The
legislation significantly enhances market access to the USA for qualifying SSA
countries. Qualifications for AGOA preference is based on a set of conditions
contained in the AGOA legislation. In order to qualify and remain eligible,
each country must be working to improve the rule of law, human right, and
respect for core labour standards.
The recently
concluded AGOA forum (between African representatives and the USA officials)
that was held in Lome, Togo (August 8-10, 2017) to deliberate on how SSA can
take advantage of this trade programme did not yield any result, neither was there
any conclusion on the way forward. As a matter of fact, the feedbacks tend to
tilt towards warning enthusiasm about the future of the Act, even though it
still has about 8 years to its expiration. Many observers have expressed
concerns about the fact that SSA countries are not taking full advantage of
this opportunity.
I do not see
any reason why anyone that is conversant with the situation of the African
continent should be surprised at the very low volumes of exportation from the
SSA countries to the USA. The situation is like giving a big and well spiced
chicken lap to a child that has no teeth, and then expressing perplexity over
the fact that the child is unable to bite the chicken and take full advantage
of the nutrients inside. The majority of African countries have fundamental
issues and challenges that need to be addressed before we can take advantage of
any trade Partnership and agreement like AGOA from the USA, or even the
Economic Partnership Agreement from the European Union (EU). I have categorised
all these challenges into seven groups which include product, purchasers,
paperwork, pricing, payments promotion and policy.
The Product
to be exported is a major challenge. It is no more news that major export
products of Africa nations including the SSA countries are mainly agricultural
commodities, crude oil and raw metals. On the other hand, most of the over 6000
items on the AGOA product list are not raw products, they are mainly value
added products in their secondary or tertiary states. So if the SSA countries
are going to be able to benefit from AGOA, there is a great need to shift from focusing
on primary products and begin to add value to them in order to convert them
into secondary or tertiary products. This has not happened for the past 17years
that this USA trade law has been in place because of other issues that I will
discuss in other factors below.
The next
major challenge is purchasers. These are the buyers of the products in the USA.
They operate under strict regulations that must be adhered to before they can import
any product into the US market. This means anyone planning to ship to a US
buyer from the SSA countries need to be able to demonstrate competence to
deliver the right product(s), consistency in delivery and credibility. We in
the SSA countries are in an environment where mediocrity thrive thus, coming up
to the high standards demanded by the buyers become a task that only few
companies can achieved.
The
challenge of paperwork is another major obstacles that has impeded the progress
of AGOA in the SSA countries. These has to do mainly with the post export
documentations. For the importer in the US to enjoy the duty free benefits on
the goods being imported, the exporter from SSA countries provides the
following documents; Commercial Invoice, Certification of Origin, Bill of
Lading, Packing List, and other necessary documents peculiar to the importation
of such goods into the US market. The challenge is not the documents themselves,
but some specific details that must be stated on them before it can be allowed
into the US market without the payment of duty fee. For example the Certificate
of Origin must conform to the details required for rule of origin while the
Commercial Invoice for Apparel has to be stamped with original AGOA visa by the
exporting country's authorities.
Pricing is
undoubtedly a major challenge that confront the AGOA programme. Despite the
fact that the goods under this scheme are allowed into the US market free of
duty payment, the infrastructural deficit is so high thus, leading to the high
cost of production. The bad roads leads to high cost of transporting the goods,
lack of power supply leads to high cost of running the factory, lack of
certified laboratory increase the cost of quality certification (since samples
need to be sent abroad to reliable laboratory analysis). Therefore, we need to
fix the infrastructural deficit in order to be reasonably competitive.
Another
vital factor that mitigate against the low volume of exportation under the AGOA
programme is Payment. The seller wants to get payment before the buyer gets the
goods while the buyer wants to see the goods before making payment. However,
since more than 80% of the world trades are done on open account (which means
the buyer will first see the goods before effecting payment), the seller is
therefore forced to agree to this payment terms. The implication of this is
that the seller might not get payment (because of the low quality of good
shipped) and this therefore discourage them from further shipment. If the
government fix the port issue and ensure that only good quality products are shipped
and secure the expected payment via an export credit insurance, this problem
can be addressed.
The need for
continuous Promotion of the AGOA programme by the relevant government agencies
through different print, electronic and online media cannot be over emphasised.
The first aim of this promotion is to continuously educate the public about the
programme. The second aim is to correct the mindset of business people in SSA
countries. There is a mindset issue that has been created for a long time that
need to be corrected, and this is the desire to always prefer to export
products in their primary state. The citizens are simply following the
footsteps of government through the exportation of crude oil. The government
needs to champion this initiative both in words and in action.
The last and
probably the most important factor is the government Policy. If the SSA
countries want to benefit maximally from the AGOA trade law, they must
formulate policies that will make exporting to the US under AGOA to be become
attractive to the business communities in their various countries. Some of
these policies include; an export growth desk in the presidency to fund and
drive the promotion strategies stated in the previous paragraph, a completely
tax free regime should be given to company that add value and export under AGOA
to the US, a quarterly intensive training that will last for one week should be
organise free of charge only for those that have already started production of
their products to build their capacity, connect them with sources of funds and
potential buyers in the US, a committee should be setup that will review the
progress made on a monthly basis, address the challenges and report to the
export growth desk in the presidency through the Nigeria Export Promotion
Council (NEPC).
I am very
sure that if the points raised in the article are well noted and the various
suggestions acted upon, in a few years, even if we have not completely fix our
infrastructural deficit, we will begin to see the desired growth in the volume
of exportation that is being done by the SSA countries to the US market and
other export markets around the world.
For question you reach me on bayemibo@3timpex.com
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