![[Column] Philip Myburgh: Maximising the AGOA opportunity](/assets/components/phpthumbof/cache/Philip_Myburgh_Standard_Bank_Africa_Business_Communities.8b9e9c238b4a37cc031afe849f0b91f7.jpg)
[Column] Philip Myburgh: Maximising the AGOA opportunity
This week, African delegations will converge in Washington DC to meet with United States (US) representatives at the annual AGOA Forum.
The focus of discussion? Renewal of the African Growth and Opportunity Act (AGOA) – a bill that has provided eligible sub-Saharan African countries with US trade tariff benefits since 2000 and is set to expire if US lawmakers don’t ratify its extension by September 2025.
What is AGOA?
AGOA grants qualifying sub-Saharan African nations duty-free access to the US market for more than 1,800 products. In addition, over 5,000 products are eligible for duty-free access under the US’s Generalized System of Preferences (GSP) programme. AGOA aims to enable economic growth, encourage political and economic reform, and enhance economic relations between the US and Africa by creating favourable trading opportunities.
Widely supported by Democrats and Republicans at its outset, AGOA was signed into law by then-President Bill Clinton in 2000. In 2015, the US passed legislation modernising and extending the programme until 2025. The question now is, will the bill be extended again, and if so, by when and for how long?
A shift in US trade policies
Today, many African leaders are calling for the next term of AGOA to remain valid for at least a decade; others are requesting it become permanent. Lengthening the programme will enable countries to engage in longer time-horizon planning for further development across different product sectors and regions and provide much-needed predictability for the supply chains of businesses trading in this corridor.
However, the future of AGOA itself is uncertain due to the US's shifting stance on global trade, the application of eligibility conditions, and the upcoming US election, which will take place before the September 2025 deadline.
The prevailing narrative of globalisation is being replaced by a growing emphasis on self-reliance in the United States, exemplified by the protectionist policies of both President Joe Biden and his predecessor, former President Donald Trump.
While the Biden-Harris administration's tariff focus has been primarily on China and is expected to remain targeted should the Democrats secure the win, Trump is proposing sweeping tariffs on all imports, including a 60% levy on Chinese goods and a 10% tax on products worldwide if he is re-elected. This escalating trade tension casts a long shadow over AGOA’s future.
Time is of the essence
As the September 2025 deadline looms large, the window of opportunity for securing AGOA's extension is rapidly narrowing. Recesses punctuate the US legislative calendar, and lawmakers' attention will inevitably be divided with the presidential election approaching.
Crucially, trade decisions, particularly those influenced by tariff structures like AGOA, often require months of planning and negotiation, and the risk of inaction or delayed decisions could have severe consequences for African exporters.
Mixed results
While all eligible sub-Saharan African countries (approximately 40 at present) stand to benefit from the programme, AGOA utilisation rates and results vary widely.
According to research house the Brookings Institution, of the 16 countries that had published strategies to leverage the AGOA programme in 2021, 14 saw an increase in their exports of non-crude oil – and several countries that implemented a national AGOA strategy, such as Mali, Mozambique, Togo, and Zambia, experienced significant success, with their exports to the US increasing by over 90% during this period.
Kenya and Lesotho have had some of the highest AGOA utilisation rates owing to their apparel-dominated exports to the US, which resulted in 88% of Kenyan exports and 99% of Lesotho’s exports qualifying for zero-tariff treatment.
However, during the same period, almost half of all beneficiary countries had a utilisation rate of 2% or lower, meaning 98% of US imports from those countries were subject to tariffs.
Challenges associated with AGOA
To date, AGOA has not yielded its intended benefits on a wide scale due in part to factors including:
• Lack of policies and information: Despite AGOA's potential, many African countries have struggled to leverage the benefits of duty-free access to the US market due to a lack of knowledge regarding the programme and the absence of domestic policies to support its uptake.
• Complex and subjective eligibility criteria: AGOA's eligibility requirements centre around the rule of law, political pluralism, anti-corruption, a market-based economy, the right to due process, and government policies affecting trade. While some criteria are straightforward, others are ambiguous and subject to interpretation, creating uncertainty for beneficiary countries.
• Vulnerability to expulsion: Beneficiary countries face the constant risk of being excluded from AGOA if they fail to meet eligibility criteria, creating instability and uncertainty. As a case in point, four African countries (Uganda, Gabon, Niger and the Central African Republic) were expelled from participating in AGOA in 2023 by the Biden administration for ‘gross violations’ of human rights or not making progress towards democratic rule.
• Navigating US federal and state regulations: Operating within the US market is complex, and complying with various federal and state laws is akin to dealing with multiple countries instead of a single nation.
• Limited value addition: A significant portion of AGOA exports consists of primary commodities with limited value addition, hindering economic growth and job creation in Africa.
• Product concentration: Many African countries rely heavily on a limited range of products for AGOA exports, making them susceptible to market fluctuations and trade disruptions.
• Limited impact on US imports: The US is Africa’s second-largest trading partner after China; however, less than 1% of US trade is with Africa, meaning African businesses are competing for space and attention against more prominent global trade partners and issues – a factor that further limits AGOA's overall impact.
South Africa as a key beneficiary of AGOA
As the country with the continent’s most developed economy and infrastructure, South Africa benefited significantly from AGOA in the years following its initiation.
For instance, the country’s automotive exports to the US increased from $195 million in 2000 to $1,8 billion in 2013. However, AGOA’s benefits have diminished in this sector over time due to economic diversification and trade diversion. In 2013, motor vehicles represented 25% of South Africa’s exports to the US; by 2022, this figure dropped to 10%, and today, almost two-thirds of its automotive exports are shipped to the European Union.
In recent years, some of South Africa’s political affiliations and rhetoric have run contrary to US policy, particularly regarding recent conflicts in the Middle East and Ukraine. Consequently, there was a call for South Africa’s eligibility for AGOA to be reviewed.
Although there remains a possibility that the country’s eligibility might be officially reviewed, an outcome excluding South Africa is unlikely. If the government can adopt a non-aligned and multilateral stance on global issues, it should bode well for continued trade and commerce with the US into the future. However, the process of a review in and of itself would be damaging to South Africa’s reputation in global trade.
The Brookings Institution estimates that if South Africa were to lose its preferential tariff benefits (due to expulsion or the failure to renew the bill), the overall impact would be small – a drop of 2,7% in total exports to the US.
However, specific sectors would be more affected than others. Notably, the agricultural industry would suffer significant losses, with the food and beverage sector expected to drop by 16% and the fruit and vegetables sector to decrease by 4,5%.
A notable beneficiary of AGOA is South Africa’s citrus industry. In 2022, over 102,000 tonnes of citrus, worth R1,6 billion, were exported to the US. The country’s Western Cape province produces high-quality citrus, a preferred product in the US market. However, without AGOA, competitors with free trade agreements could undercut South African farmers' prices, jeopardising the 35,000 jobs in the citrus industry's logistics value chain.
Other sectors that stand to benefit from AGOA
Beyond commodities, many other African sectors stand to benefit from AGOA.
An often-overlooked area in African exports is services. Africa boasts the world’s youngest and fastest-growing population with increasing pools of educated and skilled talent, making it a potential powerhouse for service exports. Africa can diversify its economy, create jobs, and increase foreign exchange earnings by capitalising on sectors like business services, IT and outsourcing. Services like software development, customer support, contact centres, consulting, and creative arts like animation are ready to be harnessed.
Africa's less mature value chains also present a strategic opportunity to capitalise on the growing demand for ethically sourced, traceable fashion products. In contrast to the opaque supply chains and ethical concerns in Asia’s ‘fast fashion,’ Africa’s shorter chains offer greater transparency and control.
African fashion brands that differentiate themselves by emphasising heritage, craftsmanship, and sustainable practices can command premium pricing. This approach is particularly resonant with African-American consumers seeking products that reflect their cultural identity and values.
Leading in purpose-led buying
More generally, I would argue that Africa is in its own league when it comes to ‘purpose-led buying.’ Nowhere else in the world will you find a dedication to upliftment on this scale.
African businesses are rooted in purpose and impact on communities. They emphasise the importance of women and youth, upskilling employees, and a commitment to corporate social investment (CSI) for social development alongside running the business itself. In Africa, it’s our nature to do things together for a positive impact. This is a competitive advantage in the US's fast-growing ‘conscious buyer’ movement.
AfCFTA and AGOA: Catalysts for regional integration and value addition
Africa's economic trajectory is inextricably linked to its ability to shift from a commodity-based to a value-added export model. Deepening regional integration is pivotal to achieving this transformation in 2018, the African Continental Free Trade Area (AfCFTA) is projected to create the world’s largest free-trade zone, comprising 1.7 billion people and $6.7 trillion in consumer and business spending by 2030.
It is hoped this unified market will enable economies of scale and foster a renewal in the continent’s industrialisation. How? By facilitating the movement of goods, services, and people across borders, AfCFTA can spur the development of regional value chains.
This, in turn, will stimulate demand for intermediate goods and services, promoting local production and job creation. When coupled with the market access provided by AGOA, the potential for African businesses to ascend value chains and capture a greater share of global markets is significantly enhanced.
To realise these benefits, however, public-private partnerships, policymakers and businesses must prioritise investments in infrastructure, skills development, and trade facilitation.
Standard Bank’s role in driving Africa’s growth
Africa presents a significant, untapped economic opportunity and financial institutions, like banks, are uniquely positioned to unlock Africa’s export potential under AfCFTA and AGOA.
As the continent's largest bank with an on-the-ground presence in 20 sub-Saharan countries, we at Standard Bank not only recognise this opportunity; we believe we have a responsibility in playing a role to address both the tariff and the non-tariff barriers in Africa.
• Network and influence: As a major financial institution, we leverage our network and influence to engage policymakers regarding tariffs and regulations.
• Finance: Through strategic public-private partnerships, we provide the financing necessary to develop Africa’s infrastructure, energy, and manufacturing sectors, which are critical components of export-led growth.
• Trade finance: This is a product that is underutilised in Africa. Financial institutions can play a pivotal role by providing financial support for international trade, mitigating risks and facilitating smoother business transactions. This is particularly important for African exporters navigating complex global markets, as it can reduce costs and increase their competitiveness.
• Supporting SMEs: A thriving entrepreneurial ecosystem is crucial for export growth. We’re committed to expanding financial access to underserved segments, particularly SMEs, through digital platforms and tailored financial solutions. By fostering a robust SME sector, we support expanding manufacturing value chains and creating a pipeline of export-ready businesses.
• Financial inclusion: As a financial institution, we contribute to Africa’s long-term growth by looking beyond immediate trade benefits and expanding financial inclusion. Empowering women and young entrepreneurs through access to credit and financial services, we foster a vibrant business ecosystem – and as technology reshapes commerce, we support the digital transformation of African businesses by enabling them to participate more effectively in global value chains.
Philip Myburgh is the Head of Trade and Africa-China, Business & Commercial Banking at Standard Bank
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