Apr 6, 1998

 

AFRICA: NO MIRACLES EXPECTED FROM US INITIATIVE

 

Harare, Apr 2 (IPS) -- African trade watchers are expecting no miracles from a proposed US initiative purportedly aimed at boosting trade and investment with Africa.

The Africa Growth and Opportunity Act (AGOA), passed in mid-March by the US House of Representatives, was promoted by President Bill Clinton during his Mar 23-Apr 2 visit to Africa. However, some observers argue that it will yield little benefit to the continent.

AGOA targets the creation of a US-Africa free-trade area by the year 2020 and proposes the launching of a $150-million private equity fund, as well as a $500-million infrastructure fund under the auspices of the US Overseas Private Investment Corporation.

The Act, which is yet to be approved by the US Senate, also seeks to strengthen Africa's private sector and encourage more trade and investment between the United States and Africa, particularly through the reduction of tariff and non-tariff barriers and other trade obstacles.

It is also aimed at "expanding US assistance to sub-Saharan Africa's regional integration efforts". To this end, a $25 million US Agency for International Development (USAID) fund would be set aside for Southern Africa.

Zimbabwe's Trade and Finance Minister Nathan Shamuyarira told a March 29-Apr 4 workshop in the Zimbabwean capital of Harare that "the trading measures put in place in the new legislation (AGOA) will go a long way to assist those African economies listed as suitable for cooperating with."

He added, however, that "the one part of the legislation that will not be acceptable to many African states is the requirement that they must be engaged in economic reforms and structural adjustment."  

Minister Shamuyarira was referring to a section of the draft which states that an African nation may benefit from the Act "only if the (US) President determines that the country has established, or is making continual progress toward establishing, a market-based economy".  

Academics and NGOs at the Zimbabwe workshop, run by the Southern and Eastern African Trade, Information and Negotiations Initiative (SEATINI), were less than enthusiastic about the Act.  

"It's not up to (the US) to dictate to us on (the issue of economic policy and reforms)," Dot Keet, a researcher at the University of Western Cape in South Africa told IPS. "We may or may not be doing those things, but I think they must emerge ...from processes internal to our countries."

In any case, she added, "the so-called market access that they are giving us, they are actually going to have to give to everybody over the next 10 years under the WTO (World Trade Organisation) agreement. But for a very minimal offer, they are extracting very heavy quid pro quos from us."

The conditions governing eligibility for AGOA programmes, projects, activities or assistance include reforms relating to the reduction of high import and corporate taxes and "foreign investment issues such as the provision of national treatment for foreign investors ...," according to the draft. "This is less about African growth and more about American opportunity," commented Keet.  

For trade expert Tetteh Hormeku of the Africa Office of the Third World Network (TWN-Africa), "the US initiative would offer some short-term gains to African countries in exchange for extensive 'reforms' along lines which undermine their capacity to develop on their own."  

"What we should be saying to the US," he told IPS, "is the strategy for developing our economies is not your bill. The strategy for developing our economies, if you are interested, is for us to develop more options in the WTO that make things better for us."  

He cited the example of a Multi-Fibre Agreement (MFA) under which the US and other industrial nations set quotas limiting their import of Third World textiles, whereas the WTO, which regulates international trade, is against the imposition of quantitative restrictions, and requires all these QRs to be phased out by 2005.

"If they fulfil their commitment at the WTO, then Africa will not be needing any special preferences from them," he argued.

Still, trade between the US and sub-Saharan Africa has been growing: it increased by 18% in 1996, outpacing the growth of US global trade. However, about 85% of US trade with Africa is with four countries, three of which -- Angola, Gabon and Nigeria -- are oil producers.

The fourth is South Africa, which is also one of the countries seen as promoting 'sound economic policies' and which has been receiving some rewards from the United States in the form of development aid: this year it is to get $70 million in assistance from USAID.

Since its first all-race elections in 1994, an estimated $40 million has been invested in South Africa by the US firms. In fact, the huge yellow 'M's of the Macdonald's fast-food chain that are visible in several shopping centres across South Africa attest to growing US investment in South Africa, but there, too, is where the problem lies. 

Most, if not all the US money entering South Africa has been going to the service sector and not manufacturing, according to Mike Macdonald, an economist at the Steel Engineering Industries Federation of South Africa.

Keet notes that when US capital is, in fact, invested in industry in Africa, it is heavily focused on extractive industries such as petroleum, other mining and timber. "The other sector that American investors are interested in is the telecommunications sector which, for us, is a strategic sector," adds Keet. The US investment in such a sector, she charges, would not create jobs in Africa nor promote technology transfers.