Opinion
But What Does Africa Want?
By Eyob Tekalign
Africa has undergone a remarkable transformation. Yes, the truth is that most countries have not been able to take advantage of AGOA; not exploiting their full potential under this arrangement. The idea was that the big market opportunity in American would encourage Africans to organize themselves and harness their resources to export to the U.S.
Over the last 13 years, there has been a mismatch between what we as Africans want, and what our American counterparts expect from us. In the process, what has actually happened on the ground is that Africa has undergone a remarkable transformation. Yes, the truth is that most countries have not been able to take advantage of The African Growth and Opportunity Act (AGOA); not exploiting their full potential under this arrangement. You can divide the reasons into two: One is because of serious supply-side constraints in Africa, and the second reason is on the American side.
To start, at the various AGOA forums we’ve had over the years, focus has been on America and how it is not doing enough to help AGOA along. There has been a constant call for the U.S. to support African countries in their AGOA efforts. But over the last three years – starting with the AGOA Forum we held in Zambia – the African countries started to suggest that they must look into their own houses to address issues; getting them in order, so to speak. Lusaka in 2011 was a turning point.
Then, as Chair of the Experts Group in Lusaka, the one thing I remember coming up consistently was this: Have we, as African countries, looked into ensuring that we take advantage of AGOA? Out of this meeting came the idea to develop national AGOA strategies for each AGOA beneficiary country. The idea was pushed through to the Ministers’ Meeting, and our Ministers overwhelmingly endorsed it. They, then, gave this assignment to the African Union and the United Nations Economic Council for Africa (UNECA) to help each country develop its own AGOA National Response Strategy. Ethiopia was the first pilot country to undertake this strategic initiative and in this regard, the Ethiopian Ministry of Trade, in cooperation with the African Trade Policy Center of UNECA developed a National AGOA Response Strategy to identify those constraints that impede the performance of the export sector.
An AGOA Baseline
Now, even though AGOA is about 13 years old, it took African countries many years to understand the essence of trade preferences and market access provision.
For instance, in Ethiopia, many people did not know what we were doing when we started having meetings with exporters in Addis Ababa. Business people and even the government did not understand the real potential of AGOA, not knowing that AGOA’s key architects expected the program to help with transforming Africa’s economic structures from mere agricultural sectors to stronger industrialized entities.
The idea was that the big market opportunity in America would encourage Africans to organize themselves and harness their resources to export to the U.S.
At the time, while I was Minister Counselor at the Ethiopian Embassy here in Washington, DC, we, for example, had discussions with Whole Foods to have an Ethiopian specific shelf at their nationwide stores. We worked on this plan for 3 years, and at the end of it all, we could not even provide one product, let alone a whole shelf. Africa, as a whole, lacks the capacity to produce products, package them – brand them and place them in a way that Americans could consume them. Even passing the quality standards is next to impossible.
Advent of National AGOA Response Strategies
The new development from Lusaka meant that all AGOA beneficiaries had an obligation to create their own National AGOA Response Strategies. What these national strategies will do is look at a product line from end to end. Subsequently, we can develop a holistic approach to ensure that our market potential – in specific regard to exporting to the U.S. is fulfilled.
In Ethiopia, to prepare for the national strategy, we held a national workshop with key stakeholders – private sector, government and donors – and talked about the fact that our country only supplied about 10 percent of sub Saharan Africa’s exports. When we asked why people were not taking advantage of AGOA, we found that on top of not knowing about the opportunity, there was not technology or production capacity. We couldn’t produce quality leather or textile products – the kind that could compete in the U.S. or against other African products. Many of those in the private sector did not have access to finances, and even with our 80 million or so people, Ethiopia does not have a fully trained workforce to man an industrialized economy.
On the government side, our agencies were not coordinated – customs, trade, commerce and private sectors had no strategic direction. What one agency did usually contradicted another: Customs contradicted trade and there were misunderstandings with the private sector. This had to stop. In fact, the AGOA exercise not only highlighted our dire need for a plan; it generated a high level steering committee chaired by the Trade Minister to report to the Prime Minister. We agreed on the need to set up sector and area specific Technical Groups, and a full-fledged AGOA center to oversee the implementation of the National Strategy.
Benefiting Ethiopia and Beyond
Interestingly, our plan has already started to resonate with many countries in Africa – including Zambia and Kenya. Even more importantly, although the current strategy – running from January 1, 2014 to 2018 is U.S. specific and meant to exploit the AGOA opportunity – we also find that if we do this properly, the national AGOA strategy can help us with our national goals and also with improving competitiveness in the export sector.
The issues of finance and human resource are the same and affect the national and continental capacity. This is a huge development, and AGOA has been the impetus to reach for the next phase of Africa’s economic milestones.
The Ideal Partnership Between the U.S. & Africa
Switching to the other side of the Atlantic, I believe that the U.S. is missing out on Africa. Although the U.S. is still helping Africa via programs like AGOA and PEPFAR, the U.S. is still a long way from being a key trading partner for Africa. That place is currently occupied by China and other third countries, including fellow African countries and regional economic communities. The U.S. private sector – save for the big boys like GE and Walmart – is largely missing from Africa. Therefore, if I was to look into an ideal partnership between the U.S. and Africa, it would be one where economic relations were given as much significance as the political and geo-strategic ones. For instance, if you want to do business with the ExIm Bank, this kind of deal takes years to even come to fruition – while China’s state owned enterprises can easily pour in billions of dollars into Africa in a short period of time.
Not only is this a strategic miscalculation on America’s part; this, on its own severely limits the U.S. private sector from chasing for the opportunity in Africa. It also shows that the U.S. neither has a solid strategy for Africa when it comes to an economics agenda, nor a coordinated one at that.
Agencies like the US Trade Development Agency and ExIm Bank are already in place, and through these, the U.S. can build upon various emerging markets work since this is in plenty. These agencies could support USAID instead of what has happened in the past.
Fortunately, this is seemingly starting to change. It seems as though the Obama Administration’s ‘whole-of-government-approach’ is starting to bear fruit; but of course, things need to move much faster if the U.S. is going to achieve its true potential under AGOA or any other program.
But what does Africa want?
At this juncture, someone may ask: But what does Africa want from the U.S.? The answer is quite simple: Africa wants the U.S. to be a key partner in its economic and not only political transformation.
Most African countries now have strategic plans and there is a sizeable movement and urge to join the resat of the world. Africa is tired of poverty, and is dying to join the industrialized world.
The U.S. has not been absent from Africa. But the support from America is not aligned with national economic strategies. The amount of aid flowing from the U.S. to Africa may be significant – but it is not necessarily making a dent in the things that matter. Fortunately, the 2013 AGOA forum proposed something called the AGOA Compact.
The essence here is that if you want to solve supply side constraints, you must devote a significant amount of resources.
The current effort on the regional trade hubs and trying to enhance market linkages and supporting African exporters is just not portentous enough for
the effort required to be truly revolutionary.
African countries need to solve the supply side approach in one go. From one end of the production line to the end. So, with national AGOA strategies with sectors prioritized – African countries can manage the resources towards the AGOA Compact and this will bring success to Africa as a whole. One has to look at their own country, look at sectors that have potential, and ensure that these country strategies have resources committed to them. At the continental level, the different country strategies would make the AGOA Compact and mirror what the U.S. did to boost demand and markets in Europe and Asia after the end of the Second World War.
This is the kind of thing Africa needs. It is also in line with AGOA because if you look at any country that has developed over the past 50 years, it has developed on the back of the U.S. market. Why, therefore, should thing be different for Africa? But all this needs to start with creating an under
standing within the U.S. government. The various agency heads and their staff need to know that they have a role to play in Africa. Congress needs
to appropriately channel resources already available into the economic sphere – away from the political or strategic one. The AGOA Compact could be like the Millennium Challenge Corporation (MCC) but would be especially concentrated on trade and investment promotion in Africa.
The Ministers’ Group from the African Union has decided that this is the way to go and AGOA Forum put significant attention on it. The AGOA Compact will track all the countries’ plans and AGOA Strategies – sorting out what has been achieved and what needs to be improved, and this could form the basis for updates at each forum.
When the AGOA Compact and the National Strategies are aligned – where you track their performance through the Compact – you have an effective way
to leverage the resources, and then also find out if the resources are making an impact. Earlier resources are a little difficult to monitor or evaluate, while, with the Compact, you have an efficient tool to manage the resources with each intervention. If these were to happen over the next 5 to 10 years, you will see a significant change in the trade and investment dynamic between the U.S. and Africa.
Now, if President Obama, at his August 5th and 6th summit with the African heads of state puts in place something like the AGOA Compact – or named something else – this must be a comprehensive plan that handles everything; from trade and investment, inter-agency relationship to strategy. This is what will help the United States of America.
Summarily, Africa is more serious than ever about doing business with the U.S. This is happening at the local, country and continental levels. Research undertaken by UNECA shows that this is real. We should now look at what is bound to happen in Africa’s future other than what happened in the past.
Relatively, the U.S. and Africa must remember that it takes two to tango. The Africans are being serious about AGOA. They are seriously thinking about the longevity of the relationship between the U.S. and Africa – and thus, the U.S. must act and show serious commitment or a level of commitment to compliment what the U.S. could benefit from a growing African middle class.
Ultimately, this has an impact on regional integration.
AGOA does, indeed, affect regional integration. When Madagascar was removed from AGOA, other African countries like Mauritius lost out.
Countries are moving together. Look at the remarkable progress that is happening in the Tripartite Group, and also in ECOWAS. Ethiopia’s leather industry is exporting to African countries and these are using infrastructure like COMESA to do business with each other.
There’s empirical evidence in the various studies like the UNECA Brookings study that show that AGOA must continue to do what it has done in the past.
We must, therefore, not punish those that are doing well –like South Africa – so that Africa can do much better in terms of regional integration.
Editor’s Note:
Eyob got onto a flight from Addis Ababa, flew into the U.S. on a Thursday evening – and on Friday morning, he was ready to meet
with people, clients and colleagues to prepare for the testimonies at the United States International Trade Commission (USITC). Although he had a tight schedule, he sat down for an in depth conversation, and then even wrote this eloquent piece for us. We can only hope that you learn something from this article. We did, indeed.
The views expressed in this article are neither those of Ethiopia’s Government nor those of UNECA.