Economies in Sub-Saharan countries stand to benefit far more from the African Growth and Opportunity Act (AGOA) than notable trade statistics, says President Cyril Ramaphosa.
"AGOA enhances the diversification of African economies, enabling them to export value-added products. By enabling African countries to have preferential access to the US market, this opportunity incentivises African countries to develop and export value-added goods and services. This does and will continue to reduce Africa's dependence on primary commodities and enhance its ability to participate in global value chains.
"Another important element of AGOA is that it has a capacity-building and technical assistance component that supports African countries in meeting the requirements for accessing the US market. This assistance helps improve Africa's competitiveness by enhancing skills, knowledge and infrastructure, enabling African businesses to meet international standards," the President said in his weekly newsletter on Monday.
The newsletter was released on the back of South Africa hosting the 20th AGOA Forum in Johannesburg, which concluded on Saturday.
AGOA is an initiative of the United States of America aimed at giving duty-free market access for producers in eligible countries in sub-Saharan Africa.
President Ramaphosa further explained how some economies' development can be enhanced through AGOA.
"If extended beyond 2025 for a sufficiently long period, and if used more effectively, AGOA can contribute significantly to the further diversification of African economies. It could enable countries to produce a wider range of products using the abundant minerals, metals and agricultural produce. The extension of AGOA could also encourage the further development of value chains across different countries.
"We have already seen this happening in South Africa's automotive industry, for example. Local automotive companies source leather car seats from Lesotho, wiring harnesses from Botswana, copper wiring from Zambia, steering wheel components from Tunisia and rubber from Côte d'Ivoire, Nigeria, Malawi, Ghana and Cameroon. The vehicles are finally fully manufactured in South Africa, then exported to the US duty-free under AGOA.
"This is a great example of the resources and industrial capabilities of different African countries being brought together to produce finished goods that can be sold beyond our shores. This is contributing to the creation of jobs both in South Africa and in other African countries, and raising foreign exchange earnings," he said.
Regional integration
President Ramaphosa said AGOA can be a catalyst for further economic integration between countries.
"Africa has been advocating for the integration of continental economies for a long time. AGOA encourages regional integration among African countries. To fully benefit from AGOA, countries are finding that it is far better to work together to increase production capacities, harmonise standards and develop regional value chains.
"This is demonstrated by the experience of 10 countries, including South Africa, in the production of motor vehicles exported to the US. This promotes cooperation, economic integration and the growth of larger regional markets within Africa," he said.
Local perspective
The President honed in on some of the benefits that South Africa already garners from AGOA.
"While [AGOA] may seem to many in our country to be a rather distant, even obscure topic, AGOA is an important instrument for growing and transforming our economy. The benefits of AGOA are felt in the lives of our people through increased economic activity and the jobs that such activity created.
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"South Africa benefits a great deal from AGOA. Our country is the United States' largest trading partner in Africa. The US exports more goods to South Africa and imports more goods from South Africa than any other African country. According to US Census Bureau data from 2020, South Africa was the largest destination for US foreign direct investment among AGOA eligible countries," he said.
President Ramaphosa emphasised that South Africa attaches great significance to its relationship with its American counterpart.
"South Africa greatly values its bilateral relationship with the US, one of our largest trading partners, with whom we enjoy relations that extend well beyond trade.
"We look forward to further engagement around the reauthorisation of AGOA at a time when its benefits continue to support our quest for economic growth, job creation and inclusive, sustainable development," President Ramaphosa said.
