Exporters’ quest to improve the quality of their products to meet global appeal, as part of efforts to boost the export trade through initiatives such as the African Growth and Opportunity Act (Agoa), is being derailed by poor business environment, a trade expert has said.
Malawi, unlike other sub-Saharan African countries that Agoa targets, has not explored the opportunity to full potential during the past 15-year period of the United States government initiative—which among others is intended to encourage export-led growth in developed countries.
Recent Agoa statistics show that Malawi has been struggling to contribute at least one percent to the total Agoa exports.
Agoa, enacted in 2000, is also aimed at deepening bilateral relations between the US and sub-Saharan African countries to enhance trade and economic development.
It provides a non-reciprocal trade opportunity for eligible sub-Saharan African countries to export over 6 400 products on a quota-free and duty-free basis.
But local exporters, according to Small and Medium Enterprises Association (Smea) lack understanding of the operations of Agoa; hence, many SMEs are failing to take advantage of the opportunity.
Smea president James Chiutsi on Wednesday said other factors that are affecting local exporters are poor infrastructure and inadequate provision of production elements enabling business environment for them to produce high quality products.
He said: “Agoa market is huge and professional, for SMEs to penetrate that market, they can ably do so by establishing linkages with bigger economic players. [But], SMEs in Malawi do mostly operate from poor infrastructure, with inadequate provision of production elements, this definitely impacts on quality.”
Chiutsi explains that skill development for SMEs is also another huge problem.
“Then there are funds required to serve such huge markets. It’s not easy to access funding in Malawi. Less skills development impacts on provision of quality products for highly competitive markets like America.
He said given the competitiveness of the market, local exporters are expected to “produce goods at a very competitive price, at the quality that is acceptable and at the right delivery time to fully enjoy the benefits of Agoa”.
Recently, the Malawi Chambers of Commerce and Industry (MCCCI) said Malawi can export more to Agoa market if government built capacity of local manufacturers.
According to a recent Agoa report leading beneficiary countries are Angola, Nigeria, Chad, Gabon, Kenya, the Republic of Congo, Lesotho, and Mauritius. Most of these led with oil exports.
South Africa is the largest non-oil Agoa beneficiary.
Since its inception in 2000, the Agoa programme has helped African beneficiary countries to expand and diversify their exports to the US.
Products from Agoa-eligible countries enter the US market duty-free. The US allows agricultural products, metals, footwear, and certain chemicals.
Currently for Malawi, textiles are a dominant export product in Agoa. But the export trend has not been so impressive in the past 10 years with the country shipping $29m worth of goods in 2006, $27 million in 2007 and $26.6 million in 2008. Malawi made $39.7 million in 2009, $47 million in 2010 before hitting $56 million in 2011, according to the report.
In 2012 the country raked in $46.3 million before registering $47 million in 2013. Initially, Agoa was set to expire on September 30, 2015 but early this month the deal was extended for another 15 years.