TRALAC - Trade Law Centre

South Africa: exporters must not miss the AGOA bus

Monday, 01 October 2007

Source: Business Day (Johannesburg)

One thing that governments around the world are good at is the creation of acronyms and initials.

Prime examples relevant to SA are Asgisa (Accelerated and Shared Growth Initiative for SA), NIPF (National Industrial Policy Framework and Action Plan), Mers (Microeconomic Reform Strategy) and some with an international flavour like Nepad (New Partnership for Africa's Development) and Agoa (African Growth and Opportunity Act).

Take a look at Agoa, signed into law in May 2000 and amended in 2002 and 2004. The latest amendment is known as the African Investment Incentive Act (AIIA) or Agoa IV in 2006.

The act extends preferential access for some sub-Saharan African countries to the American market. This expires on September 30 2015.

Other provisions under the bill also exist.

Under Agoa the list of products that eligible Sub-Saharan countries can export with a zero import duty under the Generalised System of Preferences (GSP) is extended from 4600 items to more than 6400.

Are exporters making use of this initiative? Statistics from the US International Trade Commission (USITC) and US commerce department show that there is still opportunity for growth in the export market to the US.

The most worrying factor is the fact that the two biggest African exporters to the US, Nigeria ($14,853bn) and Angola ($6,805bn), together with Gabon (fifth on the list with total exports worth $952m) export mainly gas and oil products.

South African exports to the US are not focused on energy related products and are highly diversified, but this really pales by comparison with the value of exports from especially Nigeria and Angola.

SA exported just more than $1,09bn worth of goods to the US but that is only about 7% of total Agoa exports from Nigeria.

The reason is most probably the relatively strong rand over the past couple of years, with only products priced on the international market being favoured by the Americans. Other states with substantial exports to the US are the Republic of the Congo at $1,047bn, Gabon ($952m), Chad ($931m) and Lesotho ($225m).

With expectations of a weaker rand floating through the markets, it could be worthwhile for South African exporters to investigate the opportunities available in the US.

With the subprime problem not making headlines there every day anymore, the possibility is that the demand for consumer goods from Africa will increase, especially if targeted at a niche market, such as organic health products, machinery and some chemical products.

The key is to use local raw materials already available and to add value for the US consumer.

This brings us to the NIPF. The aim of the framework is to strengthen SA's industrialisation development, with a focus on certain sectors within the economy.

These sectors include the chemical, plastics and pharmaceuticals sector; forestry, pulp and furniture; automotives and components; and capital/transport equipment and metals. Keeping an eye out for government programmes in this sector with respect to financing instruments and other capacity building initiatives could be beneficial to the pro-active domestic producer.

With all the attention on certain sectors in the economy and government's intention to decrease the import duties on intermediate goods in the key sectors, it is very important that any announcement from the International Trade Administration Commission is monitored for any changes with respect to the lowering of duties.

This is a double-edged sword in the sense that you can either gain from the lower tariff, or your business could lose against the higher imports. By responding to the notice of the initiation of an investigation, your motivation in favour of the tariff cut will be taken into account.

Your response could help determine the extent of the damage that the lower tariff could cause the industry, influencing the commission to protect your business. By being ignorant of the possible changes in the trade environment you could put your business in danger or miss out on the chance to increase your market share locally and elsewhere.



“ Latest AGOA Trade Data currently available on AGOA.info


Click here to view a sector profile of South Africa’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)

  • AGOA-Beneficiary Countries’ AGOA and GSP Trade Aggregates

  • AGOA Trade by Industry Sector

  • Apparel Trade under AGOA’s Wearing Apparel Provisions

  • Latest Apparel Quotas under AGOA

  • Bilateral Trade Data for all AGOA-eligible countries individually.