Saturday, March 12, 2011

Why Hasn’t AGOA Worked Better for Africa?

Since 2000, the African Growth and opportunity Act (AGOA) has been America’s main vehicle to enhance U.S.-African trade. If you look merely at the numbers, trade between the United States and the AGOA-eligible African countries has increased significantly. However, growth has been uneven and has not benefitted the bulk of African entrepreneurs and their societies as was intended.

When AGOA was crafted, the textiles and apparel sector was predicted to be the key to sparking African industrialization as it had been previously for Great Britain and other currently industrialized countries. Unfortunately, the process of vertical integration, synchronizing several stages of production from raw materials through the finished product, never widely took place in Africa. Cotton producers in countries like Benin and Mali looked to sell their product to America rather than other African countries, although the latter was an easier market to crack.

Under AGOA, African textile and apparel producers were originally intended to buy their raw materials from their neighbors or from the United States. Because this was either impractical or unworkable, a third-party fabric exemption was granted to allow the purchase of inputs from other sources. This has not helped African producers nor sped the development of vertical integration, which has been a source of frustration for American lawmakers who created and must maintain AGOA.

If you travel by road in Africa, at some point you will see old, abandoned factories left behind by the colonial powers. Breweries still operate, but many cereal production facilities and other manufacturing plants no longer operate. Partly, this is due to inconsistent or non-existent electric power in places where production would be most efficient. It also may be due to the lack of financing for such facilities because of disinterest in local banks in financing large, long-term projects under favorable terms. Whatever the reason, Africa lags behind the rest of the world in industrialization and remains dependent on the production of manufactured goods by other nations when it could be creating jobs and selling its own products to the rest of the world.

This is especially critical in the agriculture sector, which should be Africa’s most productive sector. During and just after the colonial period in Africa, many of its countries were not only self-sufficient in agricultural production, but also sold their products internationally. Due to war and unrest, many areas became non-productive. In Nigeria, the discovery of oil diminished interest in agricultural production. Without value-added agricultural production, its nations are vulnerable to a volatile world market for primary products. The massive leasing of African land to foreigners is ostensibly meant to be mutually beneficial, but it does not involve African farmers and doesn’t increase the indigenous capacity to produce value-added agricultural products. Moreover, there doesn’t seem to be strategies to grow more valuable crops such as gum Arabic, even though desertification is increasing the land most useful for its production.

In America and other developed countries, there is engagement between government and the business community that allows for impediments to trade to be identified and eliminated. This process is far from perfect, but it is helpful. In Africa, there remains far too much mistrust and lack of mutual understanding for such a process to be established or last even if it is. I have helped such public-private partnerships be created, as have some of my colleagues, but it is an uphill battle to maintain them. In no country is government good at business, and if there is no effective input from the private sector, too many logjams are created, and investments in infrastructure can easily be misdirected. African executive and legislative branches work together far worse than they do in America even in this time of political discord. This is a recipe for disaster in creating a productive export industry in any African country.

Finally, we in civil society promote the “three-legged” stool concept of government-private sector-civil society cooperation, but in far too much of Africa, civil society organizations lack the information and understanding of the trade process to be of much help in this. Thus, their influence on policy is minimal in far too many countries. If you think mistrust between government and the private sector is rampant, you should see the lack of trust between government and civil society. Not only do thin-skinned government officials resist constructive criticism from civil society organizations, but many of those organizations are considered way stations for would-be politicians. Consequently, what could be useful sources of information for government and the private sector go unheeded, even when such information comes from the many functional, and even exceptional, think tanks on the continent.

U.S. government policymakers have expressed frustration over the lack of progress by Africans in enhancing their own machinery of trade. Moving forward with the next AGOA bill, or whatever its future vehicle will be, this disappointment on the part of American lawmakers could limit future trade benefits for Africa. The American government clearly needs to do more, but that may not happen if African governments and their private sectors and civil societies can’t meet us halfway.

4 comments:

  1. There is no movement, that I am aware of, that is informing African-Americans of the opportunities on the African Continient and surely no educational efforts to prepare them nor support them. Am I correct?

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  2. xxPeter, try reading African states' business press. AllAfrica.com does a pretty good job of aggregating African countries' newspapers. Those can offer good macro and industry-wide indicators about the lay of the land, the business and investment climate, and about where the value and growth opportunities are.

    Stateside, there're folks who're doing the kind of relationship-building and data and intel provision you mention, but they're not always easy to find. But do some digging, you'll luck upon operations that can help. Also, partnering with a market research consultant or firm will give you lots of the data you need. One well-known African American market research consultancy is JRH Marketing Services (not a plug, I have no relationship of any kind with JRH, just making a suggestion of an African American firm you can give the business to if you go the consultancy road).

    Good luck.

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  3. A beautiful country with its natural resources yet to be tapped.

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