AGOA and the new ‘Scramble for Africa’

Lewanika Timothy | Monday June 10, 2024 06:00

Trade is credited as the economic activity that united and grew the world, when the demand for spices exploded throughout the Roman Era and into the medieval period, defining economies from India to Europe. This demand carved out some of the first truly international trade routes and shaped the structure of the world economy in a way that can still be felt today. Those who controlled spice could divert the flow of wealth around the world.

The tale has not changed much: whoever controls the muscles of world trade has the economic power to control the wealth of nations.

Africa, once regarded as a primitive continent without the right or ability to manage its own resources, has emerged as the ‘hottest girl’ in town, yearned for and pursued by the world’s competing superpowers because of its rich natural resources.

However, the African Growth and Opportunity Act (AGOA), the primary treaty for facilitating trade between the US and Africa, has been on a downward slide, marred by under-utilisation and competition from other global forces.

AGOA, which covers more than 30 sub-Saharan African countries including Botswana, was established in 2000 by the US Congress and provides relaxed access to the American market for 6,000 product lines.

AGOA is set to expire in 2025 and in the years leading to this, African leaders have been pressurising the US for an early commitment to renewal. African leaders hoped an early renewal or commitment to renewal would exorcise the spectre that haunts economies and their growth the most – uncertainty.

However, at the recent US-Africa Business Summit held in Dallas, it was clear that African leaders had not gone there as beggars. Their position was that they wanted AGOA renewed but they were not willing to kiss the ring of the US to get it done.

Minister of Trade and Industry, Mmusi Kgafela, was amongst the first to crystallise the continent’s position.

His comments were those of a Trade minister tired of manoeuvring stringent regulations in getting Botswana products to the US market.

Kgafela said Botswana with its ‘best beef in the world’ cannot export to the US because of strict sanitary and phytosanitary regulations and policies that are enforced by American pressure groups.

“While we want AGOA renewed, the truth is that it’s tough to get anything here,” he said.

“It’s expensive to comply and due to different pressure groups and their policy choices, we can’t even get Botswana beef there. “There are stringent measures against sanitary regulations around grazing and it makes everything tough for us.”

More recently Botswana has lifted its eyes to the United Arab Emirates for its beef market and the Botswana Meat Commission (BMC) sent its first consignment of meat there in December. The BMC plans to complete the accreditation of its Maun abattoir to also gain access to the UAE and other countries this year.

At the summit, a cold breeze swept through the room when a Nigerian entrepreneur, Farouk Gumel, took the podium and expressed Africa’s position even more unequivocally: that Africa had options and what was being offered elsewhere was better than what AGOA was offering.

Gumel who was a panellist during the summit, said that US and Africa trade has collapsed because other international partners have stepped up the ante in providing more trade benefits with less stringent measures, which enhances trade.

Gumel is of the view that the Chinese and the Emiratis have far outpaced the US in promoting African trade. In fact, he is of the view that the US needs to update AGOA after benchmarking what the Emirates and China have done on African soil through impactful trade.

“The truth is that AGOA is outdated.

“The continent of Africa has looked more towards the Emirates and the Chinese for meaningful trade.

“Free trade is nothing new. It has always been there, but what needs to exist is fair trade,” he said.

An indicator of the difficulty of getting Africa’s exports into the US is the declining utilisation rates of AGOA.

For Botswana, a report by a United States agency found that the country has the continent’s lowest exports under AGOA, with the country’s utilisation rate of the trade arrangement falling from 100% to zero in the last decade.

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.” Besides the strict standards, issues such as scale, capacity, distance, costs, high competition for the American market, and government reluctance to keep extending incentives for key sectors such as textiles, have weighed on utilisation in the country.

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.

Last 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 finalising more orders.

At the Summit, however, a more sobering question to reflect upon was raised by an African from the floor during a question-and-answer moment.

The delegate asked why Africans are hell-bent on improving exports to the US when trade within Africa is not balanced and fair. For the commenter, who identified as a pan-Africanist, Africa is so worked up about American trade when the real market for African products should be the African market.

The comments imply that besides looking to the Chinese, the Emiratis and others for trade, Africans, through the African Continental Free Trade Area, are increasingly looking at themselves as well.