Counting Uganda’s gains and losses from AGOA

Following the enactment of the African Growth and Opportunity Act (AGOA) some 22 years ago, the American market has been flung open for Uganda’s Micro, Small and Medium Enterprises to take full advantage of.

Under the enacted legislation, approximately 6,500 goods produced in eligible sub-Saharan African countries such as Uganda, are granted preferential (duty-free) access to the US market on a non-reciprocal basis.
The free market access to the lucrative US market is to the extent that the products hitting the United States (US) market meet the required standards—a defining caveat in the grand scheme of things.

The US enacted legislation known in short as AGOA, is currently set to expire in September 2025 at which stage these preferences fall away, unless renewed or replaced by other preferences, or by bilateral trade agreements. There are already calls from the government and sector player to have it extended to at least 2035 or leave it open.
According to AGOA in charge in Uganda, Ms Susan Muhwezi, the extension of AGOA is a no brainer, considering its recent success.  

Going by the Ministry of Trade and AGOA country response office statistics, the last three financial years provide a solid case for the extension of the initiative falling under the US Trade Act (legislation) and at the same time give a proper assessment of what is in store for this programme if efforts to get it right are not only consolidated, but harnessed as well.

Over the last three years, most part of which, the country in particular and the globe in general, were under key and lock, resulting from the Covid-19 pandemic and the resultant uncertainties. As other regional countries were finding their feet, Uganda was feeding the US market with her coffee, crafts, vanilla, chocolate, tea, textile and dried fruits—all under the AGOA initiative.

A year before the pandemic (2018/19), thanks to AGOA initiative, Uganda’s exports to US were valued at $1 million (nearly Shs4 billlion). In 2019/2020, the exports grew to $3.4 milion (about Shss13 billion) and by close of 2021, they rose to $5.1million (about Shs20 billlion).
With that growth, although still peanut compared to Uganda’s trade with European Union (EU) and the United Kingdom (UK), the signs according to AGOA exporters and government technocrats, seem promising enough to make a case for the renewal of the legislation beyond 2025, about two and a half years away.        

Players’ plight
“AGOA is a fantastic opportunity. But we haven’t taken full advantage of it yet,” says Mr Teddy Ruge, an exporter of value added Moringa products.

He continued: “It is disappointing that it is just about 50 companies or thereabout that are exporting to the US under the AGOA initiative. By now, we should be having about 1,000 local companies directly exporting to US by virtue of this arrangement-AGOA.”
Speaking to Prosper Magazine last week after participating in a meeting where harnessing AGOA exports after the Covid-19 pandemic were discussed in a Kampala hotel, Mr Ruge argued that the role of particularly the standards body (UNBS) and the exports promotion prefect (UEPB) is somewhat wanting in many fronts, impacting the export participation in a market free access such as the US.

“We need help with certifying many of our products. We also need help with value addition because there is so much that goes into it before exporting to a discerning consumers as those of US. This is because what you produce for Kikuubo market is not the same as what you produce for US market, although the vice versa is true,” Mr Ruge argues.
In a sideline interview last week while attending the above event in Kampala, the chairperson of the AGOA Exporters Association – Uganda, Ms Meg Jaquay, told Prosper Magazine that the challenge facing AGOA is what she describes as “ still a bit boutique”.

Despite the obvious opportunities that AGOA presents, including the recent in term of growth numbers, Ms Jaquay feels the conspicuous disjointed approach will not help the country’s desire to harness the opportunities that the initiative presents.
She said: “We are still a bit boutique in what we are producing, but going forward, that is something that can be addressed,” she said.

Quality consciousness
Solving challenges such as the skilling gap, shortage of working capital and addressing the value chain loopholes, including harnessing interactions with farmers, will, she believes, go a long way in reaping tangible success out of the AGOA initiative, a legislation her association is routing for its extension.

Importantly though, for Ms Jaquay, it all starts and ends with mindset that thinks quality.
“To be successful in a US market, we must have quality consciousness built into our business culture here. Quality is what will get us business and we have only one chance to make an impression. Our products must be durable and of good quality.”   

Government's position
Without hiding their heads in the sand, government technocrats and officials believe that AGOA‘s potential hasn’t been maximised to its fullest potential two decades down the road, until recently.
“We could have done much better,” the Ministry of Trade Principal commercial officer, Mr Francis Kuluo, told Prosper Magazine last week while attending the meeting to discuss how to harness AGOA exports after Covid-19 pandemic.
 
“We need to pay more attention to quality because it is an important market requirement. And we have been working on it since 2018. We have since developed standards for many if not all our products, including crafts. We have also reduced standards and certification costs with a view to grow our exports,” he said.

According to Mr Kuluo, the mindset change that has since been done by the government since 2015 has been remarkable although there is still so much room for improvement. He noted that conquering the narrative that AGOA is not meant for the likes of Fine Spinners, a textile and apparel company, but it is an opportunity for the entire MSMES sector that makes up 90 per cent of the economy wasn’t a no mean feat.

He said: “The task we have now is to embark on massive sensitisation. MSMES need to know that there are more than 6,000 products that can be supplied under AGOA to the US market,” says Mr Kuluo.

“In a nutshell, we could have done better so that next time our growth should be beyond just coffee and textiles.”  

For Ms Muhwezi, the AGOA prefect in the country, the success of this initiative is dependent on the participation of the private sector with government being a facilitator.

She concurs that, there is need for improve marketing and branding, enhance skilling and increase quantity and quality of products targeted for the US market as a result of the AGOA legislation.
Ms Muhwezi describes the 65 per cent increase in growth registered in exports under AGOA in recent years as a success that is indicative of Uganda’s resilience, saying things will get better once the national carrier begins a direct flight to US.

When asked to rate the success of AGOA so far, on a scale of 1 to 10, after a brief pause, she answered: “Five out of 10.”  
A few sector experts and trade specialists contacted think different. Although their scores are not so different from what the head of the AGOA country response office has mentioned.

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