South Africa’s Ramaphosa Emphasizes AGOA’s Vital Role in Driving Africa’s Industrial Development

South African President Cyril Ramaphosa acknowledged that this year’s AGOA Forum is taking place at a time when the world is facing difficulties from climate crisis challenges, raging wars, high inflation in a number of countries, and anaemic economic growth, as seen by the World Bank and the IMF, in his opening address in Johannesburg.

“As African countries we are committed to the industrialization process of our economies, and this is what would drive our entry and our participation in AGOA,” said Ramaphosa.

He said while Africa is a vital supplier of essential raw materials, its aspiration goes beyond merely being characterized as commodity producers.

Ramaphosa declared that the era of Africa being solely viewed as an exporter of raw materials, like rock, soil, and dust, is over as the continent’s ambition lies in manufacturing finished or near-finished products that find utility in various corners of the world, aiming to “maximize the value of our products”.

In the forum that runs for two days, the U.S. is meeting with 35 sub-Saharan African countries. The forum entails strengthening trade and investment ties between the U.S. and sub-Saharan Africa through the Africa Growth and Opportunity Act (AGOA), US legislation which provides various trade preferences to eligible countries in the region. AGOA might present a challenge to China as competition for its own interests in Africa. China would like African countries to untie or loosen their agreements with the US.

Sub-Saharan African economies are on the rise following the impact of COVID-19 with the International Monetary Fund’s Regional Economic Outlook forecasting their growth by 4.2% in 2024 from 3,6% in 2023. Alongside the forum will be the Made in Africa exhibition that will display the products of more than 500 companies from across Sub-Saharan Africa. It will exhibit the region’s agricultural, automotive, chemicals, metals and minerals, mining and machinery, clothing and textiles, leather and footwear and the boatbuilding sector products.

Ramaphosa said that, as South Africa embarks on this journey, the country anticipates collaborating with the United States and other African nations to promote an investment-oriented strategy that seeks to broaden the global supply chains of essential minerals by adding value to resources “right here” on the African continent. “We look to continue to use trade as an instrument to facilitate industrialization, job creation, and inclusive growth,” he said.

In 2021, the U.S. was the second most significant destination for South Africa’s exports worldwide, mainly thanks to AGOA. China took the top spot; Germany was third. The U.S. ranked third as a source of South Africa’s imports, following China and Germany. AGOA offers preferential entry for about 20% of South Africa’s exports to the US, or 2% of South Africa’s global exports. The stock of South African investment in the US has more than doubled since 2011, amounting to US$3.5 billion in 2020. American foreign direct investment (FDI) in South Africa increased by over 70% over that period, to U.S.$10 billion. This made the US South Africa’s fifth largest source of FDI in 2019. The US was its third largest destination for outward FDI, writes Arno J. Van Niekerk for The Conversation.

Ramaphosa underscored the importance of Africa’s relationship with the United States, the largest national market globally, with connections that extend far beyond trade alone. “Many of our countries are interconnected with the United States in more ways than one and I must say that we value those connections with the United States.”

AGOA is the cornerstone of the U.S.-Africa commercial relationship for over two decades, he said.

Data shows a significant enhancement in the export competitiveness of specific African products, particularly in the textiles and apparel sector. The exports of apparel from Lesotho, Ethiopia, Mauritius, Madagascar, and Kenya have not only resulted in the creation of tens of thousands of jobs but have also established these nations as dependable suppliers for American consumers, he said during his opening address at the Nasrec Centre in Johannesburg.

“South Africa’s auto exports to the United States and AGOA have contributed to job creation in South Africa and in the auto supply chain within neighboring countries as well. For instance, South African automotive companies source their leather car seats from Lesotho and wiring harnesses from Botswana both neighbors to South Africa.”

Ramaphosa said that these nations procure copper wire from Zambia, source rubber from Cote d’Ivoire, Nigeria, Malawi, Ghana, Cameroon, and steering wheel components from Tunisia. These components are integrated into vehicles that are exported to the United States under AGOA. It is noteworthy that these inputs alone represent over U.S.$200 million worth of products traded within African countries. In this context, AGOA plays a crucial and indeed indispensable role in advancing regional industrial development.

“Exports under AGOA can complement the efforts of African countries themselves through the African continental free trade area, this free trade area is an engine for increased trade with each other. We have made very substantial progress and we expect that as we commence to trade more fully under this trade agreement, we will be able to see great results and benefits shortly. The duty-free quota market access provided by the United States under AGOA can further be leveraged to promote investment in Africa, including from the United States,” said Ramaphosa.

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