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Saturday, 11 June 2011 17:44

American Market Yearns For African Exports

By Buziness Africa Correspondent

LUSAKA, Zambia, June 10, 2011 (Buziness Africa) — The US has provided a ready market for African products to that country under the auspices of the African Growth and Opportunity Act (AGOA) but many African countries, Zambia inclusive have not fully exploited this opportunity to increase trade with the world biggest economy.


In Zambia for example, statistics from the Central Statistical Office (CSO) from May this year indicate that the country has not benefited much from AGOA as less than one per cent of the country's goods are being exported to that country.


This scenerio is almost the same in other countries in Sub Saharan Africa under the programme, the US government gives trade preference to products from Sub-Saharan Africa to enter its market duty-free under the Generalised System of Preferences.


This is done to give Africa a competitive advantage in the US market for additional value-added products. It is also one way of encouraging greater value addition to Africa's production of agricultural and manufactured products.


Currently, 37 African countries are members of AGOA and out of these only four oil African producing countries seem to be reaping more from the initiative than the others, getting as much as 90 per cent of the total trade.


But this does not mean that the US has preference for oil producing countries because there are more than 6,000 tariff line items enjoying duty-free status under the US Generalised System of Preferences (GSP) programme.


This can be seen from countries like Swaziland, Lesotho, and Kenya which have gotten their share. Zambia, which is endowed with abundant natural resources especially minerals, timber, and produces agricultural products such as, maize, rice, cotton, cassava, inter alia is only exporting 10 products out of the over 6,000 eligible commodities to the US market.


The country has a great opportunity to exploit the US market by taking advantage of its vast natural resources to grow its trade and boost economy. For instance, Zambia can take advantage of Cassava which is grown in abundance but does not have a good market locally to enable the product be exported.


Several countries are using cassava crop as feedstock for animal feed, and its meal combined with wheat can be used in bakeries to make biscuits. Cassava can be used as adhesive in wood processing industries and paper industries, among others.


Benson Kunda, milling manager at Tute Milling in Mansa, a joint project of the World Food Programme (WFP) and Zambian Government under Programme Against Malnutrition (PAM) said cassava has high demand in Angola and other countries though there are only few if any exports of the commodity.


Most Zambian producers and traders cited several reasons, among them lack of capital, and poor quality of their product as a hindrance for them to penetrate the US market.


Kennedy Sakeni, who owns Luapula Basemetals of Mansa said AGOA is the best initiative to encourage trade with the US especially among small-scale entrepreneurs but that many do not understand it and can, therefore, not appreciate it.


"Many entrepreneurs in Luapula who should be benefiting from the programme do not know about it and it is therefore difficult for them to see its benefit. The few who know about the initiative do not have the required capital to package their products according to the US market standards,"Mr Sakeni said.


He bemoaned how difficult it was for small scale traders to penetrate the American market because they lacked understanding of the procedures required to export.

"They instead use well established companies who act as middlemen and get commission from them," he added.


In addition, Mr Sakeni noted that smallholder companies cannot access capital to expand their business and the banks demand collateral for them to secure loans, a move which he stated disadvantaged local entrepreneurs.


"Local banks cannot give loans to our small scale businesses because many of us lack security or collateral which the financial lending institutions demand before they give us capital injections. So if only the banks become lenient on us and give us the loans, we can expand our business because that is our greatest challenge for now," he said.


On the need for Government to embark on a sensitisation drive on the AGOA initiative to rural companies, Mr Sakeni said it could not be avoided if these companies were to appreciate the benefits.


There are a lot of activities in rural areas and it will be wise, if Government reach out to them and explain about AGOA and its benefits and how they can benefit from it, if the country is to reap from the initiative.


Despite the dismal picture that Mr Sakeni painted, he had a success story to highlight and he disclosed that his company in its little way had tried to export minerals to China. We have tried to to export minerals to China in a small way, although we have been using middlemen because we do not have the muscle to do the trade ourselves," he said


And Kalungwishi Estate in Kasama district situated in the northern part of Zambia produces Sugar but the product is considered to be of low grade to reach most export markets especially American and European countries.


Estates operations manager, Derrick Sianga said his company has been exporting sugar to neighbouring Tanzania but that it does not meet the quality required to export the product to the Western market.


"Our company is producing household sugar, which is usually sold on the local market while 30 per cent is being exported to neighbouring Tanzania. Our sugar is household sugar which contains vitamin A and other requirements needed for the local market. But if we need to export there is need for us to refine our sugar to meet those standards," he said.


Furthermore, Mr Sianga disclosed that the company which is owned by two Zambians of Asian origin, was producing 24 tonnes of sugar per day and plans were underway to expand its plantation to beef up production.


The company will invest in machinery which result in the improvement of quality of its products to reach foreign markets. This project requires massive investment and that his company is working towards that," he added.


"We are now concentrating on the local market; we want to ensure that we satisfy the local market with our sugar before going to meet the foreign market. There is a positive response from people especially in Kasama and other towns in Northern Province who buy our sugar and we have started receiving response from Lusaka and the Copperbelt." Mr Sianga said.


On employment creation, he disclosed that the company was helping to create 600 employment opportunities for people especially during peak production periods.

Another major contributing factor to failure by local entrepreneurs was that Zambian products faced challenges of low value addition to meet international standards.


Most Zambian products are in raw material form lacking value addition and making it difficult for them to compete with other products on the continent. Ghana, for example, exports preserved pineapple to the US while Zambia which could have the best pineapples from Mwiniluga has not been able to export its pineapples.


Most importantly, Zambian traders need access to market information and financing with reasonable interest rates which will help finance their business to become competitive and compete with other producers from Africa in the AGOA markets.


Exports help to create employment opportunities for the people and when companies are operating at full capacity, there is demand for more labour force to satisfy the market. Kawambwa Tea Company, for example, which is the biggest employer in Luapula Province employs less than 300 people but this can go up to 800 when the company is operating at full capacity.


Company general manager, Elijah Chenyika said the company can recruit up to 600 people on temporal basis while about 200 are permanent and 100 others on part time.


The company which once used to export tea to Europe and other parts of Africa, Mr Chenyika stated was working towards increasing its production, and added "I am optimistic that our product can still compete at the international market considering its good quality but this can only be achieved if there is an improvement in our packaging."


Packaging is one area that the company had since started working on to make the product attractive.


"We want to start packing our tea in tea bags and start exporting to other countries. But before we can decide to export, we want to make sure that we remain competitive on the local market. Our dream is for our brand to be a common name in Zambia and we want it to be among the top five best brands selling in the country," he said.


Zambia which is endowed with abundant natural resources, has based its export on traditional items such as Copper and other minerals for trade, which accounts for more than 90 per cent of the total exports. This is why Zambia should take advantage of all the opportunities it has, to improve trade and grow its economy.


The country as it has severally been emphasised by Commerce Minister Felix Mutati should focus on value-addition and non-traditional products such as processed agricultural goods, apparel, jewelery, cut flowers and vegetables which are in abundance to exploit the yawning US market.


By increasing its trade and market in these products under AGOA, Zambia can score high hence helping in the fight against poverty and unemployment. It is against this backdrop that Zambia and other African countries should take advantage of the ongoing10th extra-ordinary AGOA forum to run out some of the concerns firms and businesses are facing in various countries.


It is imperative for Africa to dialogue on the extension of AGOA which is scheduled to end by 2015. More than 3,000 delegates from 37 eligible countries including America are attending the high level forum in in Zambia's capital city, Lusaka.


Notable among those attending from America is US Secretary of State Hillary Clinton, Assistant Secretary of State for Africa Bureau Jonnie Carson, and US Trade Representative ambassador Ron Kirk and other senior officials from the American government. Others include a dynamic forum of governments, Civil Society organisations (CSO) and the private sector. More than 100 US investors are also attending the forum. (END)


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