Pretoria – The South African government would like an extension of the African Growth and Opportunity Act (Agoa) for a reasonable amount of time, Trade and Industry (dti) Minister Rob Davies said.
“Our overall message as the South African government is that we would like to see a rollover, an extension of Agoa for a reasonable period of time, along more or less the architecture of Agoa at the moment,” said Davies on Friday.
Agoa – which offers incentives for African countries to continue their efforts to open their economies and build free markets — was signed into law in May 2000. It expires in 2015.
It aims to expand US trade and investment with Sub-Saharan Africa; stimulate economic growth; and promote a high-level dialogue on trade and investment-related issues, among others. Under the Act, Agoa countries are eligible to ship goods to the US without having to pay import duties.
Speaking at an Agoa beneficiaries’ conference on Friday, Davies said in terms of South Africa’s bilateral relations with the US, Agoa had sustained a pattern of trade between the two countries which was mutually beneficial.
This was despite trade taking a knock in 2009 as a result of the global financial crisis. Trade had recovered, with trade now in favour of South Africa, although this is not always the case.
The US is South Africa’s third trade partner and second in terms of the destination of exports. The US is a significant investor in South Africa, with about 600 US companies operating within the South African economy.
South African imports to the US were of “reasonable” diversity, including the export of South African manufactured vehicles to the US as well as precious stones, iron and steel.
“We do have a number of value added products exported to the US. In other words, I think it has sustained and underpinned a trade relationship which is one of mutual benefit and one of opportunities, in particular for growth, development and industrial production on the part of South Africa,” noted the minister.
Compared with other Agoa beneficiaries, South Africa has a broader range of products. This speaks to a challenge that the African continent faces in terms diversifying and industrialising countries.
Yesterday, the US Congress renewed the Third Country Fabric Provision of Agoa, which was set to expire at the end of September 2012. The provision waives duties on clothing from most Agoa countries.
With Agoa benefiting South Africa, the US Congress now has to figure out how it will benefit in turn.
“What will be the benefit to the US? This is going to be something which is going to seize the mind of US Congress as they begin to reflect on the renewal of Agoa.”
Although South Africa is not a part of the Provision, the renewal is good news.
“We are not as South Africa beneficiaries of that [Provision] but the delay had an impact on a number of our neighbouring countries. I think that it’s a good thing that has happened; it has relieved some of the uncertainty although some contracts were apparently lost as a result of the delays in that regard.”
Davies said he had suggested to the US that there was a need to move away from calculations of how a product was treated in the South African market compared to the European Union.
Africa, he said, was the next growth frontier.
“If we look beyond the immediate problems and we look into the longer term, we can see that Africa is emerging as the next growth frontier after Asia.
“Some of our big projects on the continent are trying to position ourselves for that. The next phase of regional integration on the continent is involving the broadening of integration across the already existing regional economic community. That will create a regional market of a sufficient size to support diversification and industrialisation of our continent,” he said.
Additionally, infrastructure projects were going to become increasingly more important.
Davies said there was a range of external parties that was becoming involved in the African continent and that the key question for the US was how it would position itself in this regard, and how would it compete for the opportunities on the continent.
“Whatever other benefits that have been delivered by Agoa, the US has developed a considerable amount of goodwill but most on the African continent were supportive of the Agoa framework and what it has delivered.”
He expressed weariness of arrangements where some countries that were part of regional integration arrangements ended up being treated in their external relations differently to others and the incoherencies that this created for regional integration.
These issues, he said, had been discussed at negotiations with the European Union around the economic partnerships agreement negotiations.
“The question of the differentiation between EU products and US products in many cases is not that large in the South African market and in any case, it’s shaped by the existence of a free trade agreement that goes back to 1999 in the case of SA.”
Davies said there were aspects of Agoa that should be improved upon, and urged business to be more engaged in the debate.
“[This] … arrangement has yielded positive results and can continue to do that,” said Davies.
US Ambassador to South Africa Donald Gips said trade between SA and the US was up by 18%, adding that over $2 billion worth of South African produced vehicles had been exported to the US in 2011 duty free.
“I am a huge believer in Agoa and this will be a century of Africa,” he said, noting that the Act has had a positive story to tell.
SA ambassador to the US Ebrahim Rasool said South Africa should not be complacent in the lead up to 2015. – SAnews.gov.za