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US is targeting sub-Saharan Africa for first free-trade pact

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Gulf Times, Qatar

US is targeting sub-Saharan Africa for first free-trade pact

24 June 2019

Bloomberg/Johannesburg: The US plans to pursue its first free trade agreement with a country in sub-Saharan Africa as soon as it decides on the most suitable candidate, according to the US Assistant Secretary of State for Africa.

“I am passionate about having one with a sub-Saharan African country,” the State Department’s Tibor Nagy said at the University of the Witwatersrand’s Business School in Johannesburg. “We have a number of candidates and now we have to talk to them.”

“We want to evolve the trade partnership to something that’s more sophisticated, as African markets become more sophisticated and economies change toward services,” Nagy said on Friday. The first agreement, once concluded, could be used as a model for similar accords in the region, he said.

While the US currently only has one free trade agreement on the African continent – with Morocco – it’s identified a number of potential partners in the sub-Saharan region, which excludes Algeria, Djibouti, Egypt, Libya, Morocco, Somalia, Sudan and Tunisia.
Two-way trade between the sub-Saharan region and the US totalled $39bn in 2017, according to figures from the US Trade Representative.

The drive into Africa comes at a time when President Donald Trump has threatened to escalate a trade conflict with China and is also considering whether to impose auto tariffs on the European Union and Japan.

South Africa’s embattled state-owned companies, most of which are loss-making and reliant on government support, are an area of potential co-operation, said Nagy, 70, who was in the country’s economic hub after attending the US-Africa Business Summit in neighbouring Mozambique.

“South Africa faces some tough choices as it seeks to increase economic growth and come to grips with how best to manage and reform struggling state-owned enterprises,” Nagy said. “We do not view these challenges as obstacles but an opportunity for closer co-operation.”

South Africa’s economy contracted the most in a decade in the first quarter following the worst power outages since 2008. In his State of the Union address last Thursday, President Cyril Ramaphosa pledged to give the cash-strapped state power utility, Eskom Holdings SOC Ltd, “a significant portion” of the 230bn rand ($16bn) it needs during the next decade to remain solvent. South African Airways, which didn’t even warrant a mention in Ramaphosa’s speech, has 12.7bn rand of debt is due this year.

US legislation from 2018, known as the Better Utilization of Investment Leading to Development (BUILD) Act, could help the US government and companies increase investment in South Africa’s economy and help Ramaphosa meet his goal of raising $100bn in new investments over five years. The act doubles the US government’s investment capital to $60bn for promising opportunities in Africa.

“This new legislation will enable the US government to make equity investments in African companies, and we hope to use these resources to unlock billions in private capital from the United States,” Nagy said.

The US is already one of South Africa’s key trading partners and is currently the destination for 12%-15% of the African nation’s exports, according to data from the Department of International Relations and Co-operation.


 source: Gulf Times