US and Africa to Strengthen Trade through AGOA and Private Sector Collaboration

With over 1300 delegates at the US-African  Business Summit held mid-July in Gaborone,  Botswana, the main focus was on mapping out strategies to strengthen trade and economic relations between the United States and Africa. Majority of the speakers emphasized reviewing and widening collaboration between governments, while others underlined the importance of the private sector as the key driver in achieving robust economic growth in African countries.

African leaders together with corporate business executives and majority of the participants called for extension of the Africa Growth Opportunities Act (AGOA) which grants African countries the freedom to export products tax free into the American market. It is the traditional market from which most of them earn revenues for their national budget.

Renewing the African Growth and Opportunity Act AGOA immediately would remove uncertainty about the future of the pact and allow for suppliers and partners to better plan and maintain investments in African economies, ministers said during discussions in Botswana.

Chairman of the Board of Directors for the US Corporate Council on Africa (CCA), Dr. Jeffrey L. Sturchio, underlined the importance of collaboration between governments and private sectors, describing partnerships as vital ingredients for achieving robust trade and economic targets during the previous years.

The Corporate Council on Africa organized the mid-July summit as a follow-up to the December 2022 US-African Leaders Summit in Washington under the patronage of President Joe Biden where the White House and the United States offered $55 billion for tackling various development projects across Africa.

African leaders urged renewal of the long-standing Africa Growth Opportunities Act (AGOA), which gives some African countries preferential or even tax-free access  to the US for their exports.  The agreement is due to expire in 2025, and African delegates at the summit want the deal renewed without much delay. As already known, AGOA has been credited with creating employment in Africa and bolstering exports to the United States.

“It is also our earnest hope that in consonance with the letter and spirit of the U.S.-Africa Leaders Summit, the Biden administration will renew the African Growth and Opportunity Act initiative, which expires in 2025,” Botswana President Mokgweetsi Masisi, addressing delegates gathered in Gaborone. “The AGOA renewal now, with expanded mandates, will give a strong signal and confidence to the markets and serve as a catalyst for Africa’s industrialization and inclusion into the global value chains.”

Florie Liser, chief executive and president of the Corporate Council on Africa, which organizes the U.S.-Africa Business Summit, said there is a need to examine AGOA in light of the newly established African Continental Free Trade Area (AfCFTA). And the United States is exploring opportunities that the African single market offers.

A lot has changed in Africa and beyond since AGOA came into practical operation more than two decades ago. Florie Liser pointed out that “the advent of the African Continental Free Trade Area is fostering much closer economic and commercial integration on the continent, which will spur the creation of regional and continental value chains and increase value added across key sectors. In many ways, the question is how best we can support this development.”

The Atlantic Council Africa Center produced a report titled – The Future of U.S.-Africa Trade and Investment, which analyzes the future of the AGOA. The report was issued at the summit.

Frannie Leautier, a senior fellow at the Atlantic Council and the report’s lead author explained that by extending or renewing AGOA, the idea is to realize the potential of AGOA for long-term development through greater certainty, planning and skilled up support for capacity development and investment flow.

The first recommendation is straightforward: just extend it. The second one is to provide longer-term certainty about AGOA eligibility because investors are waiting for that.

He said the act “should be renewed by the US Congress for at least a ten-year period as soon as possible.” There was also a call by ministers for the AGOA rules to be streamlined and made less cumbersome in order for more countries to be able to benefit more from the program.

“There is a compelling case to reauthorize the AGOA ,” wrote Daniel F. Runde and Thomas Bryja for the Washington DC-based Center for Strategic and International Studies (CSIS) in a new paper on calling for AGOA to be renewed.

According to reports, not all African countries benefit from AGOA. Some, like Ethiopia, Mali and Guinea, were barred because of coups and human rights violations. These African countries were not invited to the Washington December gathering. South Africa’s eligibility is being reviewed over the alleged sale of arms to Russia.

South Africa has been the biggest beneficiary of the 23-year old AGOA act in monetary terms, largely thanks to the car sector. With current geopolitical changes, it fears to lose this traditional market opportunity and the United States. The South African media has also reported that President Cyril Ramaphosa sent senior members of his cabinet to Washington to discuss South Africa’s trade and the future of AGOA.

The White House in November told this author in an email response to media enquiry the criteria for inviting African governments and the primary goal was to strategize a broad inclusive gathering of high-powered delegations from across the African continent, but a number of African countries were blacklisted.

It explained that four countries were not invited because they were suspended by the African Union (AU) following military coups and counter coups. These four countries – Burkina Faso, Guinea, Sudan and Mali – were suspended by the AU and were not invited. All the four countries not invited are currently run by strong men who took political power by the barrel of guns.

According to reports monitored by this author, the U.S.-African summit discussed the emerging global order, changing geopolitical and economic issues and also offered enormous funds for various development projects as well as for good governance and human rights. Under the plan, Washington is focusing on existing challenges, especially those relating to peace and security, food security to climate change and poverty alleviation across Africa.

The subsequent high-level dialogues are expected to set the scene for reviewing the opportunities for the United States and corporate leaders from various African public and private sectors, and review thoroughly how to strengthen trade and overall economic partnership between the United States and Africa.

Scott Nathan, chief executive of the U.S. International Development Finance Corporation, who is leading the U.S. government delegation at the summit, pledged continued support for Africa. “The United States is focused on what we will do with African nations and people, and not for African nations and people. We work to deepen and understand our partnership, amplify African voices and support the empowerment of Africans,” according to Scott Nathan.

Zambia’s trade and commerce minister, Chipoka Mulenga, said his country had benefited from the trade agreement but remained “at the bottom of the benefits of the AGOA platform” due to a lack of the industrialization needed to produce more “value-added products” rather than merely exporting raw materials such as minerals or agricultural produce.

If the U.S. government wants to see AGOA succeed in Africa, it must support African countries to industrialize to give value addition. Mokhethi Shilele, trade minister from Lesotho cautioned against a complete revamp of AGOA for fear of delaying the act’s renewal. “There is a sentiment that AGOA should be reformed or changed but I’m indifferent to that because if we push for that how are we going to get it renewed this year?”

Atlantic Council views an interconnection between the AGOA and new African Continental Free Trade. The future of US-Africa trade and investment, policymakers in the US and Africa must decide the basis for stronger US-Africa trade going forward. With the African Growth and Opportunity Act (AGOA) set to expire in 2025, the U.S has an opportunity to update what its economic offer for Africa.