US keen to renew AGOA but utilisation worries persist

Mbongeni Mguni | Monday November 6, 2023 06:00

The African Growth and Opportunities Act, more commonly known as AGOA, is a trade arrangement between the US and more than 30 sub-Saharan African countries, including Botswana. The agreement was established in 2000 and provides relaxed access to the American market for participating African states.

In March, a report by a United States agency, requested by legislators from that country, found that Botswana was among countries with the continent’s lowest exports under AGOA. Botswana’s utilisation rate of the trade arrangement fell from 100% to zero in the last decade, echoing, but considerably worse than, many other countries on the continent.

The waning utilisation rates are expected to weigh heavily on the shape the new AGOA takes, which in turn will delay the renewal and introduce uncertainty African governments have said will hurt trade.

The utilisation rates are believed to have ranked high on the discussions held earlier this week in Johannesburg at the AGOA Forum, which featured private sector, civic and government officials from both the US and Africa.

AGOA elapses in 2025 and while African leaders want either a timely renewal or commitments towards the same, US lawmakers will have the final say, senior government officials from that country told journalists in a briefing last Thursday.

“Timely authorisation of AGOA is a goal of the Biden-Harris administration and an opportunity to change it for the better,” said Joy Basu, the Deputy Assistant Secretary in the US’ Bureau of African Affairs. “That being said, obviously Congress writes the laws, and so we are here to support them however they need as they consider that choice.”

Assistant US Trade Representative for Africa, Constance Hamilton told journalists that some members of Congress were due at the Johannesburg forum. Congress is the legislative arm of the US government, comprising the House of Representatives and the Senate.

“We’re very pleased that we’ll have some participation from our friends in Congress, who actually hold the pen on AGOA,” Hamilton said. “One hundred percent, they are the ones who will – if the law is going to be revised, if any changes are going to be made, if it’s going to be extended, all of that is up to our Congress. “And so it’s very important that they hear from the ministers, the private sector, and civil society, their ideas about what can be done to make the program more impactful.”

Sub-Saharan Africa’s share of US imports have been sliding over the years, sinking to five percent from more than 20%. While part of this fall has been linked to fluctuating oil prices, sub-Saharan Africa has generally battled to trade across the 6,000 product lines offered by AGOA.

From a peak of P1.8 billion in 2008, AGOA exports by Botswana-based firms have been plummeting, 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.

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.

Earlier this year, KGK Diamonds Botswana, a De Beers’ registered client which boasts the country’s largest jewellery plant, exported its first finished products to the US and is currently finalising more orders.