In his recent visit to Africa, President Obama in addition to his support for the extension of the African Growth and Opportunity Act (AGOA) emphasized the importance of long term, durable, and mutually beneficial strategic partnership with Africa. The 2013 U.S.-Sub-Saharan Africa Trade and Economic Cooperation Forum also known as the AGOA Forum, is scheduled to take place on August 12-13, 2013 in Addis Ababa, Ethiopia.
The United States’ key foreign policy priorities in Sub-Saharan African (SSA) are usually described as, among others, building democracy, strengthening regional security and promoting development. However, among several US agencies and initiatives, AGOA, which is basically a tariff- and quota – based initiative, is probably the most visible structure in the U.S. – SSA business diplomacy in the past decade.
AGOA has some successes to its credit. It has created Jobs in some eligible countries, accompanied by production and export growth. The most significant contribution of AGOA could also be put as the precedent it set. Following this Act, other countries and regions followed suit. The ’Everything but Arms’ Initiative of the European Union and China’s open market to African products initiative are just two examples.
So far it is reported that only about 50 % of AGOA-eligible countries properly utilized the opportunity as most African countries fail on diversification and international trade competitiveness indices. Even In some special cases, such as in Lesotho and Kenya where the Act helped higher growth of job creation and additional exports in the textile sector, the majority of new firms entering these countries are foreign businesses and no actual inter-industry linkages were developed.[Lesotho after AGOA: 2012, by By Sebabatso Manoeli].Hence the local benefits and networking remain negligible, leaving those who secured jobs perpetually dependent on wages from the foreign-owned textile factories, and those factories in turn are dependent on possible periodic extension of the Act to stay in the region.
The overall consensus on renewing AGOA beyond 2015 is an acknowledgement that it hasn’t yet accomplished its stated goals. But even a regular extension of AGOA in its current format and content may not bring a lasting development oriented partnerships between the people of Africa and the United States. Termination of AGOA would not be an alternative either, as it will have a serious economic and to some extent political consequences because of massive loss of jobs.
The issue is how to make a given initiative to bring about sustainable development and benefiting both the peoples of the U.S. and SSA. For example by encouraging Joint Venture projects between American companies with competent local partners. It is through knowledge and technology transfer to locals, based on business partnerships and Joint Venture arrangements that long lasting economic transformation happens. Reviewed AGOA should be changed in a way that will facilitate American investments in value creative joint venture projects.
Significant infrastructure and logistical capacity is being built in Africa in the past two decades, sometimes in difficult terrains and environment. As this would reduce both the cost and risk of doing business in the continent, moving in now may actually give the US companies second-mover advantage rather than disadvantage. Once country and industry level business risk is fairly understood, deploying the obvious competitive advantages of the US companies in Africa wouldn’t be that difficult. America, being home to highly skilled millions of Africans and African Americans, has a commanding advantage and is unlikely fail to be the major permanent trusted business partners of Africa.
Other areas of enhancing deeper partnerships through AGOA are developing and maintaining efficient commodity chains with Africa. In addition to the usual inefficiencies and supply-side challenges, the centuries old commodity chains stretching out of Africa to the west are being diverted due to increasing global demand, increasingly scarcity and lack of action by the companies at lower end of the supply chain. Creating more Jobs in America through revival of the manufacturing sector as well as expansion of exports to a region just started to grow like Africa requires maintaining a sustainable and equilibrium based supply of hard and agricultural commodities such as minerals and coffee. Equilibrium based and Sustainable Supply Chains requires working with and at the source.
Elevating American partnership to a strategic dimension and pursuing a deeper, more mutually beneficial economic relationship with ‘ right ’partners in Africa requires not only encouraging more exports but also managing risk, creating durable partnerships , support for Africans’ demands for democracy and shared benefits and opportunities.