An Assessment of the Africa Growth and Opportunity Act (AGOA) and its Implications for Namibia

An Assessment of the Africa Growth and Opportunity Act (AGOA) and its Implications for Namibia

The United States introduced the African Growth and Opportunity Act (AGOA) in 2000 with the intention of maximising trade between the US and sub-Saharan African (SSA) countries. Specifically, AGOA aimed at developing the textile industry in SSA countries as it has the potential to contribute positively to employment creation due to its labour intensiveness nature. Unlike other trade agreements that are bilateral, AGOA is a unilateral trade preference agreement decided upon by the United States and targeting SSA countries. AGOA accords the President of the United States the right to cease the status of a SSA country that does not meet the requirements set out in AGOA. Only eligible sub-Saharan African (SSA) countries that meet certain requirements outlined in the Act can benefit under AGOA. Under AGOA, certain goods from eligible SSA countries can enter the United States duty free and quota free. The introduction of AGOA led to increased trade between the USA and the SSA countries. However, the increase in trade was not experienced at the same level in all SSA countries and did not affect all goods equally. Trade statistics show that countries that experienced substantial growth in trade included Nigeria, Angola and South Africa, Gabon and Chad. Furthermore, products dominating trade between United States and SSA countries are natural resources and primary products. Overall, petroleum products account for more the 90 per cent of all African exports to the United States. In other SSA countries, AGOA led to the development of textile industries. Thus countries like Swaziland, Lesotho and Malawi experienced a substantial growth in their textile industries. Despite the significant growth experienced by the above-mentioned countries, total exports to the US from African countries are still dominated by petroleum products. In Namibia, products that dominate exports to the US are metals, minerals, textiles and apparel. The highest overall exports of US$ 238 219 million were recorded in 2004 and dropped significantly to US $129 557 million in 2005. The reduction in exports was also experienced in the textile industry in Namibia and in many SSA countries. For instance, many textile producing SSA countries experienced a decrease in their textile exports and subsequently company closures, which led to loss of thousands of jobs. In Namibia alone, about 1 600 jobs were lost when one of Ramatex’s subsidiaries (Rhino Garments) closed down in 2005. Namibia became a beneficiary country in 2001 and qualified for the ‘special rule’ provision on apparel articles which allows lesser developed SSA countries to source their raw materials from anywhere in the world. Only countries that had been classified as lesser-developed countries on the basis that their GDP per capita did not exceed $1500 could benefit from this provision. Before, 2001, Namibia did not have a developed textile and apparel industry but this changed with the introduction of AGOA coupled with many government concessions, which largely influenced the Ramatex company decision to invest in Namibia. Ramatex is by far the largest textile factory in Namibia and was expected to create about 8 000 jobs, a reason which was used to justify the concessions offered to Ramatex. Following retrenchments in 2005 and 2006, there are currently only 3 600 Namibian workers employed at Ramatex. Despite having increased workers wages in 2006 following lengthy negotiations and a strike, Ramatex workers are still among the lowest paid industrial workers in Namibia. Furthermore, since its inception, labour relations have been tense at the company with the lack of wage increases as the main source of conflict. This study revealed that there are internal and external challenges that face the success of AGOA in SSA countries. The internal challenges relate to the ability of companies to fully benefit under AGOA due to internal capacity constraints whilst external constraints are the end of the Multi Fibre Agreement (MFA) coupled with the attractions offered by China as an investment location.

Ntwala Mwilima and Herbert Jauch

Labour Resource and Research Institute (LaRRI)

2007

© Labour Resource and Research Institute (LaRRI)

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