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South Africa to gauge AGOA-extension temperature during Obama visit

South Africa to gauge AGOA-extension temperature during Obama visit
Rob Davies, South African Minister of Trade and Industry
Published date:
Wednesday, 26 June 2013

South Africa plans to use the upcoming visit of US President Barack Obama to reinforce its position that the Africa Growth and Opportunity Act (Agoa) should be extended for a sustained period beyond its September 30, 2015, expiry date and that South Africa should remain a beneficiary, despite its relative development when compared with other beneficiaries.

However, given that the power to extend Agoa lies not with the Obama administration, but with Congress, South African officials will also seek to use the networking opportunities associated with the high-level visit to understand what would be required for a successful reauthorisation and to gauge support for the extension.

Obama travels to Senegal, South Africa and Tanzania between June 26 and July 3 in what will be his second trip to sub-Saharan Africa and the first of his second term.

The trip objectives, which have been relayed to the ambassadors of the three countries, include:

  • Signalling to US business that Africa is a new frontier of global growth.
  • Outlining the economic and investment instruments that are available to support African growth and development.
  • Detailing the financial and nonfinancial support available to support Africa’s infrastructure development.
  • Advancing preparations for the reauthorisation of Agoa, while alerting Africa to the requirements for a successful reauthorisation.
  • Raising development issues relating to HIV/Aids and food security.
  • And, discussing regional security and African hotspots.

Trade and Industry Minister Dr Rob Davies believes it is significant that four of Obama’s six trip objectives relate to trade and investment matters, which he says sends a strong signal that Africa is emerging as a new economic force.

This point was reinforced by Obama’s senior director for African affairs Grant Harris who described the continent as a new centre of global growth during a pre-trip press briefing in Washington, DC. However, South Africa is concerned about the future of Agoa and its continued participation, particularly given that about 43% of the country’s exports to the US enter free of duty under the programme.

In 2012, total trade between the two countries recovered to R122.7-billion, having slumped in the aftermath of the global financial crisis – bilateral trade, which reached R123.7-billion in 2008, fell to R82.7-billion in 2009.The trade balance in 2012 was marginally in South Africa’s favour, with exports of R66.5-billion to the US against imports of R61.2-billion.The US remained South Africa's second-largest export destination and third-largest import partner.

South Africa favours a 15- to 20-year Agoa rollover, which it believes will offer investors the certainty required to make investments in Africa that could take advantage of favourable trade terms with the world’s largest economy.However, it is also aware that an extension, and South Africa’s continued inclusion, is not a certainty and is, therefore, crafting an engagement strategy not only with the Obama administration, but also with lawmakers, interest groups and think tanks. Davies indicates that he plans to travel to Washington, DC, later this year to continue with these engagements and called on members of the American Chamber of Commerce (AmCham) in South Africa to partner government in its lobbying efforts.

AmCham president Jeff Nemeth, who is also president and CEO of the Ford Motor Company of Southern Africa, reports that the chamber is also planning a visit to Washington later in the year, where it also intends reinforcing the benefits of Agoa. Nemeth believes the US Chamber of Commerce’s recently formed US-South Africa Business Council will offer further support, as will the recent appointed of former US Ambassador to South Africa Donald Gips as the organisation’s chairperson.

Davies says the South African government is alive to the fact that the extension decision rests with Congress and that lawmakers have a significant amount of autonomy in extending their support to legislation such as Agoa. It is also aware that some are questioning whether South Africa, which is the largest and most industrialised country in Africa, shouldn’t be “graduated out” of Agoa, which is designed to support smaller, poorer African countries.

However, South Africa contends that it would be counterproductive for the US to withdraw Agoa benefits from South Africa while continuing to extend the scheme to its regional partners in the Southern African Customs Union and the Southern African Development Community. South Africa also argues that it is in the interests of the US for the programme to be retained under its current architecture, as material ‘goodwill’ flows to US firms as a result of the Agoa preferences.

It is less keen, though, for the discussion to be dominated by like-for-like market-access comparisons, particularly with the European Union, which has a free trade agreement with South Africa. “Basically what we need to do is talk to a lot of people,” Davies explains, adding that it would be naïve to expect support for Agoa simply because its extension is supported by the administration.

South Africa’s embassy in the US is leading much of the lobbying effort, but the Department of Trade and Industry also has a trade representative in the US, who is helping to narrow down the list of individuals who need to be canvassed.

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