Let’s inspire projects that secure Africa’s investment
The World Economic Forum in Davos this year acknowledged a world grappling with multiple crises characterised by Covid-19, conflicts, soaring living costs, and climate change.
Amid these challenges, Africa’s economic potential is garnering global recognition. Its emerging role in markets and geopolitics is set to expand, driven by its natural resources and promising economic prospects. This reality underscores the urgency for Africa to confront its trade-related hurdles, including convoluted regulations, restricted market access, and complex trade agreements. Simplifying trade procedures is pivotal, benefiting businesses and propelling economic growth by amplifying exports, job opportunities, and competitiveness.
The African Growth and Opportunities Act (AGOA) is a great example of a beneficial programme to the continent. AGOA is a cornerstone in preferential trade that empowers sub-Saharan African nations to export numerous products to the US market without tariff impositions, providing a more stable avenue for development compared to traditional aid methods. The original AGOA legislation, initiated in May 2000, recognised a shared interest between the US and sub-Saharan Africa in fostering stable economic growth. It committed to fostering heightened trade, investment, and breaking down barriers.
AGOA has played a pivotal role in bolstering economic growth across African nations. Presently, almost 44 African countries benefit from AGOA’s preferences, invigorating essential sectors such as agriculture, textiles, and apparel.
Notably, US apparel imports from AGOA beneficiaries have risen from $953 million in 2001 to $1.4 billion in 2021, according to the US ITC 2023 Report. This growth is primarily attributed to countries like Kenya, Ethiopia, Ghana, Madagascar, Mauritius, and Lesotho. Moreover, the sectors catalysed by AGOA have generated substantial employment opportunities—directly and indirectly—for over a million individuals, with women comprising a significant portion. As global players seek diversification beyond Asia, Africa has significant potential to capitalise on this trend.
In June 2023, the United Nations Conference on Trade and Development (UNCTAD) released a comprehensive report assessing AGOA’s impact titled ‘The African Growth and Opportunities Act; Limitations, Utilisation, and Results’. The report underscores varying effects of preferential market access based on exporting countries and specific sectors. The report encompasses four analytical segments evaluating AGOA’s programme at different levels. The latter part of the report focuses on sectoral perspectives, spanning materials like apparel, minerals, and other commodities. It also explores the potential of upgrading imports like hydrocarbons, cocoa, and cotton goods for improved results. Product upgrading emerges as a significant topic within AGOA’s review. It involves exploring how the programme could complement the African Continental Free Trade Agreement (AfCFTA), its implications for workers and underserved communities, and its role in driving economic growth.
As the report concludes, UNCTAD recommends extending AGOA’s preferences indefinitely or for at least a decade. The report underscores that while AGOA’s preferences have positively impacted exports and encouraged US foreign direct investment, the programme’s 2025 expiration jeopardises investments in critical sectors.
As we encourage more programmes like AGOA, it is also critical that we look at their longevity. Industries such as textiles and apparel, would typically take about five years to achieve sustainable profits. It is also necessary to encourage long term programmes to enhance diversification of export markets, foster market certainty and counter the potential slowdown of investment and trade.
— The writer is the Senior Advisor, Global Lead, Industry and Commerce at the Tony Blair Institute for Global Change