US Assistant Secretary Johnnie Carson has talked about opportunities that have been created for African companies and governments through the African Growth and Opportunity Act (AGOA), which Zimbabwean businesses are missing out on.
Because of corruption Zimbabwe cannot access AGOA, and poor or inadequate infrastructure like unreliable electricity and railways run by soldiers, also means the country has been left behind in the hands of Chinese and other dubious businessmen from the Middle and Far East.
There is unnecessary politicizing of business and regulatory systems that are inconsistent and inefficient, making it too risky to attract foreign investment, except corrupt Chinese companies that bribe their way in and once they are in flout labour regulations and do not pay taxes.
Rather than creating an atmosphere of free competition for companies by having clear regulatory frameworks, we have opaque systems which cannot run without the say-so of some minister who also wants a cut and who is connected to a long chain that lead all the way to State House.
Africa: Economic Statecraft: Embracing Africa's Market Potential
By Johnnie Carson US Assistant Secretary
The U.S. Government is committed to expanding trade and investment in sub-Saharan Africa.Trade to and from Africa has grown and U.S. exports to sub-Saharan Africa tripled from about $7 billion U.S. dollars in 2001 to over $21 billion dollars in 2011.
In 2000 the United States passed the Africa Growth and Opportunity Act because the US believed that Africa had tremendous untapped economic potential and shared with Africans the vision of economic growth in Africa fueling growth and prosperity worldwide, thus creating new opportunities for people across the continent to start their own businesses, earn higher salaries, improve their lives, and lift the fortunes of their families and communities.
This vision is becoming reality. Africa is the next global economic frontier and Sub-Saharan Africa continues to weather the global economic crisis more successfully than other regions, with six of the 10 fastest growing economies in the world and offering the highest rate of return on foreign investment of any developing region.
Consumer spending continues to rise, with 43% of Africans having discretionary income and qualifying to be considered middle class consumers – a market for American products – from ipads and Pampers to Caterpillar tractors, which increase crop yields, and GE turbines which create additional hours of on-grid electricity to Boeing planes which facilitate African countries’ growing links with each other and with other continents.
Though impressive Africa's recent economic growth only accounts for about two (2) percent of global trade. President Obama’s recently announced U.S. Strategy Toward Sub-Saharan Africa directs the Administration to "spur economic growth, trade, and investment in sub-Saharan Africa" in the interest of both the United States and its African partners.
The strategy elevates economic growth, trade, and investment issues by calling for increased U.S. focus to:
(1) promote an enabling environment for trade and investment ;
(2) improve economic governance;
(3) promote regional integration;
(4) expand African capacity to effectively access and benefit from global markets; and
(5) encourage U.S. companies to trade with and invest in Africa.
In addition Obama’s new U.S. Strategy Toward Sub-Saharan Africa focuses on the State Department's economic statecraft policy to harnesses the forces of global economics to advance the US’s diplomatic agenda and puts the tools of diplomacy to work to meet the US’s economic goals.
We are committed to using every opportunity available to advance not only diplomatic and political priorities but our economic and commercial goals as well. In shifting from focusing almost exclusively on development assistance to promoting sustained economic growth through private sector, commercial, trade, and investment activities the Bureau of African Affairs has developed several initiatives:
Agoa continues to be Africa’s most important vehicle for market access, with some AGOA beneficiary countries taking good advantage of the provisions for fabric and apparel product lines. The third country fabric provision component of AGOA was designed to provide an opportunity for AGOA-qualified countries to be more competitive in labor intensive textile processes such as sewing, stitching, and cutting fabric.
With recognition that that most African countries would not be competitive in the capital intensive process of producing fabric from raw cotton, the programme allowed African manufacturers to successfully use the AGOA third country fabric provision to create jobs in the manufacturing countries and cross-border Pan-African supply chains, thus increasing regional integration a key goal for the continent.
Though fabric and apparel exports are the second largest AGOA export after extractive industries, the imports still account for less than two percent of U.S. imports. As American buyers place orders six to nine to twelve months ahead, 95 percent of AGOA apparel and textile exports enter under the third country provision, thus keeping African textile and apparel companies competitive with larger producers such as China, Vietnam, and Bangladesh.
Without US help, jobs would continue to disappear in some of Africa’s most vulnerable economies, affecting primarily women and the families they support. Eighty-five percent of these imports come from just four countries: Lesotho, Kenya, Mauritius, and Swaziland, and they would be worst affected if there was no renewal of the third country fabric provision component of Agoa.
Loss of just one job means that ten people lose their livelihood in the case of Swaziland where officials calculate that each textile job directly supports ten people. Lack of orders have already led to plants closures in Namibia, robbing people of their legitimate livelihoods and governments of much needed tax revenues. Mauritians report that their orders are down 30 percent since January due to uncertainty whether this provision will be renewed in a timely fashion.
Madagascar’s loss of AGOA eligibility in 2009 due to the 2009 coup led to a $150 million plummeting of its textile exports and resulted in the loss of 50,000 jobs, never to return.
Governments across the continent are working to attract new trade and foreign investment that will sustain their rapid economic growth and build their middle class. A lack of reasonably priced reliable power remains one of the most binding constraints to economic growth throughout Africa. In February, I led a trade mission to Mozambique, Tanzania, Nigeria, and Ghana with 10 U.S. energy companies ready to do business.
The mission led to a number of the U.S. companies concluding partnership agreements with African companies to jointly develop power projects. Ex-Im Bank and USTDA representatives also participated in the mission to ensure that both the U.S. participants and our Africa partners are fully aware of U.S. financing options. We are in the process of putting together a trade mission to accompany the Secretary to South Africa for the U.S.-South Africa Strategic Dialogue.
In addition, I plan to lead similar trade missions in the future and continue to help and encourage U.S. companies to be a part of the growing economic dynamism of Africa. In our continuing efforts to inform, educate and encourage U.S. companies to pursue commercial opportunities on the continent, just last week, the State Department, in collaboration with the Department of Commerce’s U.S. Export Assistance Center in Cincinnati, the Department of Transportation, the Ex-Im Bank, USTDA, USAID, USTR, and several other U.S. Government agencies, hosted a U.S.-Africa Business Conference in Cincinnati, Ohio.
This conference attracted well over 400 participants, including African government officials, and representatives from the U.S. and African private sectors and civil society. The U.S.-Africa Business Conference expanded on the AGOA Forum infrastructure theme by focusing on infrastructure development, including energy, transportation, and water and sanitation. It showcased U.S. business expertise to potential African clients and highlighted trade and investment opportunities in Africa to U.S. exporters and investors through structured networking opportunities for African government officials and business leaders with U.S. state and local government officials and business leaders; informational sessions on U.S. Government opportunities and services from various federal agencies; and site visits to companies and research facilities highlighting potential technologies for Africa.
Cincinnati was selected as the conference location for its potential to increase commercial partnerships with Africa at local, state, and regional levels given its concentration of Fortune 500 and 1000 companies. I am pleased that the Cincinnati conference built on the successes of the 2010 Kansas City, Missouri business conference. Bringing African government officials and private sector representatives outside of the beltway allows us to more effectively focus on business-to-business linkages.
We also have two very popular programs which develop business capacity in Africa, the African Women’s Entrepreneurship Program (AWEP) and the President’s Young African Leaders Initiative. This year delegates from both programs participated in both our AGOA Forum and U.S.-Africa Business Conference events. AWEP is an outreach, education, and engagement initiative that targets African women entrepreneurs to promote business growth, increase trade both regionally and to the United States using AGOA, create better business environments, and empower African women entrepreneurs to become voices of change in their communities. The State Department organizes an annual AWEP professional exchange program for these women to improve their skills and has created a series of public-private partnerships with ExxonMobil, Intel, Vital Voices, and the Cherie Blair Foundation for Women.
This year’s President’s Young African Leaders Initiative included the Innovation Youth Summit and Mentoring Partnership with Young African Leaders and brought more than 60 participants to the U.S. for three weeks of professional exchange and entrepreneurial hands-on training. This initiative encourages U.S.-Africa collaboration to promote business innovation, investment, and corporate social responsibility activities in Africa.
However, there are still many barriers that stand in the way of companies that hope to do business there. In many places, corruption is too common. The cost of finance, including investment finance, is too high. Infrastructure is lacking or inadequate. Regulatory systems are often inconsistent and inefficient. Also, many U.S. businesses see African markets as too risky. The perception of Africa as poverty filled and strife ridden persists. We work closely with African governments so that they will continue to enact the kinds of reforms to support improved investment climates which will attract both domestic and foreign investment. In addition, we continue to highlight opportunities for trade and investment in the region for U.S. companies and to work with them to conclude deals. Our work with GE Transportation in Ghana on a locomotive tender where GE was ultimately able to win a deal worth $200 million in U.S. content is but one example. We are confident that the U.S. can compete effectively in Africa, but we have to continue to encourage American companies to go to Africa and we have to encourage African countries to continue to make their regulatory and business environment more conducive for American business. Greater U.S.-Africa trade is in the interest of both America and Africa.