Africa: over-hyped or underestimated?
The US Senate's passing of the Trade Promotion Authority Bill (TPA) on 1 August expands the duty-free treatment for textiles contained in the African Growth and Opportunity Act. It may be the best thing that's ever happened to the African apparel industry says Mike Flanagan, who goes on to lament: if only pressure groups and other governments could be as helpful.
Since the United States' African Growth and Opportunity Act (AGOA) passed into law in May 2000, hype and confusion have marked comments made on Africa by most governments and pressure groups. Two years on, for example, US apparel imports from Africa are still only a quarter of the EU's imports. True, they're growing faster (15 per cent up in dollar terms in 2001, compared to a "mere" 7 per cent increase in the EU's imports). But still a drop in the ocean - only 2.5 per cent of all America's apparel imports.
A new survey from the UK's Clothesource - 'SupplyBase Guide to Manufacturing Resources: Vol 1 Sub-Saharan Africa' casts light on this.
South of the Sahara, only four countries (South Africa, Madagascar, Mauritius and Lesotho) really have a large network of clothing and raw material factories capable of meeting western mass-market demand - though there is capacity available in Botswana, Swaziland, Kenya, Malawi and Zimbabwe, and a lot of capacity being developed in many other countries. Elsewhere, countries need investments in new capacity. In Namibia and Senegal that investment is now starting, but throughout the world African governments are making the case for why their country is the best place for expanding apparel and textile manufacturers to invest.
Prior to AGOA, almost every country in Africa had duty- and quota-free access to the EU, but we didn't see such an investment explosion. Many other countries have duty- and quota- free access to Europe as well. Eastern Europe and North Africa have fast access to Europe by truck; countries like Bangladesh and Sri Lanka have sophisticated local industries. Africa, south of its Mediterranean coast, just wasn't that interesting to Europeans. And Japan is so close to the highly developed industries of East Asia that Japanese buyers really aren't that interested in anywhere else.
But the US is different. The US puts duty and quota restrictions on imports from almost everywhere - except Mexico and, since AGOA, eligible African countries. So for the first time ever, many countries in Africa have a competitive advantage in trading with the US over most of the rest of the world. All they have to do is develop the factories to make the clothes - and then, make clothes customers will buy
But until August 2002 there was the problem. AGOA originally offered tariff and quota concessions only if eligible countries accounted for 3.5 per cent or less of US apparel imports. Investors were taking a gamble: if they and their competitors developed sales to the US, they might easily shut the door on themselves. The TPA act has now doubled this cap - in practice allowing African exports to more than quadruple between now and 2008, and still have duty-free access to the US (quotas, of course, are removed from almost all apparel trade in 2005).
So TPA isn't just good for those African countries; it's also good for the US - not just because it makes clothing better value, but because the Act recognises some US jobs are likely to be lost, and has measures to ease the pain. It's good for Europe too - because, by attracting new investment into Africa, it increases the amount of high-quality, duty-free, apparel capacity near Europe, in the European time zones (Europeans can get to Africa without the jet-lag that inevitably goes with buying trips to Asia).
It's even good for Canada and Japan. Canada and Japan make great play in public over their "enlightened" trade policy, which offers duty free access for the world's poorest countries. The problem, as far as Africa is concerned, is that these policies (described by Canada's Prime Minister as "intended to give [Africa's] economy a major boost") are almost meaningless.
Of the 34 African countries Canada will offer duty-free access from 2003, for example, precisely one - Madagascar - has an apparel industry with any kind of capacity to trade with North America. Even tiny Portugal, with a larger apparel workforce to protect, offers more generous access arrangements to the world's poor countries than Canada. But as US legislation improves Africa's facilities, more of the rich world will have a wider choice of modern, low-cost, factories to choose from.
Sharpening up their acts
TPA doesn't solve Africa's problems overnight, though, and it's not just western countries like Canada that need to sharpen up their act. However much investment is poured into Madagascar, it will take US and European buyers a long time to forget the chaos and human misery caused by the self-indulgent posturing of the country's two rival presidents.
Lesotho's garment workers' union, LCAWU does no-one any favours when it calls for a total US boycott of its members' products: who's going to invest in a country whose workers sound so self-destructive? (Though to be fair to the people of Lesotho, this particular union also calls for a ban on second-hand clothes sales, and may not therefore be representative of anyone but themselves).
And when garment workers in the area around Cape Town go on strike, as they did in June, for reasons quite unconnected with their companies, who in Europe or North America is going to put more business into South Africa, with all the risks to timely delivery that irresponsible trade unions create?
Increasingly, as the SupplyBase Guide shows, Africa now has manufacturing facilities that can compete with anywhere - and, in the SupplyBase Guide detailed help on how to find them. All it now needs are more responsible politicians, both in Africa and in the richer countries.
Mike Flanagan (firstname.lastname@example.org) is chief executive of Clothesource Sourcing Intelligence, a UK-based consultancy that provides the western apparel buying community with objective information on apparel production, trade, price competitiveness, and apparel producers in over 100 countries.
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