The imminent expiry of third country fabric sourcing under the African Growth and Opportunity Act (AGOA) poses a great challenge to African countries, including Uganda that are exporting apparels to the US market under the quota and tariff-free initiative.

The third country fabric sourcing expires on September 30, 2007. The extension of this critical provision would determine the survival of the few textile factories on the continent and the retention of the remaining 200,000 jobs. Up to 100,000 jobs have already been lost across the continent due to post-MFA (multi-fibre agreements) that expired in January 2005.

Currently, over 90% of all exported apparels from Africa to the US use third country fabrics. The way forward for Africa and Uganda in particular, currently being represented by Apparels TriStar, would be to extend the third country sourcing to at least 2015. TriStar employs some 2,000 people since its inception in December 2002. The stakeholders argue that this would offer them enough time to put in place the required infrastructure for producing fabric locally. However, it is not obvious that the provision would be extended.

Those in the know say that it requires serious lobbying of the US Congress for it to be extended by any period. If the provision is allowed to expire, Africa will be left with less than 10% of its current market; further decimating tens of thousands of jobs throughout the continent. The extension issue not withstanding, all Africa needs is vertical integration to support AGOA duty-free incentives for apparels to be made with African produced cotton and yarn.

But Mrs. Susan Muhwezi, the special presidential assistant on AGOA and trade, is adamant about any unlikely extension of third country sourcing.

Fresh from an AGOA forum in Washington recently, Muhwezi said it was widely accepted that AGOA had been beneficial to Africa "but African countries should develop respond and implementation strategies peculiar to each other." She said no African country is ready for the expiry of third country sourcing.

"Trade promotion and sensitisation on AGOA should not be for African countries but the US-private sector. They do not know about AGOA. So they cannot come and invest here," she said. Muhwezi was also bullish that infrastructure development would erase fears of the expiry of third country fabric sourcing.

"Up to 29 African countries benefiting from AGOA are landlocked. We need to improve on our roads, rehabilitate or re-establish the railway line so as to reduce the cost of doing business in Africa. Otherwise, there will be no real development in Africa," she explained.

Muhwezi gave an example of a 40-foot container that costs $3,000 to transport from Mombasa port to Kigali. This is the same amount charged for a soft container from Mombasa to the US East Coast.

"With this kind of high cost of doing business in Africa, which foreign investors can come over," she asked. Muhwezi said there was need to establish mobile scanners to assist in the clearance of goods from Mombasa port to Kampala. "We should remove tariff barriers. Goods destined for Kampala should be cleared once in Mombasa and not at Malaba again," she said.

Muhwezi said there was need to address the development of entrepreneurship spirit. "Because the private sector thinks AGOA is a government think; which is not true," she said. To benefit from the US market opportunities, Muhwezi said the US government could help by giving incentives to its private sector to encourage them to invest in Africa.

She also called for the zoning of the country into eastern, central, western, southern and northern regions. Here, Muhwezi, explained, the most yielding products in each region are identified and measurable and achievable methods used to develop them. "We donot need the 1,800 products under AGOA. We need a few specific products. Even if the entire budget goes into developing them, it is okay," she said.

Latest AGOA Trade Data currently available on AGOA.info


Click here to view a sector profile of Uganda’s bilateral trade with the United States, disaggregated by total exports and imports, AGOA exports and GSP exports.

Other regularly updated trade statistics on AGOA.info include: (click each link to view)