Reap AGOA benefits, firms advised

June 25, 2009
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, NAIROBI, Kenya, Jun 25 – East African companies have been encouraged to shift their focus from competing against each other to complementing each other especially in the area of specialisation and division of labour to better take advantage of the Africa Growth Opportunities Act (AGOA) initiative.

Executive Director of East African Business Council (EABC), Charles Mbogori says the region’s private sector is yet to fully benefit from trade with United States under the AGOA almost ten years after the US Congress passed the Act due to some of these challenges. 

"Each country should concentrate on the area that gives them the most comparative advantage and regional competitive advantage,” Mr Mbogori said. “Industries that produce at smaller quantities can be merged into regional industries that can meet the demands of big external market.”

Speaking at the just concluded East African Community Preparatory Meeting for the 8th Sub-Saharan AGOA Forum, Mr Mbogori explained that East African businesses have traditionally focused on Europe and Asian markets and are still not well informed of US market, its nature, and its business environment.

He cited an example of East African Breweries that has been able to merge country subsidiaries to create a company that can meet the growing demand in the region.

“Establishing collaborative partnerships with competitors, supporting industries or producers of complementary goods increases capital, market share and spreads the risk and encourages sustainability of a larger market,” Mr Mbogori said.

He explained that the development and improvement of ports and other infrastructure is better handled at regional level and should be developed at regional level rather than country specific.

“The primary objective of deeper trade integration should therefore be improving competitiveness in the East African Community (EAC) region as a useful stepping-stone on the way to greater integration in the world economy,” he said.

Mr Mbogori observed that the situation is further worsened by the distance between US and EAC and the high cost of doing business in the region.

“East Africa region has some of the highest energy, and transport costs in the world,” he said. “This makes it difficult for firms in East Africa to compete with those in Asia and Latin America.”

The preparatory meeting, which took place in Kigali, Rwanda is a precursor to the 8th AGOA Forum scheduled to take place in August in Nairobi.

Information on trade under AGOA in sub-Saharan Africa shows that Mauritius, Botswana, Swaziland, Namibia, Nigeria and Kenya are just a few of the countries that have utilized AGOA better while Tanzania, Uganda, Rwanda and Burundi have performed poorly in comparison.

Mr Mbogori further suggested that the Aid for Trade initiative should be implemented as quickly as possible so that the EAC countries improve their productive capacity and expand exports to the US market while the AGOA preferences last. 

“The EAC member states cannot take full advantage of the trade opportunities created by the AGOA unless their productive capacities are improved and diversified so that they are capable of producing goods and services competitively and addressing the needs of their external markets,” he said.

“Elimination of supply-side constraints- and the adjustment costs need to be financed.”

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