The Africa Growth and Opportunity Act has not benefited small and medium enterprises since its inception, despite boosting trade between the United States and Africa. Agoa, which was incepted in 2000 by the US Congress to facilitate trade between the US and Africa, has only increased volumes of trade, according to a senior Leon Sullivan Foundation official.
Speaking at the on-going 8th Leon Sullivan Summit in Arusha yesterday, the Foundation’s policy and programme development vice president Gregory Simpkins noted that SMEs in both Africa and America have ‘not broadly benefited’ from the partnership.”Agoa is surely a success in terms of increased volume of trade, but SMEs in Africa and the United States have not broadly benefited to the extent originally intended by the US Congress,” he said.
According to Mr Simpkins, the impact of the duty-free trade arrangement would have been huge if small and medium enterprises between the two partners were ‘accorded a chance to benefit from the arrangement.’ “SMEs play a pivotal role in boosting incomes of the poor than big businesses do,” he told the Agoa Forum at the Summit. “Several factors, including transportation hitches and lack of financing, have thwarted SMEs from Agoa benefits.
“Since 2000, trade between the US and sub-Saharan Africa alone scaled to more than $71 billion last year; and currently more than 98 per cent of US imports from the region enter the $13 trillion American market duty-free under the partnership. Exports to the US from the region have also increased, especially in textiles, footwear, fruits and nuts, and cut flowers in recent years. But amid this boom, the region is yet to fully exploit the Agoa trade potential.
Official figures show that US imports under the trade facility totaled $51.1 billion last year, up 15 per cent from the 2006 level. Oil dominated the imports, but also non-oil imports increased by seven per cent to $3.4 billion during the same period.
The president of African Export-Import Bank, Mr Jean-Louis Ekra, said the major constraint to full exploitation of Agoa-related trade preferences has been supply-side constraints in eligible African countries.He said financing exports and imports was an important policy instrument in export development, but the role of the government should go beyond policy making.
“Aided by Agoa concessions, the trade of the top 11 Agoa-eligible countries with the US rose from $3.9 billion in 2000 to $65.2 billion in 2007,” Mr Ekra noted in a presentation, but pointed out that such increases did not reflect a direct benefit to especially small businesses.
Generally, African exports to the US are dominated by petroleum (at about 80 per cent of the total) and cover only a fraction of the more than 6,400 items that are Agoa eligible. Currently, 40 African countries, including Tanzania, are under the trade partnership.
But Tanzania does not feature among the top 11 Agoa beneficiary economies. The current top players are Kenya, Lesotho, Madagascar, Mauritius and South Africa. Others are Angola, Cameroon, Chad, the Republic of Congo, Gabon and Nigeria. Speaking at the same forum, the Assistant US Trade Representative for Africa, Ms Florizelle Liser, told the delegates that SMEs, most of which comprise the private sector, were critical for Africa’s growth and development.
She said small and medium businesses create jobs and wealth needed to eradicate poverty in the continent.On general trade in Africa, the US official said there was need to increase the continent’s share of global trade. “If trade is increased by just one percentage point to three per cent, it would generate additional export revenues of $70 billion.
This amount will be equal to three times the amount of aid the continent currently receives annually from donors,” she said. Meanwhile, the forum also challenged African countries to diversify cut flower export markets, which at the moment are mainly to European countries.