Though the extreme levels of poverty in Africa are what typically define the continent, it has seen rapid economic growth as foreign nations increase investment in sub-Saharan Africa. The U.S. seeks to expand and increase trade with Africa by way of economic development initiatives. The following article describes two U.S. initiatives that create a mutually beneficial relationship between the U.S. and Africa. These initiatives seek to fight poverty in Africa and accomplish the humanitarian and economic goals of both parties involved.
African Growth and Opportunity Act (AGOA)
The African Growth and Opportunity Act increases sub-Saharan Africa’s accessibility to the U.S. market with duty-free access to many U.S. commodities, incentivizing investment in the goods of U.S. companies. Sub-Saharan African countries that wish to attain and keep eligibility for AGOA must be actively working towards improved rule of law, human rights and labor standards. This means that these countries must minimize the poverty levels their citizens face. The desire to be part of these trade acts motivates many countries to improve upon their standards of living.
Through the benefits of AGOA, Kenya has become a top exporter of apparel and macadamia nuts to the U.S. Ethiopia now generates about $20 million in footwear exports. South Africa, the largest AGOA beneficiary by value, has increased exports to the U.S. threefold since 2001, totaling $2.9 billion in 2015, and is developing a booming automobile industry. The agriculture industry in South Africa has also flourished under AGOA. The citrus sector alone has generated 85,000 new jobs in South Africa. Since the implementation of AGOA, sub-Saharan Africa beneficiary countries have increased non-energy exports to the U.S. in total by 57.8%. These economic developments create thousands of new jobs every year which helps eradicate hunger and poverty in Africa.
American companies are also benefiting from AGOA. An example is American Augers Inc., who is adding new jobs to its factory by growing its exports to Africa. By committing to laying the fiber optic infrastructure across all of Africa, American Augers Inc. was able to expand and grow its business. This is but one company’s example of how increasing U.S. export to Africa provides jobs anywhere from factory workers to farmers throughout America.
Prosper Africa is a recent extension of the African Growth and Opportunity Act. Due to U.S. foreign direct investment statistics in Africa recently declining, Prosper Africa is the Trump administration’s initiative to double two-way trade between the U.S. and Africa. Making this initiative unique from the original AGOA, Prosper Africa creates a one-stop-shop of U.S. government support services to aid U.S. and African businesses and investors. The initiative also promises to negotiate at least one new bilateral free trade agreement in Africa. This type of agreement can significantly improve the economic activity of a country. For example, the U.S. signed and enforced a free trade agreement with Morocco. Within a decade, U.S. imports from Morocco doubled and U.S. exports to Morocco roughly quadrupled.
Small U.S. businesses in particular are benefiting from the improved, mutually beneficial business climate the initiative creates. An example is the Environmental Chemical Company. While the firm attains economic success through commercial opportunities now made available in Africa, the people of Nairobi, Kenya and the surrounding area are also benefiting from the environmental restoration and social services that the U.S. company is providing. As more U.S. businesses invest, the statistics of poverty in Africa should only see improvement.
Overcoming Poverty in Africa
In a study by the Peterson Institute for International Economics from over a decade ago, estimates determined that removing trade barriers and opening up more countries to the global market could help fight poverty in Africa by bringing as many as 500 million people out of poverty and putting $200 billion a year into the economies of those developing nations. AGOA and Prosper Africa’s efforts show that the numbers that the Peterson Institute predicted are an attainable future goal. With increased employment and reliable income, people of sub-Saharan Africa can lift their families above the poverty line. As the fight against poverty in Africa causes poverty rates to decrease, the purchasing power of the region should increase, allowing access to untapped markets.
– Hanna Rowell