TRALAC - Trade Law Centre

AGOA brings mixed success to Africa

Thursday, 09 January 2003

Source: Business Day

MASERU - In a corner of Maseru's shabby industrial zone, workers at the Shining Century factory cut and sew bolts of billowing maroon and navy blue fabric into T-shirts destined for the shelves of Gap stores across the US.

They are part of a growing textile industry in this tiny African nation that is profiting from a new US trade initiative.

The Gap shirts enter the US under the Africa Growth and Opportunity Act (Agoa), which has slashed tariffs on nearly 2,000 products imported from dozens of African countries and opened the world's largest market to goods from the poorest continent.

Excluding oil, gems and precious metals, sub-Saharan Africa saw a 10.7% increase in sales to the US last year, led by a 28% increase in apparel, one of the main categories of manufactured goods covered under the act.

The US is now the biggest importer of African goods and the new trade incentives have added $1-billion in international investment to Africa.

US trade representatives will meet January 13-17 with African government ministers on the island nation of Mauritius to discuss how US trade and investment in the continent can be expanded.

The conference, the second since the trade act was passed by the US Congress in 2000, will also assess how far the programme has come and still needs to go. Private investors and businessmen will be on hand.

Officials in Lesotho are enthusiastic about the trade deal known as Agoa, crediting it with helping kick-start their country's desperately poor economy. They also said they were encouraged by the boom in direct investment, even if most of it is from abroad.

US Trade Representative Robert Zoellick hailed the trade deal, saying it would make a major mark on the continent.

"Agoa is helping to transform the economic landscape throughout Africa," Zoellick said. "It is stimulating new trading opportunities for the region's businesses and entrepreneurs, creating jobs for people who have never worked for a weekly wage, and bringing hundreds of millions of dollars in new investment to some of the poorest parts of the world."

Africa's share of global trade has fallen from about 5% in the 1960s to less than 2% because of volatile world prices for raw materials and because of conflicts on the continent.

Now, 36 African countries participate in Agoa. Only countries with sound economic and human rights records are eligible.

While some nations have reaped huge profits from the programme, others have found it nearly impossible to take advantage of it.

In Lesotho, the Shining Century factory is one of a growing number of apparel centres that have flourished under the act, adding 15,000 new jobs in this rugged, impoverished country encircled by South Africa. Clothing exports have doubled and clothing factories are a top employer now that they are swamped with US orders.

Lesotho factories also produce clothes for the US brand Wrangler and for Wal-Mart, the American discount store chain.

Elsewhere in Africa, Agoa has met with mixed success. In Kenya, where the economy has foundered in recent years, textile exports have nearly quadrupled under Agoa. Officials forecast as many as 150,000 new textile jobs by the end of the year.

In South Africa, Agoa accounted for 21% of the country's total exports in 2001 - including clothing, iron and steel products, fruits and nuts, gold and diamonds.

Senegal has so far mostly missed out on Agoa's benefits. A struggling economy, its major textile factories have recently closed or are on the brink of closure.

Nigeria has had difficulty attracting investment because of its reputation for corruption, experts say.

Sapa-AP