US pushes for new ‘green’ AGOA deal
The new African Growth and Opportunity Act (AGOA) trade deal between Africa and the United States is expected to feature stricter requirements for climate sensitive production and sourcing, a demand that could weigh on business volumes from some countries.
BusinessWeek has learnt that on top of the existing tight protocols on governance required of African governments to remain as AGOA beneficiaries, the US also wants more adherence to Environment, Social and Governance (ESG) standards from the African corporates wanting to do business with the world’s richest market.
AGOA, which provides preferential trade access to the US for participating African countries, expires in 2025 and is currently undergoing talks towards renewal. At the US Africa Leaders’ Summit held in Washington D.C. last month, senior US government representatives, including members of Congress held high level talks with senior officials from more than 40 African governments on laying the ground rules for renewal.
BusinessWeek is informed that the Washington meeting agreed on a deadline of December 2023 to finalise a renewed AGOA, allowing the billions of dollars in preferential exports from Africa to continue flowing to the US.
Trade and Industry minister, Mmusi Kgafela confirmed that negotiations towards renewing AGOA were underway, with debates on the criteria for trading with the US.
“It goes hand in hand with climate policies or policies that are sensitive to climate change,” he told BusinessWeek in Washington D.C on the sidelines of the Summit. “You have your environment that you must look after and the quality of the supply chain needs to be one in which there’s not a single instance of climate degradation.”
Kgafela added: “AGOA goes hand in hand with the necessity to maintain high standards of governance, high standards of existence.
“They want free markets, good governments and they don’t want gross violations of human rights, governments in which the court system is compromised, or where corruption is rife.
“Those are some of the conditions of being granted access. “Remember AGOA is a piece of legislation which gives their president discretion.
“If certain adverse statements or information is brought to his attention, he has the power to remove you from entitlement as a country.”
Earlier this month, the US cut Burkina Faso from the AGOA deal, citing “unconstitutional change” in that country’s government after a series of coups.
On top of the strict sanitary and phytosanitary standards already required for entry into the US market, the addition of ESG standards is being viewed as an additional cost of business or even disincentive for African companies eying the US market.
For Botswana, one red flag reportedly raised against the country involves the country’s beef sector.
“There’s a provision that says in the supply chain, you can’t embark on deforestation and if you do, you cannot trade. “There was a suggestion that the way we raise our cattle, there’s acts of deforestation in the process but I think it’s a very unfair interpretation.
“It has not yet landed or been brought to fruition or implemented, but it’s gravitating and there are some voices that are advocating to that,” the minister told
BusinessWeek.
He however said Botswana’s governance track record, political stability, free market economy and corporates’ drift towards ESG, would help it stand out in Africa as a preferred partner under the new AGOA.
Kgafela said government had agreed to work with the US government and its agencies to better prepare and capacitate local businesses to access the American market. “We have a lot of sanitary and phytosanitary conditions which are real obstacles, but these are conditions that they have set for themselves and I don’t blame them because remember this is a very free society in which litigation is common,” Kgafela said.
“People in America are trigger-happy to litigate for the slightest violations and the courts are very generous in awarding of that.
“Out of this background of increasingly gravitating towards perfection, they are not going to have goods coming in that are harmful to their people and end up going to court.
“Back at home we need to prepare ourselves to meet these conditions.”