Deepening the U.S.-Africa trade and investment relationship and developing a long-term strategy for the continent were central themes of a key business forum in New York and a new government report outlining a roadmap for future trade on Wednesday.
The White House unveiled new initiatives and investment with African countries as the second annual U.S.-Africa Business Forum kicked off at the Plaza Hotel in New York. Cosponsored by the Commerce Department and Bloomberg Philanthropies, the forum brought together hundreds of U.S. and African government officials, organizations and business executives.
“American investment in Africa is up 70 percent. U.S. exports to Africa have surged,” President Obama said at the forum. “Iconic companies — FedEx, Kellogg’s, Google — are growing their presence on the continent. You can hail an Uber in Lagos or Kampala. In the two years since our last forum, American and African companies have concluded deals worth nearly $15 billion, which will support African development across the board, from manufacturing to health care to renewable energy.”
“Microsoft and Mawingu Networks are partnering to provide low-cost broadband to rural Kenyans. Procter & Gamble is expanding a plant in South Africa. MasterCard will work with Ethiopian banks so that more Ethiopians can send home remittances,” he added. “These are all serious commitments.”
The total number of new deals and commitments unveiled at the forum amounted to more than $9 billion in trade and investment with Africa, according to the White House.
“So we are making progress, but we’re just scratching the surface,” Obama added. “We have so much more work that can be done and will be done. The fact is that, despite significant growth in much of the continent, Africa’s entire GDP is still only about the GDP of France. Only a fraction of American exports, about 2 percent, go to Africa.”
The Obama administration has been developing policy recommendations for Congress on the future relationship with Africa, looking beyond a unilateral trade program known as the African Growth & Opportunity Act that has helped the continent increase trade but has also run into challenges in the past 16 years since it has been in effect.
While the U.S-Africa relationship was championed at the forum, the U.S. Trade Representative’s office outlined the success, as well as the limitations of AGOA in a report released Wednesday. The report found that despite AGOA’s benefits and those offered by other countries, sub-Saharan Africa’s share of global trade remains small, at about 2 percent of global exports in 2015.
Obama said the U.S. and Africa need to focus on several areas to keep the momentum going and expand the continent’s potential. He said trade should be centered around broad-based growth by integrating African economies and diversifying African exports and bringing down barriers at the borders. Making it easier to do business in Africa is another long-term goal, as is investing more in infrastructure and the access to electricity for nearly two-thirds of sub-Saharan Africans that do not have it.
At the forum, Commerce Secretary Penny Pritzker said since the last forum in 2014, the Obama administration’s Power Africa initiative has helped fuel power generation projects that are essential for economic growth across sub-Saharan Africa.
“Trade Africa has increased trade both within the continent and between Africa and the world,” she said. “And we have extended the African Growth & Opportunity Act for another 10 years, which will help more African products reach American customers duty-free. But government efforts alone are not sufficient. If we are going to grow the U.S.-Africa relationship, the business community is an essential partner.”
Pritzker noted that volatile markets and the drop in commodity prices have negatively affected many African countries in the short-run, highlighting the need for greater economic diversification.
“But Africa’s long-term prospects remain strong and investing in the continent’s future continues to be good business,” she said. “In fact, these global headwinds make it even more important that all of us — in government and in business — redouble our shared commitment to solving problems, building new partnerships, promoting further regional integration and finding new ways to plug all Africans into the global economy.”
Congress passed a 10-year renewal of the AGOA trade preference program last summer, marking the longest extension in the program’s history. Apparel brands and retailers have been exploring more opportunities in Africa with the passage of the AGOA extension.
Emanuel Chirico, chairman and chief executive officer of PVH Corp., said, “We’re trying to build a vertical operation in Ethiopia, from cotton growing to converting cotton to fabric at mills to manufacturing finished goods and putting it into the supply chain.”
Chirico said what’s critical to PVH is that it build the most efficient manufacturing process and that infrastructure being built in the country is sufficient enough to support it.
He noted that the Ethiopian government is making “a tremendous investment in infrastructure” and that the country has good natural resources.
PVH has a woven shirt factory under construction in Ethiopia’s Hawassa Industrial Park to be operated as part of a joint venture, is sourcing in Kenya and has branded product sales through various partners in the region.
Ethiopia is Africa’s second most-populous country, with an average gross domestic product growth rate of 11 percent for the past 11 years and a stable government with an ambitious 2025 vision to become Africa’s leader in light manufacturing, noted Ethiopia’s Prime Minister Hailemariam Desalegn. Ethiopia is investing in its infrastructure, including by expanding clean energy generation and worker development.
The country’s power is among the cheapest in the world, is 86 percent renewable and is on track to be 100 percent renewable over time, Desalegn said.
According to a PVH report, “Moving the Needle in Ethiopia,” it is partnering with the Ethiopian government and the other tenants in the industrial park to build a zero liquid discharge effluent treatment facility that recycles wastewater produced in the park, thereby preserving and protecting the community’s water supply.
The Ethiopian government has already earmarked $1.3 billion to develop export processing zones in key urban locations as part of its second Growth and Transformation Plan, and the World Bank Group is providing $250 million in credit in support of the projects it says will increase competitiveness in the country’s manufacturing sector.
Rahama Wright, ceo of natural and organic skin-care firm Shea Yeleen, which creates living wages for women in Ghana, spoke about her experience working as an entrepreneur, being part of the inaugural President’s Advisory Council on Doing Business In Africa and how it was an opportunity to elevate the role of women and youth.
“Shea Yeleen is a perfect example of how U.S.-Africa trade policy can benefit small businesses that have a social mission,” said Wright.
In the 79-page USTR report, “Beyond AGOA: Looking at the Future of U.S.-Africa Trade and Investment,” officials outlined potential paths, including more reciprocal trade deals or arrangements with the African continent, for deepening the relationship with Africa outside of a trade preference program.
The number of duty benefits claimed by African countries under AGOA and a second U.S. trade preference program known as the Generalized System of Preferences is only a “fraction” of the categories eligible for the benefits, according to the report. In addition, the number of large-scale AGOA users “remains limited,” the report said, noting that the top five beneficiary countries accounted for 86 percent of AGOA imports in 2015.
“AGOA’s apparel story also has been uneven,” the USTR report said. “Starting from a low base of roughly $600 million in 1999, African apparel exports to the United States quickly rose to a high of $1.62 billion in AGOA’s early years, but then dropped back after the elimination of textile quotas in 2004, before rising again to nearly $1 billion in 2015.”
Four countries — Kenya, Lesotho, Mauritius and Madagascar — accounted for 92 percent of AGOA clothing exports in 2015.