The African Growth and Opportunity Act (Agoa) has been the go-to discussion point on US-SA relations in the aftermath of the diplomatic discord surrounding Lady R. But the unilateral trade preference programme warrants scrutiny for more than the benefits it gives SA.
In two years, Agoa is due to expire after 25 years in action. I can write pages about the good things Agoa has accomplished — it has developed a very nascent private sector in countries such as Kenya and Lesotho, incentivised investment and generated tens of thousands of jobs.
But some glaring gaps that become evident. While Agoa was always meant to be a unilaterally beneficial programme, it could not have been anticipated that countries would undertake decisions that would harm American economic interests, while still benefiting from Agoa. Your mind is probably drifting back to Lady R. But let’s pivot to neighbouring Namibia, instead.
In 2019, Namibia became the first country in Africa to export beef to the US through Agoa after working meticulously for 15 years to satisfy safety regulations and logistic requirements. Namibia is continuing to scale up its exports and is expected to reach 5,000 tonnes of beef a year by 2025.
It has been an economic success story. The US is a big market opportunity for Namibia — it is the largest consumer of red meat with Americans consuming an average of 120kg of meat per person annually, according to the US department of agriculture.
Namibia has indicated that it wants to scale up its Agoa benefits beyond beef. In 2021, Namibia developed an Agoa utilisation strategy to increase the volume of exports that go through the preferential trade programme to the US. The strategy identifies exports, including fish, table grapes and dates, leather and leather products, and semi-precious stones, as short-term sectors to grow into in the short to medium term.
But on the other hand just last month Namibia banned the export of unprocessed lithium and other critical minerals. This directly undermines US human, national and energy security interests. It begs a fair question. Should Namibia continue receiving Agoa benefits if it wants to ban unprocessed critical mineral exports, especially given there was no notice given to build domestic processing facilities?
I’m not suggesting that countries have to exclusively trade with the US and its allies, but it feels unbalanced to receive preferential trade benefits from a country while also banning exports to it.
Nonetheless, it is important to delineate the two clear motives for banning exports. The first is that historically, countries, particularly developing ones, have used export restrictions to support broader socioeconomic goals, including domestic value addition, employment creation and fiscal revenue generation.
The second motive, which is more evident in the case of China and Russia, is to drive a geopolitical agenda. From 2009 to 2020, China increased its export restrictions on critical minerals by more than a factor of 10, including non-automatic licensing and export taxes. China rolled out another layer of restrictions this month on gallium and germanium, to “safeguard national security and interests.”
In the case of most African countries, it’s the former. Governments are scrambling to generate more localised benefits. It’s not incongruent for African countries to adopt policies to maximise domestic or regional value addition, while still maintaining good economic relationships with other countries. This requires ensuring that resource-rich countries give firms and governments enough time to build domestic processing facilities before imposing any sort of restrictions.
Indonesia is one such example, In 2009, the Indonesian government passed a law that required mining companies to develop local processing facilities within five years. This gave firms time to decide whether they wanted to build processing facilities or exit the market, and in 2014, a ban on raw bauxite went into effect.
Admittedly, the ban did not work as intended and a number of firms left the market, but that was largely due to the fact that remaining reserves of Indonesian bauxite were a relatively low ore grade and thus were not worth the huge capital investments required to build a domestic supply chain. But the five-year time window between announcement and implementation also gave firms time to think through various options.
With the unprocessed critical minerals ban in place, should Agoa preferences, which keep Namibia’s beef sector competitive, be rescinded in return? It is certainly something worth considering.
As discussions advance on a possible Agoa extension in 2025, building a critical minerals provision could be helpful by making Agoa more mutually beneficial, which can mobilise bipartisan support; and advancing strategic US government interests in building more resilient energy, human and national security value chains.
Agoa is a good piece of legislation, but like all things, it needs to be governed effectively and be updated as the times change.
• Baskaran, a development economist, is a non-resident fellow at the Brookings Institution in Washington DC.
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