Pres. Cyril Ramaphosa called for a ten-year extension of the African Growth and Opportunities Act – better known as Agoa – during his opening speech at the Agoa forum currently underway in Johannesburg.
Agoa, with an annual value of around $4.5 billion (about R80 billion) per year, expires in 2025, although the US president, Joe Biden, has already signaled his support for the extension of the agreement with dozens of African countries .
Under the Agoa agreement, duty-free access is given to several African countries south of the Sahara. However, participation in the agreement is linked to certain democratic criteria that the US reviews annually.
“We ask you to consider a renewal period long enough to capture growth. We can build more capacity and certainty. Shorter periods of extension paw investment.
“We are going to be here for some time. Let’s make Agoa a long-term event,” Ramaphosa asked.
At this stage, however, there is still no indication that the USA is open to such a long extension.
Four African countries have just been kicked out of the agreement and great concern previously prevailed about South Africa’s continued participation due to the country’s cozy relationship with Russia amid the country’s ongoing war against Ukraine.
Ramaphosa said on Friday that South Africa cherishes the relationship with the USA and has ties with this country that extend much wider than just trade. He also says that Africa is an important source of critically needed raw materials, but that the continent does not want to be defined as a “mere producer of commodities”.
“Rather, the real industrial opportunities lie in the transformation of the rock we mine and the metals we produce into sophisticated industrial and consumer goods that societies worldwide need,” says the president.
Agoa has been the cornerstone of commercial trade between Africa and the US for more than two decades and although it is to the benefit of many African countries, Ramaphosa believes the agreement is still not being fully utilized.
The president believes an “early renewal” can strengthen trade and investment. At the same time, there is the potential to strengthen Agoa through reform that will add more products and make it easier for small and medium businesses to participate.
Although all 35 countries can benefit from Agoa, the pace varies. Kenya and Lesotho have some of the highest Agoa usage rates. A total of 85% of Kenyan exports and 99% of Lesotho’s exports to the US qualified for zero-tariff treatment. Agoa also made certain other products, especially textiles and clothing, much more competitive.
Garment exports from Lesotho, Ethiopia, Mauritius, Madagascar and Kenya have not only led to the creation of thousands of jobs, but the countries have also become reliable suppliers for American consumers.
Manufacturing is also doing well thanks to Agoa, says Ramaphosa. South Africa’s vehicle exports to the USA in terms of Agoa have led to job creation here and in the vehicle supply value chain in neighboring countries. For example, South Africa gets leather vehicle seats from Lesotho and wire harnesses from Botswana. This company obtains copper wire from Zambia, rubber from the Ivory Coast, Nigeria, Malawi, Ghana and Cameroon, and steering wheel components from Tunisia.
“It is then installed in vehicles that are exported to the USA in terms of Agoa. The input alone accounted for more than $200 million worth of products sold by African countries.”
Ramaphosa says Agoa makes an important contribution to industrial development in the region.
“We believe there is great value in preserving all countries that benefit from building on the emerging regional value chains that make a significant contribution to the industrialization of Africa.
“A more targeted approach to promote greater levels of investment can help unlock Agoa’s opportunities.”
Ramaphosa also expressed his concern about the negative effects that trade restrictions have on products such as steel, aluminum and citrus.
“We hope the discussions at the forum help lay the groundwork for resolving the issues in the future.”
Ramaphosa also visited the Made in Africa exhibition at the forum where some of the continent’s manufacturing skills are showcased.
“I saw companies involved in food and beverages, chocolate and sugar, clothing and shoes, cars and trucks, medical products and works of art.
“These are examples of African markets that use the continent’s industrial capacity. We need many more such companies.”
#AGOA2023| We do, however, remain concerned about the negative effects that trade restrictions on products like steel, aluminum or citrus fruit have on AGOA utilization rates. #AGOAForum pic.twitter.com/lblgoq2dQs
— South African Government (@GovernmentZA) November 3, 2023