Global Policy Forum

By Stephen Mbogo

Growth benefits of sub-Sahara Africa (SSA) exports to United States attributed to the Africa Growth and Opportunity Act AGOA initiative have started to be realised.

Provisional statistics released by the Nairobi-based Institute of Economic Affairs IEA, a private sector think tank, indicate that, for instance, Swaziland's exports to US between the years 1999 to 2000 increased by about 613 percent while exports from Kenya increased by about 26 percent. Although AGOA provisions came into force in May 2000, this tremendous increase especially in apparel exports is attributed to the AGOA provisions.

"The beneficiaries should work hard to improve production efficiency because AGOA will come under attack at the World Trade Organisation WTO after eight years. Africa will have to compete with other countries for the same market," says Karanja Njoroge, Director of the East African Coalition on International Trade. Karanja proposes a policy shift for the participating countries to enter into free skies agreement(s) with the US government. This will bring flexibility to US-SSA flights and assist to bring down freight costs for goods being exported into the US from SSA countries.

Recent trends within the US-SSA trade indicate that South Africa and Nigeria exports and imports continue to dominate this trade relation. Last year, exports proportion from these two countries constituted 64 percent of all exports from SSA at the level of 52 percent and 12 percent respectively. Kenya and Angola accounted for four percent while the rest of SSA accounted for 28 percent.

Nigeria's imports from US last year accounted for 46 percent of all imports by SSA from US, South Africa 18 percent, Angola 15 percent, Gabon nine cent and 12 percent for the rest of SSA. In general, during the year 2000, US exports to Africa grew 6.4 percent to US$5.9 billion. The increase was led by sales of aircraft to South Africa and Kenya, and oil field equipment sales to Nigeria. US Department of Commerce further says that US imports from Africa surged by 75 percent to US$23.5 billion due to soaring prices of crude oil.

Ulhas Kamat, the managing director of Kenap Limited, a Kenya export processing zone (EPZ) company says that the challenge for the participating countries is to maintain the AGOA eligibility status. "Countries should establish prudent monitoring units to ensure that issues such as those of transshipment, that would affect eligibility status do not occur," he says. The monitoring units would also phase out dubious AGOA Consultants who are out to cheat on uninformed traders.

SSA, with a population of 543.4 million people hosts 10 percent of the global population, 215 million of who live in absolute poverty. Life expectancy is about 50.6 years compared to 74.2 years in industrial nations. SSA contribution to the global economy in terms of gross domestic product (GDP) is 0.98 percent compared to industrial nations' 81.82 percent, says World Bank statistics. Kamat says that AGOA is proving to be an industrial growth catalyst for Africa. Generally, people are awakening to increasing their industrial production particularly for those goods that qualify under the AGOA.

US investors are also expected to start investment ventures in Africa countries participating in AGOA. For instance, a Kenyan government official says that trade inquiries particularly in the export processing zones have been submitted to the government. According to the World Investment Report (1998), investments in Africa brought average returns of 31 percent in 1996, compared with 17 percent for Middle East, 13 percent for Asia and 12 percent for Latin America.

However, US share of African market remains lower than that of its competitors. At 6.7 percent, her share of the SSA market is inferior to European Union's 30 percent and Japan's 7.2 percent, says the World Investment Report of 1998. "The challenge for African governments is to improve their economies to facilitate attractive investment atmosphere," says Harold Foster US Commercial Consular in the Kenyan capital, here.

Indeed, the SSA governments face equal challenges as opportunities given that this is a priviledge that they should guard jealously. Other challenges include - improving infrastructure and training facilities, and that of the labour force.

The others include improving access to local raw materials, putting mechanisms in place to avoid transshipment and phasing out con artists presenting themselves as AGOA consultants.

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