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AGOA generates R10bn extra for South Africa

Published date:
Friday, 16 August 2002

The Africa Growth and Opportunity Act (Agoa) generated an additional R10bn for SA last year, accounting for 20% of the country's R50bn exports to the US.

This amount was expected to increase to R14bn this year, US ambassador to SA, Cameron Hume, said.

The figures were part of a new report on the macroeconomic effect of Agoa on SA. The act provides for duty-free access to certain products under strict rules of origin from some African countries to the US.

The report, which was funded by the US Agency for International Development, examined the act's effect on the SA economy during 2001 in terms of Agoa's contribution to GDP, capital formation, employment and government revenue.

Hume was visiting clothing manufacturer CMT, north of Pretoria, where the number of jobs had increased by 206 through the company taking advantage of Agoa. "We used the legislation to lift exports from 20% to 75% of turnover, and we installed an additional production line," said CMT CEO and MD Nicholas Fine.

The act has been criticised in the past for not having involved the countries that it affected when it was implemented by the US about 18 months ago.

Hume said that while the legislation was instituted without reciprocity, the US required or asked for nothing in return. "We see the act as a way of opening up relations with Africa," said Hume.

He said the Act was also beneficial to the US, as his government believed that its consumers should have the choice to buy the best product at the best price.

Hume said that back in SA about 20000 people were directly employed in industries exporting to the US under Agoa. About 20000 indirect jobs were "supported" by Agoa.

The report also noted the induced effect it said that 24000 jobs had been affected by the higher disposable income of workers affected by Agoa. "Some would say this is not enough, but it is up to SA companies to use the opportunity they now have to grow trade," Hume said.

The report further found that SA's Agoa exports contributed more than R12bn to national government revenue through taxes, transfers and property income last year.

Looking forward, Hume expected good growth in Agoa-related exports, because of the enhancements to the act signed into law in the US last week.

The amendments expanded on the type of products that could be exported to the US duty-free. For instance, the act now included knit-to-shape garments, and Merino wool sweaters.

SA clothing manufacturers in particular benefited from Agoa. But the act also included products from the agriculture and mining sectors, as well as various manufactured products and equipment such as basic metals products and transport equipment. SA motor manufacturers exported vehicles worth $120m to the US last year.

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