The United States said this week it is trying to promote a new type of trade, where Africa will add more value to its own raw materials, and that processed products — whether they are fruit juices or clothes — can go not only to the US duty free but also to the rest of the world.
Africa may have a wealth of natural resources but these are typically sold for a pittance, while finished products are sold at a massive profit internationally. In addition, African countries that attempt to export processed and manufactured products find themselves having to contend with additional duties.
Diamonds, for example, are shipped from Botswana to India for cutting and polishing and cotton is shipped from West African countries all over the world where it is made into textiles and clothes.
South Africa is one of the few countries in Sub-Saharan Africa that already has a wide variety of value-added products, like fridges, fruit juices, seafood and wines.
“Some other countries — while they accept your raw commodities duty free — as soon as you start adding value to it then the duties are put in place,” said Florizelle Liser, assistant US trade representative for Africa at a round-table discussion in Johannesburg this week.
Liser, who has extensive background in trade negotiations in Africa, has already met with South Africa’s business community, including producers of cars, chemicals and other products that are being exported to the US under the African Growth and Opportunity Act (AGOA). AGOA gives South Africa and other countries in the region duty-free entry into the United States for certain manufactured and processed goods.
South Africa and the US signed a bilateral agreement in April to establish a forum where a range of issues, including trade, could be discussed.
Last untapped market
Liser was in town to meet with government officials as well as the private sector.
“Many of us see Africa’s more than 680 000 000 people as the last untapped market,” she said.
“Part of the thing that we face now is making sure that American business has a good sense of the opportunities that are in Africa; that this is a new Africa, new leadership. A lot of countries have done excellent things and growth rates are relatively high,” said Liser.
According to an International Monetary Fund report on the regional economic outlook of Sub-Saharan Africa, the global economic slowdown in the region was very brief, with output projected to expand by 4,75% in 2010, compared to 2% in 2009.
According to the report, the “brevity of the slowdown owes much to the relative strength of the region’s economies heading into 2008–09, the expansionary macroeconomic stance then adopted by most countries, and the relatively quick recovery in global economic activity”.
Liser acknowledged that there were attitudes that still need to be changed.
“In general, US investors have traditionally been a little wary of Africa and we are working closely with the US Chamber of Commerce to dispel some of these negative views and to make sure that US business is aware of that,” said Liser.
“South Africa is the United States of America’s largest non-oil trade partner in Africa.”
There are about 600 companies of the US already operating in South Africa according to Scott Eisner, the executive director of the Africa Business Initiative at the US Chamber of Commerce.
Eisner, who accompanied Liser on the trip, said he saw a lot of potential in South Africa, “especially with the World Cup coming”.
In 2009, the chamber launched the initiative, which works with members to understand what their investment targets are.
“When we look at the African continent and investment, our view is very long; we don’t take a short-sighted view. You will see that with the Johnson & Johnson’s and Coca-Cola’s they have been here [in South Africa] for over 50 years,” Eisner said.
Coca-Cola hires about 60 000 Africans across the continent, he said.
Incidentally, Americans have bought 120 000 World Cup tickets, according to the consulate, the highest number of World Cup tickets bought by a country so far.
“What we are looking to achieve is expanding new opportunities for American companies and finding partners for American businesses on the continent,” said Eisner.
Liser said the US still acknowledged the World Trade Organisation talks in Doha as an important tool for expanding global trade and for opening markets for all countries, including South Africa.
“We believe that South Africa has a huge stake and we are looking forward to South Africa playing a constructive role in helping us move Doha forward,” she said.