Last week, I promised
to explore the opportunities presented by the African Growth and
Opportunity Act, commonly known by its acronym, Agoa.
This
law constituted a ground-breaking American policy towards Sub Saharan
Africa and came into effect in May, 2000, during President Clinton’s
administration.
Its purpose was to assist the economies of sub-Saharan Africa gain access to the United States market.
Initially, it was envisaged that it would take 15 years. However, in June 2015, it was extended to 2025.
The Act covers more than 6,000 products than can be exported to the US on preferential trade terms, but Sub Saharan Africa has never exploited it fully.
These
products range from live animals to all sorts of meats, milk and milk
products, eggs, nuts and fruits. The list is long and covers virtually
all what we have in excess here, but information on how these
opportunities can be exploited is lacking.
A
number of studies show that Agoa has had a significant impact on export
trade from Africa but the continent needs to do still more in order to
exploit the opportunity fully.
For
this article, rather than attempt to analyse the entire product list, I
will focus on two areas, textile and fisheries. These two also happen
to be areas that Kenya’s government has committed to developing.
In
textile, Africa is exporting less than 2 per cent (about $ 1 billion)
of the potential market Agoa yet we have abundant land to grow cotton,
and labour resources.
McKinsey & Company in one of its articles, East Africa: The Next Hub for Apparel Sourcing, predicts that Ethiopia and Kenya will constitute a major textile hub.
There
is even an unconfirmed story that Kenya, like Ethiopia, is
contemplating building a textile city. If it gets done, it would be a
brilliant idea that would create jobs and reduce poverty.
Preferential treatment into the huge US market is a great start for any country.
Access
to this market has enabled many countries to transition into
middle-income status, and was the backbone of virtually all the Newly
Industrialized Countries (NICs) of Asia, sometimes referred to as Asian
Tigers.
How
we can leverage this opportunity to create African Cheetahs ? I see two
major challenges, which, if overcome, would see Kenya rise as one
Cheetah.
The
first one, which is easy to deal with, is infrastructure, especially
cheap power that will make Africa competitive in the global market. I
will come to this later.
The
second challenge, which is more complex to overcome, is our defeatist
culture. We tend to surrender even before we try. We manufacture every
imaginable excuse why we cannot compete but fail to commit to try like
everyone else did.
BREAK DOWN THE INDUSTRY
On
energy, God has blessed us with opportunities for green energy.
Already, wind power is operational in Marsabit. Geothermal energy comes
from Naivasha, hydro power is generated in Masinga and solar power can
be tapped in virtually all parts of the country.
We
need to move production centres to sources of power. This will result
in dual benefit, i.e., cheap power as well as cheaper accommodation,
which is a major cost driver. China has used this strategy to bring
development into rural communities and pulled millions of people out of
poverty.
Our
crisis of confidence in relation to the global markets can only be
dealt with if we register successive small wins in enterprise.
If we were to succeed in clothing our people with locally-produced textiles and close the mitumba (used clothes) market, it would be a major physiological win.
We
should also create collaborations that fast-track our learning curve so
as to independently exploit the entire textile value chain. Successive
wins will strengthen our resolve to succeed and compete in the global
market.
Members of the Muluanda cotton ginnery stand in a
cotton mound in the ginnery store in Busia County on October 21, 2015.
Farmers blame the influx of imported new and second-hand clothes for the
industry's struggles. PHOTO | TOM OTIENO | NATION
As
I wrote last week, we must create closer collaboration with
universities to deepen learning, create new programs in design and
foster the interface between research institutions, government and
industry.
There must a deliberate effort to support capacity building in every sector for sustainable development.
Virtually
all textile enterprises in Kenya are foreign owned. There is a
likelihood that one day, they will leave, pushing the entire nation back
to square one.
There is power in local collaborations. Already, through the locally developed chama
concept, members can find increased investment opportunities in areas
that an individual would have found difficult to invest in alone.
Chamascan
enable us take advantage of the glaring entrepreneurial opportunities.
Often people invest in replicative enterprises with no window for making
money simply because the market entry is easy.
High
cost of textile equipment may seem a major barrier, but one can break
down the industry into segments, start anywhere along the supply chain
and grow into the more complex areas of the industry.
Creating an industry association may help local investors to develop both the capacity and means to to scale up the business.
The
resurgence of the Kenya National Chamber of Commerce is in itself an
opportunity to create an environment to share and disseminate industry
information.
MARINE SCIENCES
The
fish industry in Kenya, although highly lucrative, is hardly exploited
especially for exports to the United States under Agoa.
Perhaps it is worth knowing that piracy in Somalia started as a result of fishing in the rich waters of the Indian Ocean.
Many
fishing crews, especially from the Far East, come here to fish, mostly
in the months of January to July, a period that coincides with the
period tuna fish come into the warm waters of East Africa to spawn.
If
you compare our fish revenues with those of countries with marine
resource similar to ours, you will see we are virtually asleep.
We
can change this by developing greater capacity. Universities at the
coast should introduce programs in Marine Sciences and support the
government with research activities that can improve the exploitation of
marine resources.
Instead
of fighting those who trawl our coastal region in search of fish, we
should invite them to collaborate with local fishermen and begin
exporting fish formally around the world, including the US under Agoa.
We must also support local entrepreneurs with cold storage and other infrastructure.
Our
freshwater fish such as tilapia and trout are delicacies that market
themselves globally, yet they are not completely developed. We ought to
celebrate such fish through festivals to unearth different recipes and
increase their local consumption.
Brand them like the Norwegian Salmon and set up a global distribution network. It is not farfetched to imagine a chain of health food restaurants based on fish.
Next
week I shall continue with the Agoa product list and explore more
opportunities that are likely to create employment and reduce poverty.
Thomas
A. Edison, the inventor of the electric light bulb said, ‘Opportunity
is missed by most people because it is dressed in overalls and looks
like work.’ Reading through the Agoa product list may look like work,
but that is where opportunity lies.
The writer is an associate professor at University of Nairobi’s School ofBusiness.Twitter: @bantigito
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