The Independent Uganda: You get the Truth we Pay the Price
Stephen Kaboyo, the managing director at an investment advisory firm, Alpha Partners, told The Independent that though the objective of giving preferential access to the US market for African exports was a good one, the benefits have been uneven in both product and diversity.
He says while on one hand it boosted apparel exports, its broader economic impact has been modest in terms of real, broad and sustained growth as well as poverty reduction.
“The AGOA product coverage was very limited and did not include other products mainly in agriculture sector where a country like Uganda would perform,” he said.
Kaboyo’s argument is based on the fact that Uganda is currently able to export mainly substitutes of among other products tea, coffee and cotton under AGOA to the US market where it does not have a competitive advantage.
And while other products are on the AGOA list including animal and poultry products, they cannot be exported because the US market already has plentiful of supply of those products from its local market.
He, however, notes that supply side constraints, poor infrastructure, unskilled labour markets, which cloud the country’s export performance must be addressed if Uganda is to enhance its export competitiveness under such programs.
Looking at the general performance of the AGOA initiative, most of the African countries are yet to feel the impact of the programme.
According to Rick Helfenbein, the chairman of the board of the American Apparel and Footwear Association, whereas AGOA does have its merits, it’s difficult to prove that it has actually worked based on the data.
“In fact, one can easily conclude that the program has failed,” he says citing the fact that the AGOA export numbers to the US including the Generalized System of Preferences have plummeted from $68.2 billion in 2011 to $23.2 billion in 2014.
The first full year of AGOA showed a trading volume close to $17 billion, and it peaked in 2008 at $80 billion.
He says although energy-related products such as crude oil accounted for about 67% of all AGOA imports to the US in 2014, most of the oil bought under the AGOA banner was purchased because it was cheaper and not because it had the AGOA duty-free incentive.
He adds that, in fact, with more than 37 Sub-Saharan countries qualified to use AGOA, only a small percentage actually do use meaningful amounts of the program.
Of the ones that do, if only a handful of countries export oil — and that is 67% of the total AGOA — that leaves 33% for the non-energy portion, with South Africa currently the largest user of that very specific part, taking up the bulk (23%) and the rest sharing the remaining percentage.
“If South Africa is pushed out of AGOA, then very little is left from the non-energy group to export… To make matters worse, close to 80% of all the AGOA exports come from just four of the countries (Nigeria, Angola, Chad and South Africa), he adds.
“If we look at the non-energy sector that also includes apparel, just four of the countries (South Africa, Kenya, Lesotho and Mauritius) cover 90% of the exports.”
Helfenbein’s views are echoed by Steven Kamukama, the senior commercial officer at the ministry of trade, industries and co-operatives.
“At the moment, the only countries in Africa that have benefitted from AGOA are those producing oil products. Uganda like the other non-oil producing countries on the continent literally have little to export to the US because of the limited products on the AGOA list yet that is where we have a comparative advantage,” Kamukama told The Independent.
”Now, to increase our exports under such circumstance means that we have to venture into completely new products and no one is ready is to invest in such products with little experience coupled with the short lifespan of the programme. This has hindered attraction of foreign investors.”
He also revealed that the long distance coupled with no direct flights from Africa has rendered the country’s products uncompetitive on the US markets as a result of high transportation costs.
He added that the government, with assistance from USAID, is working on the AGOA strategy, expected to be ready before close of the year, and mainly looking at exporting textiles, crafts and specialised foods to not only US markets but also local, regional as well as EU and Asian markets. Uganda’s AGOA effort is being led by a Presidential Advisor on AGOA. However, the private sector say the Office of the President needs to hand over issues surrounding AGOA and its national strategy complemented with adequate funding to the trade ministry for easier coordination and implementation, if the country is to benefit from exports to the US markets.
“Putting AGOA in the President’s Office is more of political and not to facilitate business,” says Ezra Rubanda, the head of trade policy and advocacy at the Uganda National Chamber of Commerce and Industry, an umbrella body for the private sector.
He also said the US government needs to open up markets for the various products rather than offering an avenue for only limited products that the Ugandan firms will continue to shun and concentrate on other markets.
According to Kitunze, Kenya and Lesotho’s better performance in AGOA is based on the fact that the two governments established conducive environments for the establishment for firms to produce products for export.
She cites Kenya’s move to assist companies in the predominantly exporting textiles through the Export Processing Zones including the United Aryan Limited textiles factory that employs approximately 10,000 people and the opening up of a $25million Mombasa Apparel, garment factory in Mombasa.
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editor@independent.co.ug
