The
African Growth and Opportunity Act (AGOA), a US trade program that
allows countries in sub-Saharan Africa to export thousands of goods to
the United States without paying duties, was enacted in 2000 and
expires in 2015…Exports from Kenya, for example, dropped to an
estimated $180 million in 2009 from a peak of $272 million in 2006,
said Rajeev Arora, executive director of the Africa Cotton &
Textile Industries Federation (ACTIF)…“Because of the uncertainty of the renewal of AGOA there is a definite drop,” he said…AGOA
became an important source of jobs on the impoverished continent,
particularly in the clothing sector, where most investment has been on
making the end products, not spinning or manufacturing textiles…“The
problem with AGOA was, being a limited timeframe facility people did
not come with long term investment,” Arora said. “What we need is to
develop the backward or downstream linkages to develop the fabrics from
Africa so we get the value.”..Africa produces 12 per cent of global cotton demand, Arora said. However, 95 per cent of it leaves the continent as lint…Most
of the companies taking advantage of AGOA import fabric from countries
such as China, Bangladesh, India and Pakistan, stitch them into
clothing and then export them duty and quota-free to the United States…This
arrangement is expected to expire in 2012 and the African countries are
not ready to continue manufacturing using textiles originating from the
continent…The biggest hindrances to growth have been the cost
of finance, cost of doing business, poor logistics and lack of the
necessary knowledge to access global markets, Arora said…It
costs $25-30 million to build a viable spinning plant, he added.
Financing for that, for example, would be at a 16-17 per cent premium
in Kenya…Most of the plants on the continent were operating at 30 per cent capacity, Arora said…“AGOA
should be on some sort of permanent nature basis so that we can develop
the middle stream industries and challenge the governments to assist in
developing easy financing, getting better logistics and cost of doing
business,” he said…Actif groups 18 member countries; Uganda, Kenya, Egypt, Tanzania, Lesotho, Ethiopia, South Africa, Malawi and Sudan…Others
are Madagascar whose AGOA deal was not renewed this year because of
political turmoil Mauritius, Swaziland, Zambia, Zimbabwe, Namibia and
Mozambique. Nigeria is the only west African producer currently in the
body…Although it seeks an extension of the preferential trade
to the US market, Actif acknowledges that the greatest demand can be
created at home…“The biggest growth can happen within the
region,” Arora said. “You don’t have to look outside to sell your
product. You can sell within”
Date:3/14/2010
Source:Reuters