African business leaders say the United States can do more to encourage investment on the continent. The Obama administration agrees. U.S. Secretary of State Hillary Clinton is expected to close a meeting in Zambia on U.S. trade preferences.
The African Growth and Opportunity Act has been the cornerstone of U.S. investment on the continent for more than ten years. But the vast majority of goods imported duty free are textile and oil products.
African producers meeting in Zambia want to diversify those exports and say the U.S. government can do more to help.
Chungu Mwila, the director for private sector development at the Common Market for Eastern and Southern Africa, says the trade preferences known as AGOA would be more valuable with more direct U.S. investment.
“If American companies were to invest in Africa and boost our production capacities, then, in our view, AGOA would become more meaningful,” said Mwila.
With most U.S. direct foreign investment still going to Latin America and Asia, Mwila says the Obama administration should do more to bring American business to Africa.
“I think there is a lot more that the U.S., being the strongest economy in the world, can do by assisting in capacity building of our industries, by ensuring that some of the American companies come and look around. After all, Africa is no longer such a risk place,” said Mwila.
The Obama administration agrees and is asking Congress to extend AGOA trade preferences for another ten years. U.S. Assistant Secretary of State for African Affairs Johnnie Carson says there should be greater tax incentives for U.S. earnings from AGOA investments.
“AGOA already provides substantial tariff savings for U.S. companies importing eligible products from Africa, but there are no other types of tax incentives provided under the legislation," he said. "We recommend that the U.S. government support an effort to eliminate the U.S. tax on repatriated revenues from American companies that invest in factories in Africa that produce AGOA-eligible products.”
Carson says he is encouraged by Africa's progress, but the continent remains economically challenged and continues to need programs such as AGOA to provide incentives for greater growth.
“While AGOA has achieved a certain amount of success, it has not solved Africa's economic, financial, and commercial challenges, and the region has not experienced the fundamental economic transformation that we seek for Africa as a whole," he said. "Africa continues to struggle to compete in an increasingly competitive global economy.”
Carson says the Obama administration wants U.S. lawmakers to extend beyond next year a provision allowing AGOA-eligible nations to source raw textile materials from third countries.
Mwila says that extension, and the renewal of AGOA as a whole, will bring more business to a continent that is making itself more attractive to investors.
“We have very liberal economic regimes," said Mwila. "Our macro-economic fundamentals are being put in place. For example, the inflation rates have come down. The exchange rates are stabilizing. And the economic growth rate is one of the highest globally, around five or six percent. You don't even get that in the U.S.”
U.S. Secretary of State Hillary Clinton helps close this AGOA forum Friday before meeting with Zambian President Rupiah Banda.