US report confirms collapse of Botswana’s AGOA exports
Mbongeni Mguni | Monday April 24, 2023 06:00
A report by a United States agency has found that Botswana has the continent’s lowest exports under the African Growth and Opportunities Act (AGOA), with the country’s utilisation rate of the trade arrangement falling from 100% to zero in the last decade. AGOA is a trade arrangement between the US and nearly 50 sub-Saharan African countries, including Botswana, established in 2000 and providing relaxed access to the American market. The report by US International Trade Commission (USITC), made available this week, follows a request by a committee of the US House of Representatives. The committee requested an analysis of AGOA’s industries and beneficiary countries, including trends and utilisation trends as well as the trade deal’s impacts on workers, underserved communities, regional integration, and economic development. AGOA elapses in 2025 and negotiations for its renewal are ongoing between the US and African leaders. According to the USITC report, Botswana’s utilisation of AGOA collapsed from 100% in 2014 to zero in 2021, as local producers failed to take advantage of the world’s richest market. Although AGOA provides more than 6,000 preferential tariff lines, Botswana’s exports under the trade arrangement over the years have almost exclusively been apparel. “From 2014 to 2017, Botswana had a high non-crude petroleum AGOA utilisation rate (99.5% to 100%), but then dropped to zero or near zero starting in 2018,” the USITC report notes. “While imports from Botswana of AGOA or Generalised System of Preferences-covered products entered the United States in 2018, 2020, and 2021, none entered under AGOA or GSP preferences.” From a peak of P1.8 billion in 2008, AGOA exports by local firms have been plummeting over the years as key exporting sectors such as textiles and garments have struggled with a plethora of issues. While the US remains a highly lucrative market for local textile players, issues such as scale, capacity, distance, costs, high competition for the American market, and government reluctance to keep extending incentives for local producers, have led to the closure of some factories and relocation by others. According to BusinessWeek’s research, the last exports from Botswana under AGOA occurred in 2019 and consisted of wooden ornaments worth about $3,500. The last textile exports under AGOA from Botswana were in 2017 and consisted of women’s garments worth about $970,000. Government’s reluctance to provide direct export incentives similar to the P38 million bail-out that ran from 2009 to 2011, saw the number of AGOA textile export firms drop from 13 before 2009, to just one in 2018. That company, Carapparel Botswana, subsequently relocated to Lesotho which provides its AGOA textile exporters with a range of state-funded incentives. Government, working with the US, has since revised its AGOA strategy and is placing a focus on supporting the exports of meat and meat products, natural/indigenous products, handicrafts, jewellery, and semi-precious stones. The USITC report found that the countries that had developed national AGOA strategies enjoyed generally better utilisation of the trade arrangement. “AGOA national strategies have the potential to guide government resources to increase and diversify exports and increase the number of eligible imports that claim the preference. “More of the beneficiary countries with the highest utilisation rates have national AGOA strategies than those with the lowest utilisation rates,” the report found. Trade and Industry minister, Mmusi Kgafela previously told BusinessWeek that government had agreed to work with the US government and its agencies to better prepare and capacitate local businesses to access the American market. “We have to up our game. “The quality of our goods and services must be international standard because at the end of the day, you want your goods and services to be sought-after and the only way to do that is quality,” he said.