TRALAC - Trade Law Centre

AGOA's eased access to US may spark export bonanza

Friday, 30 August 2002

Source: Business Day

LISTED companies in a variety of industries are talking about taking advantage of the export opportunities offered by the Africa Growth and Opportunity Act (Agoa), but this does not necessarily mean that their share prices will react in the short term to the possibilities.

The performance of those companies' shares will depend on how efficiently they cope with the detail of the Agoa preferences as well as factors like their liquidity and general market sentiment towards small capitalisation companies.

Deloitte & Touche associate director in the trade and investment solutions division Riaan de Lange said Agoa presently allows nonreciprocal preferential access, often customs duty free or at reduced tariffs, for 6487 product lines from specified sub-Saharan African countries into the US market.

But it was a first step towards a free trade agreement between the US and SA which would eventually give US goods similar access to SA.

The Agoa preferences last until 2008 and cover both primary and secondary products in almost all industries, except for a couple of industries that are particularly sensitive for the US.

In the clothing and textile industries sector, local content and the process of manufacturing is specified, and some of the companies that wanted to take advantage of Agoa seemed to be oblivious of the detail, De Lange said.

It was important, too, for companies to ensure they had a particular niche or advantage that would help to sell their goods in the US, he added. For example, an SA company had been successful in exporting ice-cream to the US which had a high fruit content, so appealed to health-conscious consumers.

Increasingly, the trend in developed markets was to favour products that adhered to socially or environmentally appropriate manufacturing processes.

Within clothing and textile companies, those that have mentioned plans to export to the US using the Agoa advantages include Adonis, the knitwear company; Pals Clothing, which manufacturers men's clothing; Seardel, the clothing and textiles giant; clothing manufacturer Rex Trueform which was formerly a serious exporter to the UK; LA Group, in a joint venture for its corporate clothing division; and Ninian & Lester.

Agricultural business Afgri (formerly OTK) has geared up its cotton production activities to service demand from textile manufacturers.