AGOA renewal offers great opportunities for Africa
AGOA renewal presents unprecedented opportunity to sub-Saharan Africa
Should the African Growth and Opportunity Act (AGOA) be renewed for ten years as expected, there would be unprecedented opportunities for the sub-Saharan Africa textile and apparel sector, according to an expert speaker at this year’s Source Africa textile, apparel and footwear trade event.
Rosa Whitaker, CEO and president of The Whitaker Group, a Washington-based consultancy, transaction advisory and project development firm specialising in Africa, however stressed that ‘AGOA2’ "is an opportunity, and not a guarantee."
She told the event, held last week at the Cape Town International Convention Centre, that "the 10-year time span offers an unprecedented opportunity for sub-Saharan Africa textile and apparel producers to establish integrated supply chains, to take advantage of the preferential trade provisions which AGOA offers."
Whitaker was one of several speakers with expertise on AGOA at the event, now in its third year, which attracted over 1,600 international buyers, and more than 200 African exhibitors.
Speaking at a seminar on ‘AGOA Renewal – The Next 10 Years’, Whitaker predicted that the US Congress, despite its divisions over free trade, would approve the relevant legislation this month. Whitaker was instrumental in drafting the legislation while she served as the first ever US trade representative for Africa, under the George W Bush and Bill Clinton administrations.
Her views were endorsed by current assistant US trade representative for textiles and apparel Gail Strickler, speaking during the same seminar: "This is the only category with such preferential tariffs," Strickler said, "and this extension provides an opportunity to attract a whole new group of foreign investors. Return on foreign investment is higher in Africa than any other developing region.
"[Textiles and apparel] has the most liberal region of origin rules of any foreign trade agreement we have," said Strickler, "with the only specification being where the garment is made." She went on to note that between the US’s AGOA and various EU trade agreements, 50% of the world apparel market is accessible to sub-Saharan African producers largely duty free.
But lack of transport and logistics infrastructure is the ‘Achilles’ heel’ of sub-Saharan African countries, according to Janet Labuda, vice president of global compliance at Vandegrift Forwarding, who cited a comparative example. "According to a World Bank study, it takes 12 days to get a container from Egypt to the US at a cost of US$625. From Angola it takes up to six weeks at three times the cost."
She added that African ports are congested and under-developed, requiring improvements in cargo tracking including the use of RFID (Radio-Frequency Identification) technology. Taking full advantage of the AGOA renewal would require substantial reductions in time to market for the region’s goods, she said.
Third country fabric status
Meanwhile, the South Africa National Fashion Council executive director Anita Stanbury appealed to Whitaker during a question time to lobby for South Africa to be granted third country fabric status, allowing it to use imported yarn and fabric and still export SA-made clothes to the US duty-free.
This, she argued, would let South Africa take full advantage of the AGOA renewal: while its textile industry has potential, the country’s manufacturing capacity has declined dramatically in the last decade, with the majority of spinning mills closing their doors, making it harder for clothing manufacturing companies to take advantage of AGOA access.
Whitaker responded by suggesting that South Africa should lobby for third country fabric status directly, as Mauritius had done successfully. "I wasn’t in favour of third country fabric status for Mauritius when they started lobbying for it, but they made their case convincingly, and were eventually successful."
But Strickler argued that in her view, third country fabric status might not have a positive impact in South Africa, explaining that with the country’s comparatively high wage rates (for the region), local producers ought to focus on the higher value fashion end of the market.
Speaking after the seminar, executive vice president of American Apparel & Footwear Association (AAFA) Stephen Lamar said: "I don’t necessarily agree that third country fabric will militate against the development of local textile manufacturing capacity, but in any case, AGOA provisions permit a country to source fabric regionally. So, for example, South Africa could source fabric from other SSA [sub-Saharan Africa] countries."
Also speaking to just-style.com after the seminar, Whitaker said that SSA garment manufacturers must get closer to their customers. "It’s not a case of ‘build it and they will come’," she said. "They need to get closer to their customers, to the extent that they should have a presence in the US."
Lamar also noted the need for the region to develop a better integrated supply chain to reduce time to market, particularly for time-sensitive lines. "An example is Nigeria, one of the biggest producers of cotton in Africa, which is rainfall irrigated. It has the potential to become a powerhouse in quality cotton fabric production, for use by garment makers in Nigeria and the wider SSA region."
He agreed AGOA renewal presented unprecedented opportunity to Africa, but with no guarantees: "It’s up to countries in the region to integrate their supply chains, to shorten distance between fabric makers and garment makers, and also to pursue intra-regional trade. None of this will happen on its own."
Regional supply chains
In a seminar on regional supply chains, Heinrich Schultz, managing director of OrganiMark, a South African supply chain engineering company, stressed the importance of traceability for ethically conscious consumers.
"Increasingly, consumers want to know that the garment they purchase is made in a factory which observes ethical standards for labour, wages, conditions of employment, and is also environmentally conscious and sustainable. In order to do that, product level traceability must be engineered into the supply chain."
Speaking during the same seminar, Mark Neuman, global trade advisor at MGF Sourcing, said SSA countries needed to facilitate the flow of people and expertise into their economies. "Improvements in the supply chain rely on technology, expertise and people. It is essential that the movement of people be facilitated, both from an investment and an expertise viewpoint. The immigration regime in a country must foster the easy movement of people who are required by a country’s garment industry. For example, if a customer needs to locate somebody in the country close to the source of supply, that process must be as easy as possible."
A package of bills currently working its way past Washington lawmakers includes legislation to reauthorise AGOA and extend the trade pact for ten years, simplify rules of origin, add notification and reporting requirements, and improve transparency and participation in the AGOA review process.
For further insight into Sourcing in Africa: Challenges and opportunities, click on the following links:
- Sourcing in Africa: AGOA extension key
- Sourcing in Africa: EAC readies for EU market access
- Sourcing in Africa: An alternative to Asia?
- Sourcing in Africa: Foreign investment flows in
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