| UNIVERSITY OF PENNSYLVANIA - AFRICAN STUDIES CENTER |
USA: Africa Economy Updates
Date distributed (ymd): 990731
Document reposted by APIC
+++++++++++++++++++++Document Profile+++++++++++++++++++++
Region: Continent-Wide
Issue Areas: +economy/development+ +US policy focus+
Summary Contents: This posting contains a briefing paper
from the Association of Concerned Africa Scholars commenting
on the July 16 passage by the House of Representatives
of the Africa Growth and Opportunity Act (AGOA), which
is still to be considered by the Senate.It also contains
press releases from the Overseas Private Investment
Corporation and the Export-Import Bank on two new initiatives
which are not contingent on whether the AGOA becomes
law or not.
A parallel posting today contains updates on recent initiatives by African countries to shape a common agenda for global negotiations on economic issues.
Additional links and background on these issues can
be found at:
http://www.africapolicy.org/docs99/econ.shtml
http://www.africapolicy.org/docs99/tr9902a.htm
http://www.africapolicy.org/docs99/tr9902b.htm
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Association of Concerned Africa Scholars Briefing Paper
For more information contact:
Email: ACAS@prairienet.org
Web: http://acas.prairienet.org
Africa Growth and Opportunity Act Passes House Efforts to Oppose Economic Conditionality Defeated Opponents Focus on Senate
July 19, 1999
The House of Representatives in mid-July approved the Africa Growth and Opportunity Act (H.R. 2489), legislation that if it became law would link new trade preferences for Africa to structural adjustment reforms and IMF style conditionalities. The ACAS Executive Committee believes the legislation approved by the House is worse than no bill at all and we recommend members urge their Senators to vote against the bill when it comes for a vote in that body.
Supporters of the Africa Growth and Opportunity Act (AGOA), including the Clinton administration, most business groups, Africare, the African American Institute, a majority of the Black Caucus and the entire African diplomatic corps in Washington, argue the legislation is a long overdue recognition of U.S. interests in Africa and an important first step in promoting U.S. trade and investment. The conditionalities in the legislation, argue supporters, are modest and in most cases are subject to the presidential discretion.
But opponents such as Representatives Jesse Jackson, Jr., Maxine Waters and 12 other members of the Black caucus as well as the 13 million member AFL-CIO trade union federation, TransAfrica, the Sierra Club, Public Citizen, COSATU and a coalition of African NGOs argue the legislation imposes economic policy prescriptions without providing meaningful development for the poorest continent in the world. (For a full list of opponents see the Public Citizen web site at http://www.citizen.org/pctrade/Africa/opponents.htm). Although the South African government now supports the legislation, Nelson Mandela's first reaction to the legislation was to call it "unacceptable." An alternative trade bill proposed by Rep. Jesse Jackson (and cosponsored by 75 other members of Congress), that would expand trade preference, call for debt cancellation and insist on minimal levels of continuing development aid, was not even brought to a vote. Its provisions should be reconsidered by the House and Senate.
What AGOA Does
The legislation approved by the House offers African countries a series of rewards, including expanded duty free access to American markets for certain products, equity and infrastructure funds to support U.S. investment, and establishment of a mechanism to promote and review U.S. trade policy toward Africa. Yet to receive these benefits, African governments must remove restrictions on foreign investment, reduce corporate taxes and privatize state owned companies.
The benefits of these programs are, moreover, minimal. The House bill would in theory allow duty free imports of textiles, primarily from Kenya and Mauritius, if the textile imports do not damage U.S. companies. But a March 1999 Congressional Budget Office study suggested that in reality 90 percent of African textiles would probably be declared "import sensitive" and denied access to U.S. markets. The Senate version of the bill, which has been approved by the Senate Finance Committee but not by the full Senate, allows imports only of textiles made with U.S. cloth and thread.
The legislation also provides authority for the president to provide "duty free" access to U.S. markets for certain African goods under a trade provision known as GSP. Yet according to the Deputy U.S. Trade Representative, more than 29 African countries already have GSP trade status and the real effect of this provision is simply to encourage the president to consider allowing "enhanced GSP" status for certain African products if they will not damage U.S. manufacturers. Each decision on each product would have to first be reviewed by both the U.S. Trade Representative and the International Trade Commission.
Supporters argue the real value of the bill is not so much in the specific lifting of trade restrictions, but in the framework it establishes for promoting trade with Africa including the call for a free trade agreement between the U.S. and Africa and the establishment of annual forums at which trade and finance ministers from Africa and the U.S. meet. Efforts to strengthen U.S. ties with Africa are indeed welcome, and the Clinton administration has already established a special trade office for Africa and the first ever meeting of African and U.S. trade and finance ministers was held in Washington in early 1999. But what are the benefits to those who do not attend meetings of government officials and other elites?
The Wrong Framework, the Wrong Symbolism
A closer examination reveals that the Africa Growth and Opportunity Act approved by the House establishes the wrong framework and is a step in the wrong direction. The legislation passed by the House establishes a framework that might at best help a few more economically advanced countries-but will bring few if any benefits to the majority of people in Africa. Indeed at its core are policies now proven to increase poverty and decrease the provision of public goods such as health care and education.
At the core of the Act is another attempt to force African governments to prioritize a series of free market principles, including cuts in government expenditures, privatization of government corporations, new rights for foreign investors to buy African natural resources and state firms without limits, deep cuts in tariffs, and membership in the World Trade Organization. (See the attached excerpts from the bill for a list of the conditions.) Labor advocates did manage to force the sponsors to add a provision raising the issue of labor rights and there is a reference to the importance of respect for "internationally recognized human rights," but eleven of the twelve items on the checklist used to determine "eligibility" for benefits under the legislation are designed to open markets for U.S. investment and trade.
Such priorities were made starkly clear in the debate on the House floor in mid-July, when the sponsors of this legislation used a parliamentary maneuver to defeat an attempt that would have allowed countries to import generic, lower cost drugs to deal with national emergencies such as the HIV/AIDS crisis. At the moment, the U.S. is vigorously threatening South Africa with trade sanctions in retaliation for the South African government's efforts to obtain low cost, generic alternatives to drugs necessary for combating AIDS.
These policies are not new. The World Bank and IMF have been imposing these policies on poorer countries in the world for decades, but even the multilateral institutions have acknowledged that these policies have not improved conditions for the poorest segment of the world's population. In fact, according to a new report by the United Nations Development Program, the poorest countries have actually gotten poorer in the last decade and that same report notes that 29 of the 34 poorest countries in the world are in Africa.
In summary: the Africa Growth and Opportunity Act passed by the House is a step in the wrong direction. This legislation is an attempt to force African countries to prioritize macroeconomic policies that are not appropriate for the level of development in Africa.
An Alternative Vision
Congressman Jesse Jackson, with the assistance of labor, citizen and environment groups, drafted an alternative piece of legislation-the HOPE for Africa Act (H.R. 772)--that sought to focus U.S. Africa policy on debt relief, development assistance and social programs. That legislation, however, was never brought to the floor for a full debate. (For a full comparison of that legislation with the Africa Growth and Opportunity Act, see the Public Citizen comparison on the web at: http://www.citizen.org/pctrade/Africa/HOPE/comparison.htm ).
Defeat AGOA in the Senate
The Africa Growth and Opportunity Act must now be approved by the Senate. The ACAS Executive urges members to write to your senators and express your opposition to this legislation (see the acas web page for addresses if necessary), and urge a new, fairer deal for Africa-as proposed in key provisions of the Hope Act.
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Export-Import Bank
July 20, 1999
Contact: Ken Murphy (202) 565-3200 Web: http://www.exim.gov
$200 Million Ex-im Bank Africa Pilot Program Begins August 1, Short-term Credit Will Be Available in 16 Sub-saharan Countries
Washington, DC: The Export-Import Bank of the United States (Ex-Im Bank) is implementing a $200 million Africa Pilot Program, designed to make available short-term export credit insurance in 16 countries including 11 countries where routine Ex-Im Bank financing was previously unavailable.
$100 million of the proposed $200 million program will support US export sales to Nigeria, based on current projected demand for financing exports to that country. The remaining $100 million program capacity will be allocated on a first come, first served basis for the other 15 countries. The effective date of the one-year pilot program is scheduled for August 1, 1999.
The sub-Saharan Africa public and/or private sectors of the countries impacted by the new Africa Pilot Program are: Burkina Faso, Cameroon, Cote d'Ivoire, Chad, Equatorial Guinea, The Gambia, Guinea, Madagascar, Malawi, Mali, Mauritania, Mozambique, Nigeria, Sao Tome & Principe, Tanzania and Togo.
Ex-Im Bank Chairman James Harmon stated that "under this pilot program, Ex-Im Bank will be able to help small and medium-sized companies in many African markets purchase the U.S. goods and services needed in order to participate in the global economy."
The Africa Pilot Program will assist businesses to obtain financing for the purchase of US-made spare parts, raw materials and agricultural commodities. The short-term export credit insurance will generally be made available in the private sector through irrevocable letters of credit from credit-worthy banks in the respective countries. Coverage will be provided primarily under Ex-Im Bank's short-term "Bank Letter of Credit Policy." In certain markets, a single buyer policy may be used, so long as the obligor's obligation represents a reasonable assurance of repayment. Terms will initially be limited to "sight" until there is sufficient repayment experience. In the public sector, Ex-Im Bank will generally finance transactions with sovereign guarantees. Also, Ex-Im Bank will consider letters of credit issued by credit-worthy public sector banks, operating on a commercial basis, with satisfactory payment records.
This program is designed to allow Ex-Im Bank to optimize its ability to support US exports to sub-Saharan Africa while retaining the ability to minimize potential risk. This program also offers correspondent banks, operating in the U.S., especially those currently active in this region, an effective tool for mitigating risk, as well as expanding its confirmation lines.
This year, in a continuing attempt to increase business in sub-Saharan Africa, Ex-Im Bank also initiated an innovative $10 million credit facility for Business Partners Limited (BPL), for the purchase of U.S. goods by its membership. BPL is a South African small-business development company, with an estimated membership of 4,500 small businesses. Under this agreement, BPL will on-lend Ex-Im Bank funds to small businesses. Ex-Im Bank also approved $10 million in export credit insurance for Tanzania Air Services and Zambia Flying Doctor Service. Although Ex-Im Bank financing was technically unavailable in both countries, Ex-Im Bank overcame that hurdle by working with PTA Bank (The Eastern and Southern African Trade and Development Bank), a supranational bank with its headquarters in Kenya, which is the guarantor for this transaction.
Ex-Im Bank is an independent U.S. government agency that assists in financing the export of U.S. goods and services to developing markets all over the world by providing loans, loan guarantees, and export credit insurance. In fiscal year 1998, Ex-Im Bank supported $13 billion of U.S. exports worldwide.
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Overseas Private Investment Corporation (OPIC)
July 22, 1999
For further information, contact: Larry Spinelli (202) 336-8690 Jeremy Butler (202) 336-8744 Web: http://www.opic.gov
Opic Launches $350 Million Fund for Investment in Africa: Largest Single Fund in Opic's History
WASHINGTON, D.C. -- The Overseas Private Investment Corporation (OPIC) today launched a $350 million equity fund for investment in sub-Saharan Africa -- the largest single fund in OPIC's history. The fund was formally launched at a Capitol Hill ceremony today sponsored by Congressmen Bill Archer (R-TX), Charles B. Rangel (D-NY), Philip M. Crane (R-IL), Sander M. Levin (D- MI), Sonny Callahan (R-AL), Benjamin A. Gilman (R-NY), and Sam Gejdenson (D-CT).
The New Africa Infrastructure Fund responds to the commitment made by Congress and the Clinton Administration to increase private investment in sub-Saharan Africa. It is expected to leverage an additional $2 billion of investment in Africa which will create approximately 6,800 new jobs for Africans and generate almost $50 million in annual revenues for the countries of sub-Sahara Africa. It will also generate an estimated $350 million in American exports while creating U.S. jobs -- all at no cost to the U.S. taxpayer. Investments will focus on basic infrastructure needs such as telecommunications, transportation, and power.
"I commend the Congress and the Administration for identifying Africa as one of the biggest growth opportunities for American business in the world," George Munoz, OPIC President and CEO said. "As this fund -- the largest in OPIC's history -- demonstrates, we are strongly committed to increasing U.S. direct investment in Africa."
"OPIC is also committed to working with the nations of sub-Saharan Africa as partners in growth and to help facilitate the integration of Africa into the global economy," Munoz continued. "The New Africa Infrastructure Fund is the fourth OPIC equity fund supporting investment in Africa. OPIC has signed new bilateral investment agreements with 14 sub-Saharan African countries since 1997. In addition, OPIC is providing almost $900 million of support in approximately 20 countries in sub-Saharan Africa."
OPIC's Investment Funds program supports the development of many important "frontier" markets, facilitating early access to new consumers and paving the way for further investment by U.S. companies. OPIC leverages private equity capital by lending or guaranteeing long-term debt to the Fund. OPIC must be repaid in full before equity investors receive returns of capital or any profit. All fund investments must be submitted to OPIC for approval and must meet OPIC statutory requirements including protection of U.S. jobs, worker rights and environmental requirements.
The New Africa Infrastructure Fund was established using a new open and transparent process for selecting a fund manager. The consortium of Sloan Financial Group (SFG), Taylor-DeJongh (TDJ), and New Africa Advisers (NAA) was selected for its expertise in private equity investment, infrastructure knowledge, capital raising capabilities and sub-Saharan Africa experience.
Sloan Financial Group, Inc. has roots dating back to 1898 when the ancestors of Sloan Financial Group and the New Africa Advisers Chairman, Maceo K. Sloan, founded North Carolina Mutual Life Insurance Company. Through its subsidiaries, which manage over $5 billion, Sloan Financial Group is the world's largest black-owned diversified financial services firm.
Headquartered in Durham, North Carolina, and incorporated in 1992, New Africa Advisers is a subsidiary of Sloan Financial Group, Inc. In anticipation of Nelson Mandela's call for the end of sanctions and his invitation for renewed foreign investment in South Africa, New Africa Advisers was the first U.S. investment firm to be established in post-Apartheid South Africa. With offices throughout Africa, New Africa Advisers is the largest employer of pan-Africa investment professionals and was the first firm to offer pan-Africa institutional investment products. When the New Africa Infrastructure fund is raised, New Africa Advisers and its affiliates will advise assets of over $500 million.
Taylor-DeJongh is one of the world's leading firms for infrastructure project development and financing. It has advised on, structured, negotiated and financed major capital projects in more than 60 countries, for investments totaling more than $50 billion. The firm is consistently ranked in the world's top 5 financial firms for advisory on power, petrochemical, telecommunications and water project financing. Taylor-DeJongh's headquarters is in Washington, DC, with additional offices in London, Istanbul, Cairo, Bahrain and Johannesburg.
OPIC is a self-sustaining federal agency that sells investment services to small, medium and large American businesses expanding into some 140 developing nations and emerging markets around the world. OPIC's political risk insurance, project finance and investment funds fill a commercial void, create a level playing field for U.S. businesses and support development in emerging economies. Since 1971, OPIC has supported $121 billion worth of investments that will generate $58 billion in U.S. exports and create more than 237,000 American jobs.
For more information about the New Africa Infrastructure Fund, call 919-688-8092.
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Message-Id: <199907311440.KAA02318@server.africapolicy.org> From: apic@igc.org Date: Sat, 31 Jul 1999 10:45:58 -0500 Subject: USA: Africa Economy Updates
Editor: Ali B. Ali-Dinar
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