TRALAC - Trade Law Centre

African countries urged to take advantage of AGOA

Tuesday, 29 June 2010

Source: African Manager

With about five years to the expiration of the African Growth and Opportunity Act (AGOA) in 2015, African countries have been advised to step up their efforts in taking advantage of the Act as a way of creating employment opportunities and improving the income of their small and medium enterprises, United States-based economist, Professor Thomas Andrew O'keefe, said in Lagos on Monday.

"The Act is for all countries in sub-Saharan Africa to take advantage of by exporting certain categories of products to the United States duty free. However, except for a handful, majority of the countries have not been able to take advantage of it since 2000, when it started," O'Keefe told journalists at the US Public Affairs section in Lagos.

The economist, who earlier held a training programme for Nigerian businessmen in conjunction with the Nigerian Bank of Industry (BOI) on how they could access the US market under the Act, said poor infrastructure, lack of adequate finance, high cost and unreliable power supply as well as corruption were some of the factors that had made it difficult for many African countries to take advantage of the Act.

O'Keefe, however, said countries such as Madagascar, Mauritius, Lesotho, Botswana, Kenya, Ghana and South Africa were taking full advantage of the Act.

"They basically have lowered the cost for doing business in their country. We are not talking here about labour cost per se, because in reality most of these countries have higher salaries, but the cost of doing business, reliability of electricity and easier access to finance.

“These are the factors that make it much easier for somebody to establish a factory in places like Botswana, Lesotho, Madagascar or South Africa for export to the US. Generally those are things that are lacking in other countries."

O'Keefe specifically mentioned the high cost of doing business in Nigeria as one major reason why the country, in spite of its huge potentials, has not really taken advantage of AGOA.

"The textile industries here (Nigeria) are not completely competitive. It is not because of the delay in the take-off of Visa Verification System which is required for exporting products to the US, but the competitive reasons. There are the aspects of the basic business environment that don't make what is produced here competitive internationally or in any U.S. market,"said O'Keefe, who is also the President of Mercosur Consulting Group in the U.S.

Under AGOA some 6,400 products are allowed from sub-Saharan African countries tariff-free. One of the purposes of AGOA is to use preferential trade access to the US market as a catalyst for economic growth in the continent by encouraging governments to open their economies and build free markets.

The US Congress passed AGOA as part of the Trade and Development Act in 2000 and President Bill Clinton signed it into law on 18 May, 2000. It was initially to end in 2008, but was extended to expire on 30 September, 2015.