ONE’s Africa Director Dr. Sipho Moyo reflects on some of the lessons learned at this year’s African Growth and Development Act Forum in Lusaka, Zambia. The outcomes of this event will help guide trade between the US and Africa.
Secretary of State Hillary Clinton at the AGOA Forum in Lusaka, Zambia. Photo courtesy of the State Department
This will require hard work and diligence on both sides to face down entrenched interests and confront political realities. Secretary of State Hillary Clinton specifically called for more American investment in Africa adding, that “business can’t do it without a supportive government policy framework and governments can’t do it without entrepreneurs and business people who are really going to take advantage of all of these opportunities.” She also noted that the growth of American business on the continent was part of the Obama administration’s approach to help developing countries chart their own future and ultimately end their need for aid altogether.
But what does this mean in reality? How can Africa reap the full potential of AGOA? Fortunately, there were plenty of ideas from both sides. We’ll start with what many of the African ministers, entrepreneurs and civil society organizations had to say and then look at what the American interests had to say.
Like Secretary Clinton, Africans agreed that America needs to do more — invest more, trade more and expand product eligibility amongst other initiatives. They noted the harsh reality that America is being out-bidded by intense competition among companies from all over the world, and that if America is to compete, it too must step up to the plate.
This means America must provide a longer and more predictable investment horizon by extending AGOA beyond the current short term provisions, which lapse in 2015. For anyone in business, four years is not much of an investment horizon. To invest with confidence, businesses need 10, 15 or 20-plus years to contemplate meaningful, game-changing investments. For now, the Obama administration is asking Congress to extend AGOA trade preferences for another 10 years.
Along with extending AGOA for a longer term, African countries would like America to expand the type of products eligible and harmonize product regulations and standards. Currently, petroleum imports count as the lion’s share of trade with Africa. While that is important investment, Africa’s economies need to diversity and compete in other products and services. There ought to be a real commitment from America to expand trade with Africa from such a large emphasis on natural resources and commodities to value-added products and sectors. And in the same vein, harmonizing product regulations in order to ease the burden on African producers could be another step in the right direction. If certain African products meet European standards, why shouldn’t they meet American standards (and vice versa)?
So, what can Africans do to enhance and capitalize on the potential of AGOA? While Africa continues to struggle to compete in an increasingly competitive global economy, Africans, for their part, acknowledged the importance of a supportive business climate that empowers entrepreneurs. In this respect, they agreed on the need for simpler requirements — when it comes to the time it takes to register a business, for example — they also agreed on the need for a market-driven policy framework and liberal exchange rates, and on the importance of property rights among other measures for greater competitiveness and investor confidence.
Beyond that, the Secretary noted that it boils down to expanding economic opportunities for women and youth, focusing on regional trade and integration within Africa and emphasizing quality control in producing African goods. For women and youth, as Secretary Clinton pointed out, it is nonsensical to not engage half of a society in the economy. Women own and operate a majority of small- and medium-sized enterprises and are more likely to use the profits generated to benefit their families. Secretary Clinton even makes a note of how as a woman she was denied credit 40 years ago in the US, illustrating how every society has had to work for progress for women.
Regional integration was the buzzword of the 2011 AGOA Forum. African economies trade the least between themselves compared to any other region in the world, according to some reports. Therefore, regional integration could be the key to unlocking the economies of scale that African producers need to compete more effectively on global markets. To do this, African countries will have to lower tariffs and trade barriers to their neighboring countries’ products while also investing heavily in infrastructure and customs services in order to ease the flow of commerce. Secretary Clinton called on African governments to do more to fight corruption and encourage cross-border commerce to better benefit from AGOA trade preferences but this ultimately requires Africa’s leaders to decide whether they have the political courage for greater economic integration.
And finally, African producers and manufacturers must have an intense focus on the quality of their goods. Hannah Tetteh, Ghana’s minister for trade, emphasized this in her remarks in a panel on promoting women business leaders. The entrepreneurs aren’t able to be in the US to promote their products themselves, so the only way they can build a customer base is to sell quality products that inspire customers to return for more. In other words, cutting corners to save cost could turn out to be even more expensive if it results in an inferior product.
All in all, the 2011 AGOA Forum was an exciting convening of the varied interests that support a strong Africa-United States relationship. The potential is enormous and for that reason, we at ONE will continue to hold leaders to account on both sides to ensure we realize the full opportunity and potential that trade holds for Africa and the United States.