ADF and the African Growth and Opportunity Act (AGOA): 

Helping African Small Entrepreneurs Tap New Regional and International Markets, Generate Quality Jobs, and Expand Income and Opportunity across African Economies
 

What is AGOA?

The African Growth and Opportunity Act (AGOA) was signed into law on May 18, 2000 as Title 1 of The Trade and Development Act of 2000. The Act offers tangible incentives for African countries to continue their efforts to open their economies and build free markets. President Bush signed amendments to AGOA, also known as AGOA II, into law on August 6, 2002 as Sec. 3108 of the Trade Act of 2002. AGOA II substantially expands preferential access for imports from beneficiary Sub-Saharan African countries.

AGOA currently provides 37 African countries with the most liberal access to the U.S. market available to any country or region with which the United States does not have a Free Trade Agreement. AGOA expands the list of products that eligible Sub-Saharan African countries may export to the United States subject to zero import duty under the Generalized System of Preferences (GSP). While general GSP covers approximately 4,600 items, AGOA GSP applies to more than 6,400 items. AGOA GSP provisions are in effect until September 30, 2008, nearly two years longer than general GSP.

AGOA can change the course of trade relations between Africa and the United States for the long term, while helping millions of African families take advantage of opportunities to build prosperity:

·         By reinforcing African market efforts;

·         By providing improved access to U.S. technical expertise, credit, and markets; and

·         By establishing a high-level dialogue on trade and investment.

Since its implementation, AGOA has encouraged substantial new investments, trade, and job creation in Africa. It has helped to promote Sub-Saharan Africa's integration into the multilateral trading system and a more active role in global trade negotiations. It has also contributed to economic and commercial reforms which make African countries more attractive commercial partners for U.S. companies.
 

What is ADF’s Role Under AGOA?

When Congress first enacted AGOA in 2000, the legislation highlighted ADF’s unique congressional mandate as an organization charged with generating opportunities for Africa’s poorest citizens to participate fully in development by expanding opportunities for the creation of sustainable small businesses, quality jobs, family-supporting incomes, and a more equitable distribution of income across African societies. AGOA notes that ADF has worked successfully to enhance the role of women as agents of change; strengthen the informal sector with an emphasis on supporting micro- and small-sized enterprises and indigenous technologies, and mobilize local financing. The legislation also defines a clear role for ADF under AGOA: the development and implementation of strategies that promote participation in the socio-economic development process of grassroots and informal sector groups such as nongovernmental organizations, cooperatives, artisans, and traders into the programs and initiatives established under AGOA.
 

The 2004 AGOA Report

Under reporting requirements mandated by the African Growth and Opportunity Act (AGOA), the President of the United States is required to submit annual reports to Congress on United States trade and investment policy toward Africa and the potential to establish free trade agreements between the United States and African nations. The President’s annual report for 2004, prepared by the Office of the United States Trade Representative, was released in May. The following excerpt summarizes activities undertaken by the African Development Foundation, in its role as an independent corporation of the United States Government, to enhance the capacity of African small-, medium- and micro-enterprises to pursue sustainable overseas trade and investment opportunities.
 

AGOA 2004 Report on the African Development Foundation (pp. 56-58)

The African Development Foundation (ADF) is a U.S. Government corporation that provides support directly to small-, medium-, and micro-enterprises in Africa and nongovernmental organizations that work at the grassroots level. ADF responds to unsolicited proposals for activities that are African-driven and African-owned. The Foundation helps applicants to develop business plans for commercially viable activities and to obtain up to $250,000 in financing for fixed capital, working capital, and technical and managerial assistance. In exceptional circumstances, a larger amount of financing can be provided.

The bulk of ADF’s support is directed toward rural and periurban areas and underserved populations, including women and minority groups. ADF seeks to advance replicable models for increasing the ability of the poor and disadvantaged to participate in new economic opportunities. Thus, ADF is a valuable complement to other Federal programs that seek to stimulate large-scale, macro- level change in Africa.

ADF’s current programs promote micro- and small-enterprise development (MSE), trade and investment (T&I), use of participatory development methods, and AIDS prevention and mitigation. In FY2003, ADF had active projects in 13 African countries: Benin, Botswana, Cape Verde, Ghana, Guinea, Mali, Namibia, Niger, Nigeria, Senegal, Tanzania, Uganda, and Zimbabwe.

AGOA specifically notes an important role for ADF in developing and implementing strategies for increasing the participation of small-scale producers in trade and investment activities in Africa. ADF provides capital as well as technical and managerial assistance to enable small-scale producers to (1) adopt, produce, and export high-value, nontraditional crops; (2) scale up the quantity and quality of production to meet specifications of export buyers; (3) establish or increase local processing or manufacturing to add value to primary products; and (4) create new export marketing partnerships.

In FY2003, ADF had 26 active T&I projects in three countries (Namibia, Uganda, and Zimbabwe) that have had at least one major disbursement of funds. Sixteen of the projects, all in Zimbabwe, promoted paprika cultivation for export. The other Zimbabwe project produced tubes for toothpaste and pharmaceuticals. (Note: ADF’s grantees in Zimbabwe, as elsewhere, are private sector enterprises or non-governmental community organizations. ADF did not fund any new economic development projects in Zimbabwe in FY2002 or FY2003 given the economic and political stability there.) Four of the Uganda projects helped to develop vanilla exports. One project in Namibia supported rock lobster fishing and one project in Uganda upgraded the processing of Nile Perch. The other active projects supported exportation of silk, salt, and packaged juices. These projects have a total current budget of $3.595 million.

In addition, ADF had seven active MSE projects that have stimulated some export production although they were primarily focused on domestic markets. These MSE projects produced pineapple products (Benin), solar-powered hearing aids (Botswana), fishing (Guinea), ostrich products (Namibia), decorative ceramics (Senegal), butter (Tanzania), and animal hides and skins (Uganda). ADF’s active T&I and MSE projects have generated over $12 million in African exports.

The grantee for the Uganda Marine Project, Uganda Marine Processing Ltd (UMPL), which received $250,000 in financing from ADF in FY2001, has continued to be a standout performer. UMPL is the smallest of the eight formal sector fish processing companies in Uganda and one of only two with majority ownership by indigenous Ugandans. It processes Nile Perch into fresh and frozen fillets for export to the EU and Middle East and was the first company in East Africa to receive the International Standards Organization (ISO) 9001 quality certification. In FY2003, UMPL earned $4.505 million in export revenues, up 7.4 percent from the previous year.

In FY2003, ADF signed memoranda of understanding for strategic partnerships with the governments of five countries (Cape Verde, Ghana, Mali, Swaziland, and Zambia) that will leverage funding contributions for joint programs. All of the new strategic partnerships except the one in Swaziland will have a strong focus on Trade and Investment.

In late FY2003, ADF funded 6 new Trade and Investment projects with a total budget of $1.642 million. Two of the new projects supported silk production in Uganda. The others supported tomato processing in Ghana, meat processing in Namibia, textile production in Namibia, and smallholder tea production in Uganda. The newly funded tomato processing project in Ghana is particularly noteworthy because ADF agreed to provide $530,000 in financing, which exceeds the usual amount of support that the Foundation will provide to a single enterprise. The exception was granted because of a unique opportunity for a private company to buy a food processing plant that had been owned by the Ghanaian government and to supply Unilever with bulk shipments of tomato paste. Unilever will be responsible for packaging and export marketing of the tomato paste. The Ghanaian company will also produce and market chopped tomatoes and tomato puree in cans and aseptic packaging for the domestic market.
 

Additional Resources on AGOA

The full text of the 2004 AGOA report to Congress - 2004 Comprehensive Report on U.S. Trade and Investment Policy Toward Sub-Saharan Africa and Implementation of the African Growth and Opportunity Act - is available as a PDF document at http://www.ustr.gov/regions/africa/2004-05-agoa.pdf.

The full text of the African Growth and Opportunity Act of 2000 is available as a PDF file at:  http://www.agoa.gov/agoa_legislation/agoatext.pdf

The full text of the 2002 amendments to AGOA (also known as AGOA II) is available as a PDF file at:  http://www.agoa.gov/agoa_legislation/AGOAII_text.pdf.

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