A new era in US-Africa trade relations? - The US Electrify Africa Act

JB Cronjé, tralac Researcher, comments on the Obama Administration’s passing of the Electrify Africa Act

On 1 February 2016, the House of Representatives and Senate of the United States (US) finally passed the Electrify Africa Act nearly two years after it was first introduced in the House. A few days later on 08 February 2016 President Obama signed it into law. The Act is the most significant piece of legislation to advance United States’ commercial interests with the African continent since the enactment of the African Growth and Opportunity Act (AGOA) in May 2000. This could signal the beginning of a new era in US-Africa trade relations beyond AGOA; placing greater focus on specific areas of mutual benefit such as the energy and information and communications technologies services sectors.

The purpose of the Act is to establish a comprehensive policy framework that provides for the development of an implementation strategy containing clear policy goals, and to give a clear mandate to the US Administration and Agencies to prioritise and encourage efforts made by sub-Saharan African countries to improve access to affordable and reliable electricity. The Act also provides for mechanisms to coordinate, monitor and evaluate its implementation. As a whole, the Act gives a long-term commitment from the US Government to actively contribute to the transformation of the electricity market on the continent.

The Act authorises the US Administration to partner, consult and coordinate with sub-Saharan African countries, international financial institutions, African regional economic communities, cooperatives and the private sector to promote access to electricity for at least 50 million Africans by 2020; encourage the installation of at least 20000 of additional megawatts of electricity by 2020 using a broad mix of energy options, including renewable energy; promote non-discriminatory, reliable, affordable and sustainable electricity in urban areas; promote policies to facilitate public-private partnerships; encourage electricity generation, distribution, pricing and regulatory reforms; promote an increase in private financing; promote the displacement of kerosene lighting with other technologies; and to promote an energy development strategy for sub-Saharan Africa that includes the use of oil, natural gas, coal, hydroelectric, wind, solar, geothermal power and other sources of energy.

The Act directs the President to prepare a multiyear strategy to assist sub-Saharan countries to implement their national power strategies. A report that contains the strategy must be submitted to the Senate and House of Representatives within 180 days from the enactment of the legislation. The President is also required to prepare a progress report, containing detailed information on each power project, three years after the enactment of the Act.

In accordance with the requirements of the Act, the strategy should contain:

• A general account of efforts in sub-Saharan Africa to increase power production; electrical transmission and distribution infrastructure; provide for regulatory reform; improve the reliability of power supply; maintain the affordability of electricity; maximise the financial sustainability of the electricity sector; and improve non-discriminatory access.
   
• Plans to support efforts to increase access to electricity in urban and rural areas, including plans to address commercial, industrial, and residential needs.
   
• Plans to support efforts to reduce waste and corruption, ensure local community consultation, and improve existing power generation through the use of a broad power mix and other technological innovations.
   
• An analysis of existing mechanisms to promote commercial cost recovery; commercialisation of electric services through distribution service providers; improvements in revenue cycle management, electricity pricing and fees assessed for service contracts and connections; reductions in technical losses and commercial losses; and non-discriminatory access to electricity, including recommendations on the creation of new service provider models that mobilise community participation.
   
• A description of the reforms being undertaken or planned by countries to ensure the long-term economic viability of power projects and to increase access to electricity, including reforms designed to allow third parties to connect power generation to the grid; policies to ensure there is a viable and independent utility regulator; strategies to ensure utilities become or remain creditworthy; regulations that permit the participation of independent power producers and private-public partnerships; policies that encourage private sector and cooperative investment in power generation; policies that ensure compensation for power provided to the electrical grid by on-site producers; policies to unbundle power services; regulations to eliminate conflicts of interest in the utility sector; efforts to develop standardised power purchase agreements and other contracts to streamline project development; efforts to negotiate and monitor compliance with power purchase agreements and other contracts entered into with the private sector; and policies that promote local community consultation with respect to the development of power generation and transmission projects.
   
• Plans to ensure meaningful local consultation, as appropriate, in the planning, long-term maintenance, and management of investments designed to increase access to power.
   
• A description of the mechanisms to be established for the selection of partner countries for focused engagement on the electricity sector; monitoring and evaluating increased access to, and reliability and affordability of, electricity in sub-Saharan Africa; maximising the financial sustainability of power generation, transmission, and distribution; establishing metrics to demonstrate progress on meeting goals relating to access to electricity, power generation, and distribution; and terminating unsuccessful programs.
   
• A description of how the President intends to promote trade in electrical equipment with countries in sub-Saharan Africa, including a description of how the government of each country receiving assistance pursuant to the strategy plans to lower or eliminate import tariffs or other taxes for energy and other power production and distribution technologies destined for sub-Saharan Africa, including equipment used to provide energy access, including solar lanterns, solar home systems, and micro and mini grids; and plans to protect the intellectual property of companies designing and manufacturing products that can be used to provide energy access in sub-Saharan Africa.
   
• A description of how the President intends to encourage the growth of distributed renewable energy markets in sub-Saharan Africa, including off-grid lighting, which includes an analysis of the state of distributed renewable energy in sub-Saharan Africa; a description of market barriers to the deployment of distributed renewable energy technologies both on- and off-grid in sub-Saharan Africa; an analysis of the efficacy of efforts by the Overseas Private Investment Corporation (OPIC) and the United States Agency for International Development (USAID) to facilitate the financing of the importation, distribution, sale, leasing, or marketing of distributed renewable energy technologies; and a description of how bolstering distributed renewable energy can enhance the overall effort to increase power access in sub-Saharan Africa.
   
• Plans to ensure that small and medium enterprises based in sub-Saharan Africa can fairly compete for energy development and energy access opportunities associated with the Act.
   
• A description of how US investments to increase access to energy in sub-Saharan Africa may reduce the need for foreign aid and development assistance in the future.
   
• A description of policies or regulations, both domestically and internationally, that create barriers to private financing of the projects undertaken in the Act.

The Act grants the President the authority to establish an Interagency Working Group to coordinate the activities of relevant US government departments and agencies and to oversee the implementation of the strategy. Several US entities, including the USAID, the United States Trade and Development Agency (USTDA), the Millennium Challenge Corporation (MCC), and the OPIC, are tasked to prioritise and expedite institutional efforts and assistance to facilitate their involvement in power projects and markets, both on- and off-grid, and to partner with other investors and local institutions. This includes providing technical assistance, loans, insurance, grants, and other assistance to implement the strategy. In particular, these agencies must also promote the use of private financing. US representatives deployed to appropriate international bodies are required to leverage international support for the objectives of the Act.

Most of the Act’s requirements in relation to the promotion of access to electricity will be implemented under the existing Power Africa initiative. The initiative, launched by President Obama in 2013, aims to double access to clean, reliable and efficient electricity in sub-Saharan African countries and is based on a partnership approach, leveraged by private sector investment and supported by host country governments and multilateral and bilateral donors. At the launch of the initiative in Cape Town South Africa, President Obama said, “we are moving beyond the simple provision of assistance, foreign aid, to a new model of partnership between America and Africa – a partnership of equals that focuses on your capacity to solve problems, and your capacity to grow.”

Three years after the launch of the Power Africa initiative, nearly $43 billion in commitments from the public and private sectors, including more than $31 billion in commitments from the private sector has been leveraged over and above the initial $7 billion commitment from the US Government. Public sector partners, including the African Development Bank (AfDB), the World Bank Group (WBG), the Government of Sweden, and the European Union (EU) have collectively committed nearly $12 billion in support of sustainable energy activities. The Power Africa Initiative has also formed partnerships with the Governments of Norway and the United Kingdom. Strategic partnerships have been concluded with the African Union’s New Partnership for Africa’s Development (NEPAD), the United Nations’ Sustainable Energy for All initiative (SE4All), and the International Renewable Energy Agency (IRENA).

The phenomenal progress thus far confirms private sector interest in the electricity sector on the continent and preparedness to form partnerships. This initiative highlights the (well-known) need to undertake necessary domestic reforms and to create a regulatory environment that is conducive to foreign investment. Obviously, regional power pools should be connected and strengthened to facilitate cross-border trade in electricity. But regional trade agreements currently under negotiation also have an important role to play in unlocking opportunities for investors and local entrepreneurs. They should be forward-looking enough to stimulate infinite economic opportunities associated with greater levels of interconnectedness but they should also address possible challenges that could hamper the development and establishment of a competitive regional electricity market.

Click here to read this Discussion and its sources on tralac’s website.

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tralac maintains a collection of regional and national trade-related resources including copies of the texts and annexes of regional and bilateral trade agreements; copies of various regional protocols, memoranda of understanding and tariff offers; and copies of national legislation and policy documents.

Resources can be found in the following regional repositories:

• COMESA – Common Market for East and Southern Africa
• EAC – East African Community
• SADC – Southern African Development Community
• COMESA-EAC-SADC Tripartite FTA
• SACU – Southern African Customs Union
• BRICS – Brazil, Russia, India, China and South Africa
• Continental Free Trade Area (CFTA)

Can’t find what you’re looking for? Please let us know.


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Information on tariff applications, Government Gazette Notices and ITAC Reports

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tralac at the Trade and Development Symposium in Nairobi, Kenya: 15 December 2015

tralac participated in the Nairobi Trade and Development Symposium (TDS) organised by the International Centre for Trade and Sustainable Development (ICTSD) in partnership with the University of Nairobi and the Saana Institute, with the support of the Republic of Kenya that took place from 14-18 December 2015 during the Tenth WTO Ministerial Conference in Nairobi, Kenya. The aim of the TDS was to provide a forum for discussion among government and non-government stakeholders on issues related to the trade and sustainable development agenda, including the rise of Africa, climate and energy issues, food security, natural resources, and emerging governance.

On Tuesday 15 December tralac hosted a session titled ‘The CFTA: Toward 21st century trade governance for Africa.’ A very active discussion raised a number of key issues. The interconnections between the trade in goods and trade in services agenda were emphasised; this requires novel approaches to ensure that the fundamentals of 21st century introduction, production and trade be reflected in the provisions of the agreement.

The future of the regional economic communities (RECs) such as the Southern African Development Community (SADC) was noted; these RECs are most likely to continue to exist alongside the CFTA. This will have important implications for the how the CFTA can build on what has already been achieved in these sub-regional integrational integration initiatives.

The ambition to achieve early harvests has been articulated. This means that the sequencing of the negotiations will be very important; tariff liberalisation negotiations can be expected to be very contentious, as some Member States are concerned about loss of tariff revenue, while others use tariffs to protect domestic industry from import competition. Negotiations on trade facilitation matters may be much less contentious; and it may be possible to make progress much faster in this area, than on tariff liberalisation. This has been the case in the Tripartite Free Trade Area.

The CFTA negotiations will take place in a political economy context; with Member States will articulating their specific offensive and defensive interests. It will be very important to take note of the domestic political and political economy dynamics, and identifying champions for a 21st century CFTA.

A report on the session, photos and background briefs are available on tralac’s website...

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The tralac Annual Conference 2016 will take place in Windhoek, Namibia on 7-8 April. Further information will be made available in due course.

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Working Paper:  Trade diversion and trade creation effects of economic integration: Illustration of an Excel based tariff simulation of Zambia entering a hypothetical Free Trade Agreement (FTA) with South Africa

By Cecilia Punt and Ron Sandrey: The aim of this paper is to illustrate an Excel spreadsheet* simulation that can be used to determine the trade creation and trade diversion effects of a Free Trade Agreement (FTA). As a case study it is assumed that Zambia is entering into an FTA with South Africa. The impact is evaluated in terms of trade creation, trade diversion, the price effect, the tariff revenue loss and the welfare gains if Zambia reduces tariffs on selected products imported from South Africa. Read more and download the working paper on tralac’s website...

* An Excel spreadsheet accompanying this Working Paper is available on request from Trudi Hartzenberg (trudi@tralac.org)

Working Paper:  Mercosur and Africa: the trading relationships

By Ron Sandrey, tralac Associate: Ten years on, the preferential trade agreement (PTA) signed between SACU and the four South American countries of Brazil, Argentina, Uruguay and Paraguay that make up the core group of Mercosur is still not in force. The objective of this paper is not so much to examine the political economy of the Mercosur-SACU PTA but rather to examine the sometimes overlooked profile of trade between the core group of Mercosur and the continent of Africa. Read more and download the working paper on tralac’s website...

Trade Brief:  Regional Food Security Situation Tight as Grain Shortage Hits Parts of the SADC Region

By Brian Mureverwi: Using the FAO’s Global Information and Early Warning System, this Trade Brief examines the grain demand and supply situation for each SADC member state. Given the structural changes in national, regional, and global food markets, the region faces what could be an entirely new challenge to what is fundamentally an old problem. Chief among these challenges is determining the level of production and import requirements. Read more and download the trade brief on tralac’s website...

Trade Brief:  The Agriculture Negotiations at the World Trade Organization: An update after the Nairobi Ministerial Conference*

By Miriam W. O. Omolo: The MC10 was the first WTO ministerial meeting to be held in Africa. The Nairobi Package made some remarkable progress in agriculture even though it did not result in the conclusion of the Doha round of negotiations. While there was progress in achieving reduction in export subsidies, under the market access pillar and domestic support, very little progress has been made. A lot of work needs to be put in place in order to carry forward the commitments under the Hong Kong Ministerial Conference. Read more and download the trade brief on tralac’s website...

* This paper updates an earlier version prepared for the 10th WTO Ministerial Conference in Nairobi, available on tralac’s website.

Working Paper:  The Use and Potential of Export Taxes for Africa: an Introductory Analysis

By John Stuart, Independent Economist: Export taxes have been used as long as international trade has taken place, both as a generator of revenue and also for strategic reasons. However, despite the unambiguously negative (inefficient) nature of export taxes, when viewed from the perspective of global welfare, they continue to be used in world trade, especially among developing and middle income countries. This paper attempts an introduction to an analysis of export taxes for Africa, concluding with policy implications and some recommendations. Read more and download the working paper on tralac’s website...

Trade Brief:  Implications of COP 21

By Gavin van der Nest: This trade brief reviews the outcomes of the Conference of Parties (COP) 21 held in Paris during December 2015. The adoption of the Paris Agreement recognises that climate change represents an urgent and potentially irreversible threat to humanity and the planet. Africa’s role in these negotiations will be highlighted and the implications of this Agreement for Africa is also discussed. Read more and download the trade brief on tralac’s website...

Trade Brief:  Trade, Industry and Infrastructure in Africa: A Summary of the Paper-Trail from 2008-2015

By David Christianson: Although the idea that Africa’s next stage in development requires industrialization is decades old, the current process of linking industrialization to the continent’s trade reform agenda – is most appropriately viewed as starting with the January 2008 adoption of the programme for the Accelerated Industrial Development of Africa (AIDA). The process has seen repeated commitments though other programmes and documents since then. A summary review of the commitments made in the landmark programmes/publications for the period 2008-2015 is presented in this Trade Brief. Read more and download the trade brief on tralac’s website...

Trade Brief:  The WTO’s Aid for Trade Initiative at 10: An Overview

By Henry Kibet Mutai, tralac Associate: 2015 marks ten years since the Aid-for-Trade Initiative was launched at the WTO’s Hong Kong Ministerial Conference in 2005. The aim of this paper is thus to provide some background regarding the Aid-for-Trade Initiative as well as to give an overview of its achievements, the challenges encountered in its implementation, and the opportunities that it provides for developing countries wishing to improve their capacity to trade through reduction of trade costs. Read more and download the trade brief on tralac’s website...

Working Paper:  Sugar: production, trade and policy profiles for South Africa and other selected African countries

By Ron Sandrey, tralac Associate and Masego Moobi: While agricultural protection has been declining in recent years, several sectors remain heavily protected in many countries. These sectors include sugar, rice and dairy. The objective of this paper is to provide an analysis of the first of these, namely the African sugar sector, with an emphasis on South Africa, Swaziland and Kenya. The paper begins with a global profile for the production and trade of sugar and then moves on to examine the country profiles. Read more and download the working paper on tralac’s website...

Working Paper:  A historical perspective on South Africa’s trading and investment profile with Africa in recent years

By Ron Sandrey, tralac Associate: The objective of this note is to provide some background to the South African trade and investment profile in recent years, with a special emphasis on the trade relations with the African continent. We explore the merchandise trading relationship before putting South Africa’s investment position with Africa in perspective and finally examining the SACU revenue-sharing formula and options. Read more and download the working paper on tralac’s website...

Working Paper:  An analysis of Kenya’s trade and economic profile

By Ron Sandrey, William Mwanza and Michelle Swarts: The objective of this paper is to set the background for a discussion and analysis of Kenya and its merchandise trading background before presenting a more detailed analysis of this trade and possible implications for Kenya of wider trade and economic integration. The paper also reports on intra-Regional Economic Communities (REC) trading in East Africa and how this is confused by the overlapping membership issue, as well as tralac computer simulation work on African trade liberalisation and reforms. Read more and download the working paper on tralac’s website...

Trade Brief:  African export performance under AGOA: a country analysis of Lesotho

By Taku Fundira: This trade brief looks at the export performance of Lesotho’s trade with the US and more specifically it concentrates on the preferential trade accorded to Lesotho by the US. The analysis splits the trade under different regimes to ascertain whether the bulk of trade is benefiting from AGOA or not. It also looks at the main competitors for goods exported by Lesotho to the US under two regimes, AGOA (without the Generalised System of Preferences – GSP) and under the GSP (extended programme). Read more and download the trade brief on tralac’s website...

Trade Brief:  African export performance under AGOA: a country analysis of Kenya

By Taku Fundira: This trade brief looks at the export performance of Kenya’s trade with the US and, more specifically, it concentrates on the preferential trade accorded to Kenya by the US. The paper also briefly addresses the African Growth Opportunity Act (AGOA) and recent developments since the extension of the AGOA. Read more and download the trade brief on tralac’s website...

Special Report: Trade in Services in Africa

By John Stuart, Independent Economist: tralac has published a set of papers containing a large amount of visualised data on trade in services in Africa. There are seven sectoral papers and one framework paper, which contextualises, defines and presents top level data. The intention of these papers is to especially assist non-quantitative researchers in understanding the pattern of services trade within Africa and between Africa and the rest of the world. However, the papers will be of use to anyone interested in quickly understanding services trade patterns in Africa. Click here to find out more and download the Framework and sectoral reports on tralac’s website...

Working Paper:  Trade liberalisation in Africa: a GTAP analysis of intra-African agricultural tariffs going to zero

By Hans Grinsted Jensen and Ron Sandrey, tralac Associates: This paper uses the Global Trade Analysis Project (GTAP) computer database and takes the full suite of African agricultural sectors and African countries/regions in order to assess the benefits of intra-African tariff liberalisation in agricultural merchandise across the continent. Overall, Zimbabwe is the big loser in Africa from this liberalisation, and only Tanzania has a similarly meaningful loss. Read more and download the working paper on tralac’s website...

Working Paper:  Lesotho – where to?

By Ron Sandrey, tralac Associate: The objective of this paper is to provide a background to Lesotho’s economic and trade policies with a particular emphasis on future directions for the Mountain Kingdom. Manufacturing and in particular the textiles and clothing sector is the main contributor to the growth of Lesotho’s formal Gross Domestic Product (GDP), but this sector is stagnating in the face of competition from low-cost Asian producers and rising labour costs. Mining, the fastest growing sector in Lesotho, is the one bright spot in Lesotho’s economy. Read more and download the working paper on tralac’s website...

Working Paper:  The West and Central African trade profile, with a special review of the relationship with China and regional agricultural trade

By Yolanda Potelwa, Ron Sandrey and Sun Zhina: This paper examines the West and Central African (WCA) trade profile, with some reference to the trading relationship with China and the agricultural trade profile of the region. The BRIC countries (Brazil, Russia, India and China) and Africa increased in importance, while the United States of America (US) share declined dramatically. The most significant partner for regional imports was the EU, although its importance declined over time in the face of relentless competition from China. Read more and download the working paper on tralac’s website...

Trade Brief:  New Generation Disputes in African Regional Integration: What are the Reasons and the Implications?

By Gerhard Erasmus, tralac Associate: The active pursuit of REC membership has not been accompanied by clear designs about how to develop community law, to ensure legal certainty and the enforcement of obligations. Private parties have not enjoyed standing before regional Courts and Tribunals; jurisdiction has traditionally been limited to inter-state disputes. This state of affairs is changing; at least in some of the RECs. This Trade Brief discusses some of the recent cases and discusses the reasons and the implications of these developments for African regional integration endeavours. Read more and download the trade brief on tralac’s website...

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AGOA extension: Out-of-cycle review of South Africa’s continued eligibility, and possible suspension

South Africa’s International Trade Administration Commission (ITAC), which is responsible for customs tariff investigations, conducting trade remedy investigations, as well as import and export controls, a short while ago published draft guidelines for the application and allocation of preferential quotas on imports of poultry falling under HS0207.14.90. This follows an agreement in Paris between the South African Poultry Association (SAPA), the USA Poultry and Egg Export Council (USAPEEC) and the National Chicken Council (NCC) on an annual quota of 65,000 tons of bone-in chicken pieces, and which would be exempt of payment on the anti-dumping duties levied by South Africa. 
 
Comments on the draft guidelines were invited by 13 November. The final guidelines on the tariff rebates were published on 18 December and can be downloaded from AGOA.info.
 
Earlier, South Africa had been given until the end of 2015 to ensure that outstanding issues had been adequately addressed, including that US chicken exports could enter the country unencumbered by earlier restrictions. While the veterinary protocols were not in place in time for the formal deadline of 4 January 2016 to pass, these were concluded two days later. On 11 January, US President Obama nevertheless announced that South Africa’s AGOA market access for agricultural products (these account for approximately 2% of South Africa’s aggregate exports to the US) would be suspended on 15 March 2016 since the stipulated conditions around South Africa’s AGOA eligibility had not been met by the due date. However, indications are that the final hurdle –that of US chicken affected by previous anti-dumping duties entering South Africa commerce – is a formality now and a suspension of South Africa’s AGOA preferences on 15 March 2016 can still be avoided.
 
See related news coverage on AGOA.info at this link.


Documents related to the recently concluded out-of-cycle review of South Africa’s continued eligibility under AGOA

USITC notice relating to South Africa here.
Trade Preferences Extension Act of 2015 (AGOA renewal) here.
Original AGOA legislation here.
Copy of the submissions received for the review.
Announcement by President Obama on a possible suspension of South Africa’s AGOA benefits for its agricultural exports
Follow-up announcement by President Obama that South Africa has not met the earlier deadline, and risks being suspended on 15 March 2016.

AGOA Data Center

Country Trade Profiles

Bilateral trade profiles, disaggregated by sector, are available for each AGOA beneficiary country individually and contain quarterly data. The data also includes a number of regional trade profiles, featuring the AGOA beneficiaries in SACU, SADC, EAC, COMESA and others. The monthly data sections have been updated to December 2015. Data includes exports by country, by product sector, and apparel trade.

New AGOA apparel quotas for October 2015 – September 2016 published
 
The Committee for the Implementation of Textile Agreements (CITA), Office of Textiles and Apparel, US Department of Commerce has announcing the new 12-month cap on duty- and quota-free imports of apparel articles assembled in beneficiary Sub-Saharan African countries from regional and third-country fabric. The new quota represents an increase of approximately 6% over the 2014/15 quota period.
 
Federal register notice at this link.
Related news article here.
Apparel quota section on AGOA.info.

Exporter Toolkit
The exporter toolkit contains sector-specific resources, and also covers key themes (SPS measures, packaging, trade shows, business planning etc.) that are of relevance to producers and traders planning to export to the US.
 
From the AGOA news archive

• COMESA: AGOA-US exports swell to US $17 Billion
• US urges Zambia to diversify
• AGOA has rich export opportunities, if Kenya is interested
• US is optimistic that South Africa will meet Obama's AGOA deadline
• East Africa: New AGOA rules on eligibility and suspension start to apply
• US embassy soothes SA’s brooding over poultry

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