SanMar Corporation’s general counsel and corporate secretary Melissa Nelson told the US Senate Committee on Finance that a “quick renewal” of the African Growth and Opportunity Act (AGOA) will have the largest impact on her business and customers.
She explained that so many US jobs in the value chain depend on being able to import duty-free under AGOA, before adding: “SanMar’s apparel production in five AGOA countries provides good jobs for over 9,000 Africans. 70% to 80% of the workers manufacturing products for SanMar are women. These jobs provide stability and drive the socio-economic growth of the region. Entire families are pulled out of poverty and their living standards are increased.”
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Nelson also highlighted that “staring down the expiration date” of 2025 has put any potential investments on hold for the past few years.
US AGOA renewal is window of opportunity
Nelson clarified that “we are missing an incredible window of opportunity”.
“There is so much potential in manufacturing expansion and vertical integration, but companies are hesitant to invest when the benefits of AGOA could expire before a return on investment. Textile plants require hundreds of millions of dollars in investment and can take years to build. Businesses need certainty before taking that next step,” stated Nelson.
She believes quickly reauthorising AGOA is essential to maintaining the ongoing progress in AGOA countries as the product development cycle when sourcing from even an established factory in these countries is close to 18 months, which includes approximately five months from issuance of a purchase order to receipt of goods.
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By GlobalData“With the program set to expire next September, we are already within that window and making business decisions with the expiration in mind,” Nelson added.
She is confident that a mature, vertically-integrated apparel manufacturing sector in sub-Saharan Africa is possible, but she admitted we are not there yet: “The synthetic-heavy fabrics used in products manufactured in AGOA countries are still produced outside of the region, which is why we need to maintain the current rules of origin. That will provide time for further manufacturing and infrastructure investments to have an impact. The region has phenomenal potential, but businesses need the stability of a long-term AGOA renewal to create a sustainable manufacturing base.”
Nelson concluded that as more and more companies look to diversify their sourcing base and move production away from China, sub-Saharan Africa and Generalized System of Preferences (GSP) countries stand to gain from this demand – but only if AGOA is quickly renewed for a long period and GSP reauthorized with reimbursement.
US loses economic ground in Africa to China even with AGOA
US senator Mike Crapo agreed with Nelson and stated: “we are losing economic ground in Africa to China — even with the African Growth and Opportunity Act, or AGOA.”
He noted that since many AGOA users make purchasing decisions two years in advance, “we should not leave them in uncertainty by waiting to decide on the programme’s future next year”.
Crapo criticised the Biden administration for terminating the Trump administrations efforts to step up engagement in Africa with negotiation efforts to get a “real free trade agreement with Kenya”.
He said Biden has favoured “a low ambition framework agreement that fails to reduce tariffs and lacks commitments on key disciplines that are integral to any comprehensive trade agreement”.
Crapo continued: “Although I support programmes like the Generalised System of Preferences (GSP) programme and AGOA, we need to resume negotiating real, comprehensive trade deals before it is too late. In the interim though, while the Biden Administration takes no steps toward meaningful trade agreements, Congress can at least prevent us from falling back by getting preference programs back on track.”
AfCFTA will make Africa even more attractive to investors in future
Florizelle B. Liser, president and CEO of the Corporate Council on Africa pointed out that Africa in 2024 is very different than the Africa of 2000, when AGOA first went into effect.
“Through the African Continental Free Trade Agreement (AfCFTA), African countries are creating a much more harmonised and unified market by reducing and removing both tariffs and non-tariff barriers. This is making it much more commercially feasible for African companies and others sourcing from Africa (like the United States) to create the networks and regional value chains that will make African suppliers more competitive, while also expanding intra-African trade as well as the continent’s trade with global partners like the United States,” she said.
She also shared that while AfCFTA should be a game-changer for Africa, its success will depend on access to markets and in that regard, continued access to the US market under AGOA will be critical to retain current and attract new investment.
Liser suggested there are few steps the US could take that would be more significant than renewing AGOA for at least ten years in 2024 in terms of sending a powerful signal to companies, American as well as African, that the United States supports Africa’s development as well as stronger U.S.-Africa trade, investment, and commercial ties.
In April 2024, the African Coalition for Trade (ACT) voiced its support for AGOA Renewal and Improvement Act of 2024 and credited the bill with creating hundreds of thousands of direct jobs in Africa and the US.
