TRALAC - Trade Law Centre

Build brands to seize AGOA market

Tuesday, 11 August 2009

Source: Business Daily (Kenya)

The past week saw a disruption in the life of many Nairobians as we made room for both the 8th African Growth and Opportunity Act (Agoa) forum. I wish to address the issue of Agoa from a business perspective and posit here that in its current form and with Africa’s current approach, it is probably much ado about little.

What is Agoa all about? This question has two sides to its answer. According to the portal, The Agoa is “a United States Trade Act that significantly enhances US market access for (currently) 39 Sub-Saharan African (SSA) countries.

The Act originally covered an eight-year period from October 2000 to September 2008, but amendments signed into law by US President George W. Bush in July 2004 further extended its life span to 2015.

At the same time, a special dispensation relating to apparel was extended by three years to 2007.

In December 2006, key changes to Agoa were signed into law, extending the garment provisions to 2012. In simple terms, Agoa seems designed to allow preferential access for products from sub-Saharan Africa to the huge US market.

At first glance this looks like a great initiative aimed to serve Africa’s best interests. The flipside of the Agoa coin is rarely talked about openly, but it may be the more important side.

The same portal mentions that “It (Agoa) supports US business by encouraging reform of Africa’s economic and commercial regimes, which will build stronger markets and more effective partners for US firms.”

Quoting from Jaindi Kisero’s recent piece in the Daily Nation, “US imports from Africa increased by more than 50 per cent from the pre-Agoa 1999 levels.

In 2001, the US imported $7.6 billion of duty free goods from Agoa-eligible countries and by 2008 this figure had shot up to over $81 billion”.

It is also important to note that most of those imports, according to the same analysis, have been dominated by petroleum exports to the USA.

The textile clauses in Agoa remain the pet subject for Kenyan firms wishing to find their way into US markets through Agoa. Garment factories have grown to exploit Agoa. The irony of it all is that a vast majority of these factories continue to be foreign owned.

While one cannot fail to appreciate the nearly 40,000 jobs created by some estimates, one must also not forget that these are the dregs of development, the crumbs from the banquet table we ought to and deserve to be seated at.

Malcolm X, the black American nationalist, was probably right even though in a different context, when he said, “Nobody can give you freedom. Nobody can give you equality or justice or anything. If you’re a man, you take it.”

So what need we take from Agoa? Here’s a little open secret about the success of the American economy.

According to Interbrand’s Best of Global Brands league table of 2008, eight of the top 10 brands by dollar value are American. A total of 52 of the top 100 brands are American.

The other 48 are dominated by the top world economies. It is also an open secret that most of the manufacturing in the world is done in China, but the Chinese economy continues to lag behind the American one and will do so until it grows some brands of its own.

China now knows this and has started gobbling up global brands, the celebrated Lenovo brand from IBM being a case in point.

Agoa will only work if Africa takes the shortcut China never took by moving straight to brand building and bypassing playing the subservient role of being a mere factory for the American economy and American brands.

Brand economy

Carl D Howe, the principal and co-founder of Massachusetts based Blackfriars Communications in a July 2005 article stated that the American economy has “the potential to transform into a brand economy”.

I think it already did and approaching it from a product (factory) perspective is to sell Africa short.

The theme of the Nairobi Agoa Forum was: Realising the Full Potential of Agoa through Expansion of Trade and Investment. For the forum to have made any real progress, the participants should have donned a new set of lenses.

They should have sought to find a route to the hearts and minds of USA’s over 300 million consumers, not get African raw unbranded goods into the stores of a handful of American traders or become the satellite factory for American brands.

Perhaps if we thought a little more soberly about Prime Minister Raila Odinga’s outburst about the west lecturing Africa on governance rather than how to trade, we would have come up with more answers on how to really capture American hearts and minds.

The expanded markets, business and economic development will follow.

By Tom Sitati, who is the author of ‘It’s a Branded World’. Email: This email address is being protected from spambots. You need JavaScript enabled to view it.