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President Yaya Boni of Benin and US President Barack Obama at the recent Summit in Washington,DC

US-Africa Summit: What post agenda for West Africa?

August 24, 2014

By Emanuele Santi and Mohamed El Dahshan* [caption id="attachment_11342" align="alignleft" width="275"]President Yaya Boni of Benin and US President Barack Obama at the recent Summit in Washington,DC President Yaya Boni of Benin and US President Barack Obama at the recent Summit in Washington,DC[/caption] As the largest-ever US-Africa gathering of leaders came to a close, the debate on the future of the US policy for Africa has once again resurfaced. While interesting suggestions are put forward by economists and other experts – this argument by the Center for Global Development on closing the energy gap is among the most interesting – it may however be judicious if, rather than hope for a new grand scheme to be implemented, we take a deeper look at the existing US economic policies and instruments towards Africa, and analyze their effect on the West African region. The flagship economic policy of the US-Africa policy as it stands is the African Growth and Opportunity Act (AGOA), by which the US decided to incentivize African countries to open their markets and partake in global trade, by offering to eliminate import duties on over 6,400 products exported from 38 eligible Sub-Saharan countries, including all 15 West African nations. Indeed, US President Barack Obama had vowed, in a 2013 press conference in Senegal, that the AGOA programme would be “renewed and improved”. The programme indeed stands to be greatly improved. For one, the yearly renewal of AGOA appears to present some difficulties for investors in terms of investment planning and diverting resources to AGOA-compliant exports. As such, a number of African ambassadors to the US drafted a proposal suggesting AGOA be renewed for 15 years. As displayed in the table below, which details the yearly exports from AGOA beneficiary countries to the US over the past 10 years, few countries appear to have benefited from the preferential access, with Nigeria and, to a lesser extent, Côte d’Ivoire, far ahead.

  2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Q1
Nigeria 16,267 23,801 27,709 32,373 37,756 18,753 27,884 32,348 18,179 11,122 973
Côte d’Ivoire 697 784 552 545 710 696 926 1,069 1,083 932 543
Ghana 138 154 191 197 177 132 250 748 257 306 69
Guinea 64 74 91 95 105 67 90 80 103 90 27
Liberia 84 91 130 115 143 78 155 158 144 93 18
Sierra Leone 9 9 35 47 46 23 27 23 15 39 12
Senegal 2 3 18 12 16 6 4 6 16 16 5
Togo 1 6 4 5 11 7 9 31 50 7 3
Benin 1 1 1 5 16     2 3 3 2
Niger 15 61 117 8 43 105 26 288 81 2 1
Burkina Faso   2 1 1 1 2 2 3 2 6  
Cape Verde 3 2 1 2   1 1 1 1 1  
Gambia             3        
Total 17,281 24,988 28,850 33,405 39,024 19,870 29,377 34,757 19,934 12,617 1,653
Table 1.Combined AGOA Exports to the United States (including GSP), million USD Source: AGOA.info portal, based on United States International Trade Commission data.
The profile of AGOA trade shows that a massive concentration on the oil and gas sector. In the first quarter of 2014, for instance, African exports under AGOA totaled $3.4 billion; a whopping 74% of those being petroleum products. Non-fuel products, worth $890 million, were almost exclusively raw materials, mostly agricultural products. During that same period, West African countries exported $926 million worth of goods under AGOA only – a figure rising to $1.653 billion if we were to include duty-free exports under the WTO’s Generalized System of Preferences (GSP) as well. Table 2 and the accompanying graph break down the latest figures on exports to the US under AGOA, by sector, for a clearer idea of the relative importance of export sectors.
Product Value (USD) Percent
Oil and Gas $22,781,896,155 59.80%
Primary metal manufacturing $3,063,465,495 8.00%
Petroleum and Coal products $2,683,498,920 7.00%
Transportation Equipment $2,528,074,222 6.60%
Miscellaneous manufactured commodities $1,679,184,263 4.40%
Agricultural products $1,315,531,485 3.50%
Apparel manufacturing products $921,160,903 2.41%
All Others $3,139,099,559 8.23%
Total $38,111,911,002 100%
 
Table 2: US Imports from AGOA Beneficiary countries, by sector, 2013
Source: US Government trade statistics, Department of Commerce.
Of particular relevance to West Africa is the opportunity to export textile and apparel – a sector clearly marginal in the AGOA export product mix to date, despite its great potential. West Africa is the second-largest regional group exporting cotton, providing 11% of the world trade in the commodity; a major source of agricultural income, it provides up to 12.7% of the agricultural value-added in Mali, 7% in Burkina Faso – most of it to smallholder famers. Yet 83% of Sub-Saharan African cotton is exported as lint; and disparities between countries mean that transformation rate decreases further, reaching only 5% in francophone Africa. Moving the African cotton and textile sector up the value chain has the potential to transform many countries in the region – and improve the livelihoods of millions. The Africa Investment Incentive Act of 2006, which amended the textile section of the AGOA, stipulates the rules governing the textiles to be granted duty-free access to the US were generally generous. More importantly, the quotas determined for those good were never filled by the beneficiary countries. In fact, in 2012-2013, the export quota was only filled to 12.59% under AGOA; the year prior, 10.14%. Thanks to the wealth of raw material and the geographic proximity of the sub-region to the United States, the textile and apparel industries could be key to break the dominance of raw materials on West Africa’s exports under AGOA. For this to happen however, investment are needed in energy and transport infrastructure, which represent today two major bottlenecks to the development of the sector. In many countries of the region, energy costs are significantly higher than in the rest of the continent, largely due to expensive delivery and inconsistent supply, forcing people to rely on more expensive backup energy sources. Transport costs are also often noncompetitively expensive, due both to weak infrastructure and inefficient logistics, administrative delays, and corruption. The US initiative Power Africa could also play a complementing role to accompany the country in such needed reforms. Finally, the cotton and textile sector also requires a better comprehension of the value chain, improved capacity of cotton-related organisations, and a new regional strategy for sharing knowledge, skills, and sourcing of materials and technology. This must be complemented by a promotion policy aimed at familiarizing potential customers with West African cotton and textile products. The rising outlook on cotton prices gives West African countries ample room to enact their long-planned market reforms and investments in ginning facilities. *Source afdb
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