Unlocking Africa’s Industrial Potential

With vast reserves of essential minerals, a young and vibrant population, burgeoning urbanization, and escalating connectivity, Africa’s potential for economic development is monumental. President Ramaphosa underscored the importance of ascending the value chain, thereby creating jobs and adding value to the African economy. The goal is to transform Africa from being mere producers of commodities to manufacturers of sophisticated industrial and consumer goods that the world demands.

AGOA: A Pillar of US-Africa Trade

For over two decades, AGOA has remained the cornerstone of US-Africa commercial relations. Although it has brought about economic benefits to sub-Saharan Africa, its potential is yet to be fully harnessed. Ramaphosa urged for an early reauthorization and renewal of AGOA, focusing on enhancing trade and investment. He also highlighted the need to augment AGOA with reforms that would include more products and simplify the process for small to medium-sized businesses.

AGOA’s Impact on African Economies

Kenya and Lesotho are among the countries that have utilized AGOA most effectively, with a significant chunk of their exports qualifying for zero-tariff treatment. The program has positively impacted African products, particularly textiles and apparel. Countries such as Lesotho, Ethiopia, Mauritius, Madagascar, and Kenya have witnessed the creation of thousands of jobs through apparel exports to the US. AGOA has also played a crucial role in job creation in South Africa’s auto industry, demonstrating its significance for regional industrial development and the integration of African economies.

AGOA and AfCFTA: A Synergistic Pairing

President Ramaphosa emphasized that AGOA could complement the African Continental Free Trade Area (AfCFTA). The AfCFTA aims to stimulate intra-African trade and create a single market for goods and services. By leveraging the duty-free market access provided by the US under AGOA, it can further catalyze investment in Africa, including from the US. Ramaphosa urged for AGOA’s extension or renewal for a substantial period to encourage investors to establish new factories in Africa.

In his concluding remarks at the AGOA Forum, President Ramaphosa reiterated the importance of harnessing AGOA to spur industrial development, job creation, and inclusive growth in Africa. His address underscored Africa’s industrial potential and the need for stronger trade and investment collaboration between the United States and African countries.

A Call for Changes in AGOA

The United States is looking to improve its flagship trade program with Africa, the African Growth and Opportunity Act (AGOA), rather than simply renewing it without changes, according to U.S. Secretary of State Antony Blinken. AGOA grants duty-free access to the U.S. market for exports from qualifying African countries. However, there are divisions over the need for updates, and there are concerns that attempts to alter AGOA could delay its renewal in a Congress already struggling to pass critical legislation.

Struggles with the Current AGOA

Last year, over $10 billion worth of African exports entered the United States duty-free under AGOA. Yet, the U.S. International Trade Commission highlighted major shortcomings earlier this year, revealing that more than 80% of duty-free non-petroleum AGOA exports have come from just five countries: South Africa, Kenya, Lesotho, Madagascar, and Ethiopia. African governments and U.S. industry associations are concerned that attempts to radically alter AGOA could risk delaying its renewal in Congress.

The Lobito Corridor Project

The Lobito Corridor, a railway project in Africa, is also receiving attention. The U.S., European Union, three African nations, and two financial institutions signed a memorandum of understanding last month to develop the partially existing corridor. The project aims to extend the railway through mineral-rich Zambia and the Democratic Republic of Congo to an Atlantic port in Angola. This move signifies the U.S. commitment to improving connectivity and trade in Africa, contrasting with China’s infrastructure investments.

The U.S.’s approach to AGOA and infrastructure projects in Africa reflects a desire to compete with China’s influence on the continent. The Lobito Corridor project will be a test of the U.S.’s ability to compete directly with China in its spheres of interest in Africa.