Africa, the United States, and the African Growth and Opportunity Act

Correspondent | Friday September 11, 2015 14:37

In fact, a forecast by The Economist and IMF for 2011-2015 for African countries shows them pulling ahead of Asian countries in terms of growth in Gross Domestic Product (GDP).

One reason for this optimism is The African Growth and Opportunity Act (AGOA), which was initially signed in 2000, and renewed by the United States (U.S.) Congress 2 months ago for a ten-year term. It offers, on the surface at least, tremendous opportunities to African nations for trade expansion with the U.S.

But look a little under the veneer and numerous structural problems surface for African nations. Major new initiatives need to be undertaken to make the best of the opportunities presented by AGOA, which extends preferential treatment to African goods exported to the U.S.  Here are a few key reasons why.

First, African exports to the U.S. increased to nearly US$ 30 billion between 2000 and 2013; but the lion’s share (more than four-fifths) was from oil.

Second, African countries have failed on two key economic fronts, industrialisation and diversification. Take for example Botswana, which, despite its stellar (long-term) economic growth record, just cannot shake off its dependence on the sale of natural resources (especially, diamonds). This failure is certainly not due to lack of trying, but new approaches and strategies clearly need to be taken.

Third, GDP growth in Sub-Saharan Africa is forecast to decline in the near term to around 4 percent compared to nearly 6.5 percent on average, from 2002-2008.

This is cause for concern and highlights the need for bold reforms.Fourth, what’s holding Africa back? Here are a few key reasons: limited infrastructure (e.g. transportation links), inefficient customs procedures, costly electricity, poor access to finance, the legacy of a colonial-era bureaucracy, and corruption. These weaknesses should and can be tackled in the short- to medium-term.

On corruption, for example, and with the help of the Commonwealth Secretariat, the Commonwealth Africa Anti-Corruption Centre was formally established in Gaborone, Botswana, in 2013. As part of its mandate, it has a broad scope of objectives, including anti-corruption training (encompassing prevention, detection and prosecution) and research, to address corruption issues in Commonwealth Africa.

Fifth, notwithstanding these drawbacks and given several positive initiatives to date, there are, to be sure, some bright spots in Africa, including Ethiopia, Mauritius and Rwanda. In part, countries like China and India are helping to diversify African economies through investment in areas such as textiles and footwear.

With 26 African countries that qualify for duty-free exports of clothing under AGOA, there is much potential for industrial expansion in textiles alone. Other areas include low-technology manufacturing of goods and some medium-technology products to be produced in partnerships with overseas industrial powerhouses.

A word of caution is in order: the outlook for resource-rich African nations such as Nigeria, Botswana and Guinea is not as bright in the absence of economic diversification. Thus, these countries face an uncertain future under the status quo.

Bold new initiatives need to be taken to push resource-rich countries to a higher level of economic activity, and the AGOA presents one solid opportunity that should be exploited through economic partnerships, strategic planning, branding, investment, training, infrastructure development, anti-corruption programs, modernising bureaucracies, and capacity building.

*Michael Chibba is a writer, public speaker, guest columnist, international business & development management guru (incl. anti-corruption initiatives), economist/social scientist, teacher/lecturer/professor (and the former Managing Director, Distinguished Fellow & Adjunct Professor of ICDEPR, Canada). He served as an Adviser in Sub-Saharan Africa (Botswana) for the Commonwealth in 2006.