19/11/2023 | By Busiswe Mavuso
The AGOA Summit held two weeks ago has sparked productive conversations on how South Africa and the rest of the continent can benefit. The US legislation gives eligible countries access to US markets free of tariff barriers. While the opportunity is grasped by many companies, especially in South Africa, far more could reap these benefits.
That was my main takeaway from an interesting session held last week by organised business on the opportunities presented by AGOA and how South Africa could further benefit. Apart from mainstream formal sector businesses, there are opportunities to enable more entrepreneurs, including women-led businesses and SMEs, to benefit. They may need support to build their export capacity, but the market is waiting for them once they do. This is I think an under exploited mechanism for small business development that those working to support small businesses should be exploring.
South Africa’s continued eligibility for AGOA is not certain, but there were positive indicators at the Summit that it will be on the list when it is published on 1 January next year. The US Congress also needs to extend the legislation when it expires from its current 10-year term in September 2024. There are good indications that will happen, with a members’ bill currently proposing to extend it for 16 years. A long-term extension enables planning and investment, so companies can build capacity to benefit from AGOA over the long term.
There are also opportunities for better regional outcomes. The African Continental Free Trade Agreement, which is slowly becoming a reality as countries align and sign up, potentially changes the dynamic of how AGOA and Africa engage. The trading block could allow better specialisation in comparative advantages on the continent, improving the offering to US markets. But planning could enable substantial further benefits – if we properly think about what the African export basket should look like in 2040.
We discussed at last week’s session that African markets are generally slow to take up opportunities created by free trade agreements and tariff-free access to markets like the US. We need to analyse why that is the case and plan to fix it. Network industries are part of it – if you can’t access ports to send goods out, it doesn’t matter how favourable the trading relations are. But there also needs to be promotion of the opportunities and support for the local business sector to develop capacity to take advantage of them.
Business and government must take the initiative to prepare that and not wait another year before doing the necessary work. I was much encouraged by department of industry, trade and competition deputy minister Fikile Majola who addressed last week’s session about government’s plans for AGOA and his confidence that South Africa can benefit. We must work together to enable businesses to grasp opportunities.
Also last week we saw the publication of a Harvard University report assessing South Africa’s economic performance. It made for sober reading. We have lagged our peers and the Harvard team, led by Ricardo Hausmann who has long been close to policy debates here, pins the blame on factors including cadre deployment and “ideological gridlock” in government that prevents solutions involving other social actors. The report cites the long resistance to the private sector, municipal and provincial government power generation as an example that has frustrated growth. That certainly rings true – we solve problems fast, electricity among them, when the state and private sector work together to play to their respective strengths. But when the state attempts to block the private sector, it creates delays and missed opportunities.
The Harvard report made an interesting background to last week’s session on AGOA. It made clear how government and business must work together, that the state can enable opportunities for businesses to thrive and grow the economy. Our eligibility for AGOA was called into question in the United States at the beginning of this year because of our ambiguous relationship with Russia. That storm seems to have calmed, but it showed how government actions can have a direct impact on opportunities for businesses to access foreign markets. Last week’s conversation was a much healthier example of government and business working together, the kind of thing the Harvard team suggests is critical to enabling our economic potential.
BLSA is a business organisation that believes in South Africa’s future and shares the values set out in the Constitution. BLSA is committed to playing its part in creating a South Africa of increasing prosperity for all by harnessing the resources and capabilities of business in partnership with government and civil society to deliver economic growth, transformation and inclusion.
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