The African Growth and Opportunities Act (AGOA) was enacted by former President Bill Clinton in 2000 with the aim of boosting trade and development in eligible African countries by allowing them to export products to the USA, duty-free. A large proportion of these products are garments, with exports from Africa to the USA now representing more than US$800 million and creating an estimated 300,000 new jobs mainly in Lesotho, Swaziland, Kenya and Mauritius, according to a recent report by the Brookings Institution. Madagascar's garment industry also benefited from AGOA until it was declared ineligible following a coup in 2009.
Aside from having preferential access to US markets, the competitiveness of these clothing and textile products relies on a provision of AGOA that allows manufacturers to import inexpensive yarn and fabric from another country, such as India or China.
Although AGOA itself is not due for renewal until 2015, the so-called Third Country Fabric (TCF) Provision is set to expire at the end of September. Without it, fledgling textile industries all over Africa are likely to flounder.
The uncertainty surrounding whether or not the provision will be renewed has already resulted in a 30 percent drop in clothing orders from US buyers and the loss of thousands of jobs since January, according to a coalition of African manufacturers and US importers that has appealed to the US Congress to approve the legislation as quickly as possible.
Lesotho’s textile and garment industry, which relies heavily on exports to the USA, is the largest formal employer in a country where job opportunities are scarce. According to Lesa Makhoabile of the Lesotho National Development Corporation (LNDC), a decline in orders from US buyers in recent months has already forced a number of companies to lay off workers, while 15 out of 40 textile factories are at a high to critical risk of closing down or downsizing.
“The [TCF] provision is extremely important to Lesotho because all the companies that export to the US rely on it to remain competitive since they are able to source cheap raw materials from Asia and produce garments at affordable production costs,” she told IRIN.
Most of Lesotho’s 36,000 textile workers are women who are often the sole breadwinners for their families. Laid-off workers do not qualify for pensions but receive severance pay equivalent to two weeks wages for each year they worked for the same employer.
A representative from the Swaziland Textile Export Association said the looming expiry of the TCF provision was just one of a number of reasons why Swaziland’s garment manufacturing industry has shed over two-thirds of the 30,000 textile workers it employed at the height of production in 2004. These include the flagging US economy, unfavourable exchange rates, a lack of local investment and minimum wages for garment workers that are high compared to those earned by Asian workers.
The cost of living in Swaziland nevertheless meant that the salary Cynthia Lushaba earned working at a textile factory in Swaziland’s main commercial hub Manzini was just sufficient to cover the essentials. “I saved no money,” she said. “We were paid only enough for my children and me to have two meals a day and pay our rent.”
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“There is no compensation for people like me,” she added. “They said I did not work so long to earn a pension and the government does not give anything to people who lose their jobs. There is nothing, I just pray.”
Donna Bawden, CEO of the Apparel Lesotho Alliance to Fight AIDS, which provides HIV prevention and treatment to Lesotho's textile workers, said there was confidence among local manufacturers that the TCF provision would be renewed but that there was also recognition of the need to become less reliant on US markets. "AGOA is very important, especially in establishing the industry here, but they’re trying to diversify the market," she said.
Bills to extend key provisions of AGOA, including the TCF have been introduced in both the US Senate and House of Representatives and until now have had strong bipartisan support. President Barack Obama is also in favour of renewing the provision. However, there are fears that the bill may nevertheless be stalled by partisan politics, particularly as the presidential election draws nearer.
US Trade Representative Ron Kirk reportedly told participants at the 12th annual AGOA Forum, held in Washington last month: “We are regrettably in an election year and I think some people think partisan politics trump common sense."