TCS Daily


Going Ga-Ga Over AGOA

By Stephen Mbogo - January 19, 2004 12:00 AM

It is being described as an "ocean of thanks," a "great phenomenon" and "unbelievable opportunity" given to Africa by the United States. The African Growth and Opportunity Act (AGOA), initiated by the administration of former President Bill Clinton, is making significant industrial development and job creation changes in Africa.

Mehdi Bawa, administration manager of Alltex Limited EPZ, a garment manufacturer in Kenya enjoying an unlimited duty-free American market, says AGOA will enable Africa to boost its industrial revolution. "Trade favors from the US [through AGOA] are very good for Africa because of multi-benefits that they bring," Bawa told reporters visiting the Alltex factory recently.

The Alltex garment factory is a $7.2 million foreign direct investment by the Aga Khan Foundation. The factory is presently employing 2,000 people, mostly women. The factory, only one among thousands across 38 African countries participating in AGOA, plans to expand in at least three other phrases, and could possibly double the number of people it is employing.

AGOA has created tens of thousands of Africa's new jobs -- 190,000 alone in Senegal, Malawi, Ghana, Togo and Kenya -- and over $340 million dollars in new investment in sub-Saharan Africa, according to the U.S. Department of Commerce. The increased trade has brought with it improved infrastructure in seaports, airports and highways. It has also facilitated transfer of technology and opened up our African countries to travel, movement and development.

According to U.S. Commerce Secretary Donald Evans, AGOA imports to the United States this year through September already amount to $10.2 billion. This is an amount almost equal to the value of annual trade between China and Africa, which currently stands at $12 billion. Most African nations are presently exporting garments to the U.S. although there are wide range of other products which qualify for the AGOA trade arrangement.

The U.S. garments export market is worth $100 billion. China takes 21 percent of this while Africa takes 10 percent, a figure which is set to increase in the coming years as Africa's trade relationship with the U.S. continues to soar.

AGOA will not only transform Africa's industrialization and employment pace but will also have significant impact on the African agricultural revolution. For instance, the bulk of African exports as of now are garments, which need cotton as a raw material. And since garment factories in Africa exporting under AGOA will be expected to use local fabric after 2008, unlike the present situation where they can import, cotton growing is likely to grow at an exponential rate in Africa.

Both U.S. and Africa trade stakeholders agree that there is still room for a deepening of trade relations between their countries. According to Secretary Evans, the historic legislation needs to be expanded to cover a broader range of goods to enable Africa to export more to the US. Evans said the AGOA process must "move beyond" the headline industries and look at an additional 6,000 items where AGOA countries have trade preferences.

However, to achieve the expected expansion, there are challenges which Africa needs to address. Among them are the transport obstacles. For instance, it is presently more expensive to move products from Uganda to neighboring Kenya by road than it is from Kenya to Japan.

Another area is access to capital. Experts say that for AGOA to be sustainable, it should be made easier for African entrepreneurs to access development capital. In Kenya, exporters under AGOA have been complaining of then delays by customs officials to process export documents in time. The exporters have suggested to the government to allow a number of customs officials to be on call for 24 hours in order to minimize export delays.

Another challenge, according to Undersecretary of State Alan Larson, is to integrate non-governmental organizations (NGOs) in the AGOA arrangement. "Only through partnering with NGO's will we be able to build investments and expand trade in the 38 AGOA-eligible countries of sub-Saharan Africa," he said.

As of now however, African nations must take full advantage of opportunities created by AGOA and their pre-existing resources to achieve full potential of the trade agreement.

Stephen Mbogo is a free-lance journalist based in Nairobi.


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