US-Africa Summit: What post agenda for West Africa?

12Aug2014
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By Emanuele Santi and Mohamed El Dahshan,

As the largest-ever US-Africa gathering of leaders came to a close, the debate on the future of the US policy for Africa has once again resurfaced. While interesting suggestions are put forward by economists and other experts – this argument by the Center for Global Development on closing the energy gap is among the most interesting – it may however be judicious if, rather than hope for a new grand scheme to be implemented, we take a deeper look at the existing US economic policies and instruments towards Africa, and analyze their effect on the West African region.

The flagship economic policy of the US-Africa policy as it stands is the African Growth and Opportunity Act (AGOA), by which the US decided to incentivize African countries to open their markets and partake in global trade, by offering to eliminate import duties on over 6,400 products exported from 38 eligible Sub-Saharan countries, including all 15 West African nations.

Indeed, US President Barack Obama had vowed, in a 2013 press conference in Senegal, that the AGOA programme would be "renewed and improved". The programme indeed stands to be greatly improved. For one, the yearly renewal of AGOA appears to present some difficulties for investors in terms of investment planning and diverting resources to AGOA-compliant exports. As such, a number of African ambassadors to the US drafted a proposal suggesting AGOA be renewed for 15 years.

As displayed in the table below, which details the yearly exports from AGOA beneficiary countries to the US over the past 10 years, few countries appear to have benefited from the preferential access, with Nigeria and, to a lesser extent, Côte d’Ivoire, far ahead.


2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014 Q1

Nigeria

16,267

23,801

27,709

32,373

37,756

18,753

27,884

32,348

18,179

11,122

973

Côte d’Ivoire

697

784

552

545

710

696

926

1,069

1,083

932

543

Ghana

138

154

191

197

177

132

250

748

257

306

69

Guinea

64

74

91

95

105

67

90

80

103

90

27

Liberia

84

91

130

115

143

78

155

158

144

93

18

Sierra Leone

9

9

35

47

46

23

27

23

15

39

12

Senegal

2

3

18

12

16

6

4

6

16

16

5

Togo

1

6

4

5

11

7

9

31

50

7

3

Benin

1

1

1

5

16



2

3

3

2

Niger

15

61

117

8

43

105

26

288

81

2

1

Burkina Faso


2

1

1

1

2

2

3

2

6


Cape Verde

3

2

1

2


1

1

1

1

1


Gambia







3





Total

17,281

24,988

28,850

33,405

39,024

19,870

29,377

34,757

19,934

12,617

1,653

Table 1.Combined AGOA Exports to the United States (including GSP), million USD
Source: AGOA.info portal, based on United States International Trade Commission data.

The profile of AGOA trade shows that a massive concentration on the oil and gas sector. In the first quarter of 2014, for instance, African exports under AGOA totaled $3.4 billion; a whopping 74% of those being petroleum products. Non-fuel products, worth $890 million, were almost exclusively raw materials, mostly agricultural products. During that same period, West African countries exported $926 million worth of goods under AGOA only – a figure rising to $1.653 billion if we were to include duty-free exports under the WTO’s Generalized System of Preferences (GSP) as well.

Table 2 and the accompanying graph break down the latest figures on exports to the US under AGOA, by sector, for a clearer idea of the relative importance of export sectors. 

Product

Value (USD)

Percent

Oil and Gas

$22,781,896,155

59.80%

Primary metal manufacturing

$3,063,465,495

8.00%

Petroleum and Coal products

$2,683,498,920

7.00%

Transportation Equipment

$2,528,074,222

6.60%

Miscellaneous manufactured commodities

$1,679,184,263

4.40%

Agricultural products

$1,315,531,485

3.50%

Apparel manufacturing products

$921,160,903

2.41%

All Others

$3,139,099,559

8.23%

Total

$38,111,911,002

100%

Table 2: US Imports from AGOA Beneficiary countries, by sector, 2013

Source: US Government trade statistics, Department of Commerce.

Of particular relevance to West Africa is the opportunity to export textile and apparel – a sector clearly marginal in the AGOA export product mix to date, despite its great potential. West Africa is the second-largest regional group exporting cotton, providing 11% of the world trade in the commodity; a major source of agricultural income, it provides up to 12.7% of the agricultural value-added in Mali, 7% in Burkina Faso – most of it to smallholder famers. Yet 83% of Sub-Saharan African cotton is exported as lint; and disparities between countries mean that transformation rate decreases further, reaching only 5% in francophone Africa. Moving the African cotton and textile sector up the value chain has the potential to transform many countries in the region – and improve the livelihoods of millions.

The Africa Investment Incentive Act of 2006, which amended the textile section of the AGOA, stipulates the rules governing the textiles to be granted duty-free access to the US were generally generous. More importantly, the quotas determined for those good were never filled by the beneficiary countries. In fact, in 2012-2013, the export quota was only filled to 12.59% under AGOA; the year prior, 10.14%.

Thanks to the wealth of raw material and the geographic proximity of the sub-region to the United States, the textile and apparel industries could be key to break the dominance of raw materials on West Africa’s exports under AGOA. For this to happen however, investment are needed in energy and transport infrastructure, which represent today two major bottlenecks to the development of the sector. In many countries of the region, energy costs are significantly higher than in the rest of the continent, largely due to expensive delivery and inconsistent supply, forcing people to rely on more expensive backup energy sources. Transport costs are also often noncompetitively expensive, due both to weak infrastructure and inefficient logistics, administrative delays, and corruption. The US initiative Power Africa could also play a complementing role to accompany the country in such needed reforms.

Finally, the cotton and textile sector also requires a better comprehension of the value chain, improved capacity of cotton-related organisations, and a new regional strategy for sharing knowledge, skills, and sourcing of materials and technology. This must be complemented by a promotion policy aimed at familiarizing potential customers with West African cotton and textile products. The rising outlook on cotton prices gives West African countries ample room to enact their long-planned market reforms and investments in ginning facilities.


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