economic challenges faced by Botswana, Montsho said, the US Government agrees that there is a dire need for economic diversification, and it is through AGOA that Botswana can do just that and develop globally competitive companies that will still be relevant beyond the tenure of AGOA. "We have no doubt that the Botswana Government has drawn an AGOA response strategy that will guide the country into building a strong manufacturing industry and therefore broaden its export base. We commend Botswana stakeholders for highlighting the need to improve competitiveness in this regard. This, of course, has to work in conjunction with an improved doing business environment and we would like to believe that the business reform road map will be implemented soon enough to support the AGOA strategy implementation," said Montsho. She said USAID, through its regional Trade and Investment Hub, is providing technical assistance and capacity building to improve competitiveness, reduce the costs of transportation, and streamline customs. She added that these efforts are designed to unlock potential in the region.

"Botswana, at the center of SADC, stands to most notably benefit by these reforms.  We urge the Government of Botswana to capitalize on this support with speedy implementation of initiatives such as the National Single Window.  This is an electronic platform in which all paperwork can be easily submitted by traders at any time.  The system provides significant cost savings to the trading community and the government by enabling easier, faster, and more transparent clearance processes while improving border control, compliance, and security. Conversely, we do not recommend local preferences, localization requirements, or subsidies as it is through competition that businesses develop efficiency and comparative advantages.  Protectionist measures scare away investors. US companies tend to first come as traders to foreign countries, and they have the potential to become investors when they have a positive experience.  We fully concur with the action plan to promote U.S. investment by simplifying applications for work permits, and streamlining procedures and trade.  To this we add the important note that a transparent and level playing field for international companies attracts investment," said Montsho.

Statistics, facts on AGOA
As at the year to date June 2016, Botswana had exported goods worth $3 million (excl. GSP) under AGOA, the lowest it has ever exported in all its beneficiary years, the highest being at $30 million in 2005. The total as at June 2016 for all beneficiary countries stood at $4,250 billion. So Botswana’s AGOA exports accounted for less than 1% of this.  Exports to the U.S stood at $7.5 million in 2015, down from $9 million in 2014. Botswana's export to the US in 2014 was dominated by diamonds at 94% of total exports.

2015 AGOA Exports from sub-Saharan Africa
South Africa: $2.9 billion; Angola: $1.8 billion; Lesotho: $299 million; Malawi: $49 million; Mozambique: $9 million; Botswana: $8 million; and Zambia: $4 million.

2016 AGOA Forum
Giving feedback from the 2016 AGOA Forum, Gideon Mmolawa Deputy Director, Department of Industrial Affairs, said the forum adopted the following Recommendations/Resolutions:
• African countries should ensure alignment between AGOA and their regional integration agenda which focus on industrialisation and preservation of policy space aimed at enhancing efforts to diversify export base and integrate supply chains to  take advantage of the market access opportunities under AGOA;
• Creation of an enabling environment for the private sector including women and young entrepreneurs to take advantage of AGOA as well as establish platforms between Government and the Private Sector;
• African Governments should show commitment in improving the business environment by removing Non-Trade Barriers with a view to facilitate the growth of intra-Africa trade;
• Regional integration efforts to be enhanced through the implementation of cross-border infrastructure projects and the development of regional value chains to increase productive capacity and reduce African countries’ reliance on production of primary products;
• Ministers responsible for trade and labour to make continual progress toward establishing protection of internationally recognized worker rights and as well implement their commitments to eliminate the worst forms of child labour in conformity with AGOA eligible criteria;
• To increase coordination of trade and labour policies under AGOA with a view to attract increased sustainable trade and investment as well as contribute to shared prosperity;
• The U.S. should encourage their companies to support the African industrialisation agenda by investing in African resource based industries with a view to promoting export of industrial products into the US market;
• The US to align Aid-for-Trade support to Africa with compacts for National AGOA utilization strategies; and
• AGOA eligible countries should be included in the list of designated countries under the Trade Agreements Act (19 U.S.C. & 2501 – 2581) that require the US Government to acquire only US made or designated country end products.