South Africa and the United States have agreed to continue to work together to address concerns around the African Growth and Opportunity Act (AGOA) which is designed to help qualified sub-Saharan African countries economically. Sectors in South Africa that have shown interest in AGOA are the wine, citrus, auto, and textiles industry.
AGOA is a legislation that provides duty-free market access to the US for qualifying sub-Saharan African countries by extending preferences on more than 4,600 products.
It has created 100,000 jobs in the US and 350,000 direct jobs and 1.3 million indirect jobs in sub-Saharan Africa. In South Africa, AGOA is estimated to have created 62,000 jobs. The current AGOA is set to expire on 30 September 2015.
It is for this reason that the South African delegation is in the US for the Trade and Investment Framework Agreement (TIFA) talks with the US Trade Representative to advocate the renewal of AGOA.
Main concerns relate to – among others – market access in South Africa for certain US products.
This agreement follows a conversation between Deputy President Cyril Ramaphosa and US Vice President Joe Biden who discussed the critical role that AGOA has played in expanding US and Africa trade.
Biden urged South Africa to address these issues as soon as possible. He reiterated Washington’s interest in renewing AGOA as soon as possible, for as long as possible, in order to continue to encourage sustainable investment and robust economic growth in sub-Saharan Africa.
Last week, Rob Davies, Minister of Trade and Industry in South Africa, said, “ South Africa together with sub-Saharan Africa have been calling for 15 year renewal of AGOA for all eligible countries without any conditionalities. This position was also reiterated by the African leaders at the US-Africa Leaders Summit in Washington last year. Even congress members believe that AGOA should be extended; it is the only programme that enjoys bipartisan support.”
“For us as the African continent we believe the programme should be extended for 15 year renewal for the following reasons:
- AGOA has been successful and it contributed in transforming Africa from a continent that used to rely on development aid to a continent that is today referred as “rising.”
- The programme contributed to revival of industrialisation in the continent following periods of deindustrialisation. Due to AGOA, sub Saharan Africa countries managed to attract new investments in clothing and textile, and other industries.
- It contributed to regional integration and creation of regional value chains as AGOA allows cummulation amongst the countries. Examples here include leather car seats, where South Africa source leather from Botswana and denim clothes, South African textile and clothing industry procures part of its raw materials from other regional garment producers – mainly Lesotho, Swaziland, and to some extent Mauritius. Further, South Africa exports some trims (zips, buttons, sewing thread, wadding, tapes and elastics) to Lesotho for its clothing industry.
- AGOA generated enormous good will for the US in the continent.
- The benefits of AGOA are two-way, estimate indicate AGOA created 100 000 jobs in the USA and 350,000 direct jobs and 1.3 million indirect in sub Saharan Africa. In SA, AGOA is estimated to have created 62 000 jobs.
- 5 years is a significant period for African countries to attract much needed investment and for those investments to realise returns.
- Further, the continent needs 15 year renewal of AGOA as most Least Developed Countries (LDCs) in Africa would graduate to developing country status around 2030. Why South Africa should be included in AGOA
- AGOA is important to balance the structure of trade. SA exports still concentrated around raw materials. 43% of SA exports to US are metals and mineral products. On the other hand, South Africa imports largely value-added products from the US.
- AGOA contributed to the development of automotive industry in South Africa. There is a growing intra-industry trade in the automotive sector between SA and the USA.
- The view that SA is more developed with diverse portfolio of products is misleading as the country still experiences the triple challenges of poverty, unemployment and inequality. The country currently has 56.8% of its population below the poverty line, and 24.3% of population that remains unemployed.
- SA is part of a customs union with a common external tariff; any attempt to exclude SA from AGOA will undermine SACU.
- SA remains an important anchor for regional value chains (RVC) in the continent; any attempt to exclude South Africa will undermine regional integration and RVC.
- Removing South Africa from AGOA will reduce the value of AGOA for other African countries, as they depend on South Africa for key inputs. AGOA will thus become less effective and lose its significance. It is also for this reason that the African Ambassadors in Washington, and the Commissioner for Trade of the African Union (AU), made representations to the US Congress underlining this point. The AU is in full support of South Africa’s continued inclusion in AGOA."