America.gov (Washington, DC)
Charles W. Corey
3 August 2009
Nairobi — The East and Central Africa (ECA) Global Competitiveness Hub, one of four such U.S.-sponsored African trade offices, is promoting greater U.S.-Africa trade as well as increased African regional trade. It has directly closed at least $29 million in trade deals since its creation in 2003.
The ECA Hub, located in Nairobi, is operated by the U.S. Agency for International Development (USAID). Other U.S. trade hubs -- located in Dakar, Senegal; Accra, Ghana; and Gaborone, Botswana -- have directly closed, collectively, more than $135 million in trade deals since their inception earlier this decade.
Three USAID employees based in Nairobi -- Stephanie Wilcock, regional trade adviser; Larry Meserve, deputy regional director; and Kim Wylie, development outreach and communications specialist -- sat down with America.gov August 1 to discuss the operation of the ECA Hub.
All three were gearing up for the Eighth United States-Sub-Saharan Africa Trade and Economic Cooperation Forum, which takes place this year in Nairobi, Kenya, August 4-6. The meeting is also known as the AGOA Forum named after the U.S. African Growth and Opportunity Act.
Since 2003, the ECA Hub has worked with hundreds of firms and has been responsible for millions of dollars' worth of exports to the United States, under AGOA in particular.
Beneficiary companies such as Kenana Knitters of Kenya have tripled their work forces and are now selling their creative products in the United States and, in particular, to the prestigious U.S. retailer Saks Fifth Avenue.
Gahaya Links of Rwanda has been able to create more than 3,000 jobs by producing and exporting decorative baskets to the giant U.S. retailer Macy's.
Other firms, such as Novastar Garments of Ethiopia, and Phenix Logistics, which makes organic cotton apparel in Uganda, have also now penetrated the U.S. market, thanks to the ECA trade hub.
Wilcock said the ECA trade hub staff holds numerous workshops to "educate" those across the region on how to qualify their products for export to the United States under the U.S. AGOA trade preference program. They also help identify business firms that might have export potential to the United States and take some African firms to U.S. trade shows to help them market their wares to American buyers.
She said the hub -- which is now working with an increased budget -- is also now coordinating closely with private sector businesses across the region to lobby African lawmakers to further streamline the regional trade process.
"Having focused initially on AGOA, I think all of these hubs have expanded and realized that there are a number of barriers in taking advantage of AGOA, and those come in the form of a poor business climate, high transport costs and high energy costs," Wilcock explained.
Turning again to her Nairobi hub, Wilcock said it "focused a lot on AGOA at first but then quickly diversified into programs designed to expedite transport" from the region to reduce costs.
Illustrating her point, she said "At Malaba -- the major rail customs border point between Uganda and Kenya -- we worked to reduce clearance time by introducing a one-stop clearance process where both sides clear products together rather than separately."
That, she said, has dramatically reduced clearance time from three days to three hours and has thus saved time and costs for everyone. That same process, she said, is now also being applied to truck traffic.
Meserve said the ECA Hub is now working with the Common Market for Eastern and Southern Africa (COMESA) and other regional economic commissions to reduce trade barriers and "bring out more common policies" from which everyone can benefit.
That includes promoting regional transit facilitation and encouraging common tariffs and one-stop border posts, he said. Most countries work bilaterally and so cannot do that, he explained.
"The hub's value-added" contribution, he said, "is bringing in a regional problem-solving approach and clearing barriers to trade."
The use of common regional systems, he said, actually has "significantly reduced the transit time for goods in shipment and, with that, the actual cost of doing business. We are working with the ports too, with the East African Freight Forwarders Association, to help standardize procedures and certification processes to professionalize their systems," he said.
Traders are forced to purchase a bond in each country where goods are transshipped, guaranteeing that those products will not be sold in that country. Clearance of those bonds can take up to a year.
Wilcock said it is estimated that up to $500 million in scarce capital is locked up in this bonding system. If a regional approach can be adopted, much of that scarce capital would be available for other investments.
Wilcock said there are competitiveness arguments mandating the need for taking a regional approach to trade. "For transit, it makes a big difference for your global competitiveness level," she said.
Such a regional approach is also helpful in the area of financial services and transaction costs, she added, which tend in sub-Saharan Africa to be "some of the highest in the world. ... If you can scale-up with financial integration on a regional basis, you can reduce those transaction costs" and make those goods more competitive.
Those costs are especially pertinent in the area of cotton and textiles, she explained, where different parts of the supply chain exist in different countries.
"Kenya is a big apparel producer, Tanzania has cotton and lint production, cotton is grown in Uganda, and garment trims are produced in other countries," she said. Individual country tariffs present huge additional costs to the end products, she said, and thus make them less competitive.
Kim Wylie, USAID's development outreach and communications specialist in Nairobi, said that, ultimately, "if regional trade increases, if poverty is reduced and an African middle-class is created, think of the market that there would be for African products just in Africa, and that will spur even more economic growth and development across the continent."
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