TRALAC - Trade Law Centre

AGOA presents an opportunity to be seized with both hands

Monday, 30 April 2001

Source: Financial Mail

The cynicism that greeted the passing of the African Growth and Opportunity Act (Agoa), which offers duty-free access to the US market for an additional 1 837 products from Africa, should now be laid to rest.

Instead, the continent's exporters and producers of goods must take the opportunity with both hands, while trade unions should be advised that trade advantages and opportunities are enormous. We just have have to be mature about it.

The signing of a R1 billion textile and garment deal between the Malaysian Ramatex Group and the Buffalo City municipality in the Eastern Cape is a true example of how beneficial Agoa can be to an eligible African economy.

It is a direct response to opportunities offered by Agoa.

South Africa was chosen because of its "strategic location to buyers in the US, Europe, cheap electricity, proximity to raw cotton fibre in Africa, abundance of water, good roads and ports and the two airports at East London and Port Elizabeth".

The Ramatex deal is expected to generate 18 000 new jobs to the Buffalo City municipality, a unified administrative structure for Bisho, East London, King William's Town and other smaller towns in the Eastern Cape.

It is no secret the Eastern Cape is one the most economically starved regions in the country, so the Ramatex deal will go a long way to pulling it out of economic stagnation.

In addition, the deal will aid skills transfer and development.

As this newspaper reports today, 50 young South Africans will be sent to Malaysia every year for training in textile technology.

It is also encouraging that the department of trade and industry (DTI) expects the Malaysians to apply for tax incentives in this regard.

The US government opened its doors wider to trade with sub-Saharan Africa last year, when then President Bill Clinton agreed to give more than 1 800 African-made products duty-free access to the US market.

According to Agoa, no other region in the world will have better access to the US market than Africa, aside from a handful of countries that have free trade agreements with the US.

Agoa's duty-free benefits give African businesses a competitive advantage over most of the world's businesses in selling to the US market.

The biggest benefit will go to the local apparel industry, which will be able to sell more clothing, duty-free to US stores. More than 60 000 new jobs could be created in this sector alone, according to some estimates. Overall, African textile and apparel exports are expected to grow from the current $250 million a year to more than $4 billion.

Soon after, yarn spinning and fabric weaving and knitting will also become important as South Africa emerges as the central supplier for local and regional apparel manufacturers. Other industries will benefit as well.

For South Africa, this means revving up exports like wine, leather goods, footwear and beef. Of special interest to South Africa are leather goods and clothing, wine and certain meat products.

The low-cost sector of the footwear industry, in particular the synthetic footwear industry which had been hit by cheap imports from the East, is expected to get a revival from Agoa, as certain South African shoe exporters will save nearly 40 percent in duty.

South African wine can now be exported to the US duty-free, while the duty for wine from other continents will remain at at up to 22 US cents a litre.

At least two products sought by South African producers were not included: fruits and various steel metals.

Admittedly, there will be disadvantages. But opportunities offered by Agoa are enormous.