SA seeks to maintain Agoa benefits

The continuation of the Africa Growth and Opportunity Act (Agoa), under which most South African exports enter the US duty- and quota-free, is essential for SA to continue attracting investment, particularly in the automotive industry.

South Africa will lobby at this week's 10th Agoa Forum in Washington for its continued inclusion under the act and an extension of the 2015 expiry date, trade and industry minister Rob Davies and representatives of industry bodies said this week.

The automotive industry in particular benefits from Agoa, put in place in 2000 to encourage exports from qualifying African countries to the US. While energy and minerals still constitute the bulk of African exports to the US under Agoa, SA has expanded its range of automotive parts exports and started exporting vehicles to the US.

Roger Pitot, executive director of the National Association of Automotive Component and Allied Manufacturers, said US import duties on vehicles are 2.5% of the landed cost in the US.

While this may be low, "it makes the difference between that car coming from SA or Europe".

Without Agoa, it is unlikely that Mercedes-Benz and BMW could export as competitively to the US from SA as they now do.

But lobby groups in the US want to stop Agoa benefiting SA's "first-world" automotive industry before 2015. Others want the act to benefit only least-developed countries (LDCs). SA might be excluded and all other LDCs included.

Next week's visit would be "just lobbying", Pitot said. "We need to counteract some of the other lobbies that are active there. Agoa has helped to create thousands of jobs, and feeds tens of thousands of people here."

Catherine Grant, trade policy director at Business Unity South Africa, said her group "strongly opposes" SA's exclusion from Agoa, as different trade rules would divide the region - as was the case with the European Union's economic partnership agreements.

Delegates will push for better market access in sectors such as clothing and textiles and agricultural products.

Grant said while agricultural exports could be expanded under current Agoa preferences, there were delays with sanitary and phytosanitary requirements.

"We will raise some of these issues," she said.

Products with good export potential included ostrich meat, canned fruit, grapes, tropical fruit and fresh produce, Grant said.

The clothing industry hopes to be reclassified under Agoa to allow duty-free "single-stage conversion" exports.

For South African clothing to qualify under Agoa, textiles and garments must be made locally. Single-stage conversion would allow the use of cheaper, imported textiles.

Johann Baard, executive director of the Cape Clothing Association, said material was the biggest input cost for a clothing manufacturer, contributing up to 70% of a garment's cost. SA's negotiators, under former trade and industry minister Alec Erwin, offered the dual-stage conversion requirement, hoping this would boost local textile manufacturing, Baard said.

But with many textile manufacturers closing in recent years, clothing manufacturers imported the bulk of textiles used.

Clothing exports to the US had plunged, mainly on rand strength and the scrapping of a government export incentive, clothes makers said this week.

While Agoa benefited clothes makers of beneficiaries such as Lesotho and Mauritius, SA's exports to the US were negligible now, Baard said.