Building capacity to help Africa trade better

South Africa ducks Agoa exclusion, for now


South Africa ducks Agoa exclusion, for now

South Africa ducks Agoa exclusion, for now
Photo credit: BBC

As concerns mount of South Africa’s dominance with the trade pact.

South Africa can breathe a sigh of relief for now, as indications are clear that the African Growth and Opportunity Act (Agoa) might be renewed.

But South Africa’s inclusion into the trade pact is raising questions about the country’s dominance in relation to other African counters.

Introduced in 2000 by US Congress, Agoa provides South Africa and other African countries with duty-free access through exports to the US market. And South Africa’s agreement with the US expires in 2015.

Patrick Gaspard, US Ambassador to South Africa, said at the Nedbank and NEPAD business foundation on Tuesday that the world’s number one economy is behind Africa’s growth potential and Agoa’s renewal.

“When President [Barack] Obama was here last year [2013] he made it clear that he and the secretary state support the renewal of Agoa, as quickly as we can possibly get it under board and certainly for South Africa as well as companies here [in South Africa] to [bring] a level of playing field,” Gaspard said.

It has been reported that law makers in the US want South Africa removed from Agoa due to the country’s economic clout in the continent and benefitting most from the trade agreement.

“There isn’t any country which has taken better advantage of Agoa than South Africa has. In last year alone over $2 billion (R22.3 billion) of duty free goods moved to US markets through Agoa,” Gaspard explained.

Scott Eisner, Vice president of African Affairs and International Operations for the US Chamber of Commerce in Washington D.C, said US exports under Agoa have risen from $6 billion (R67 billion) to $24 billion (R268 billion) over the past 14 years.

“The chamber is an ardent supporter of Agoa, the relationship is important as a trade vehicle for two-way trade [and] we hope to see it quickly authorised soon.”

South Africa’s automotive industry has benefited through Agoa, specifically the manufacturing and automotive industries in Port Elizabeth, Gaspard noted. “Sixty thousand luxury auto mobiles have been exported to the US through Agoa in 2013,” he added.

“The reason why companies such as Mercedes Benz are in South Africa is because of Agoa. Many industries beyond manufacturing and automotive have told us that Agoa is critical to their ability to remain here [South Africa] to create a vibrant economy,” he said.

Gaspard said Obama has made it clear that he wants to expand trade on the continent.

“Africa is a continent that is poised for sustainable growth well into the century. Our [US] motivation is not philanthropic, we are motivated here because we see the benefits for emerging corporations.”

Agoa discussions follow the visit by President Jacob Zuma and Minister of Trade and Industry Rob Davies to the US in August for the US-Africa Leaders’ Summit, where trade relations were discussed.

At the summit Zuma lobbied for the Obama administration to renew South Africa’s inclusion into Agoa, but media reports have also suggested that the US might lean towards a general renewal in future and leave South Africa out in the cold.

Still the gateway to Africa

South Africa is still the gateway to the continent for US-based investors. Gaspard said South Africa continues to offer the best mix of development, financial stability and openness to investments in the sub-Saharan region.

Eisner said the business community are recognising that there are more opportunities outside of the country. “We see it [South Africa] as an important economic destination, but not the only economic destination. Companies are looking at Morocco and Kenya where the manufacturing industry will compete with South Africa,” he said.

Issues such as nationalisation of mines and visa regulations, which have been described to be hostile towards foreigners, as well as corruption are impeding factors to foreign direct investment, which added to investor uncertainty, Eisner noted.


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