The African Growth and Opportunity Act (AGOA) and the African Continental Free Trade Agreement (AfCFTA) stand as linchpins in Africa’s economic landscape, opening gateways to global trade and paving the way for increased intra-African and U.S.-African commerce. With AGOA slated for renewal in 2025, the prospect of leveraging this agreement alongside the burgeoning AfCFTA presents unprecedented opportunities for Africa’s energy markets.
AGOA Diversifies African Export Markets
Since its enactment in 2000, AGOA has been instrumental in promoting trade between the U.S. and eligible sub-Saharan African countries. Over the years, it has spurred economic growth and job creation and facilitated access to diverse markets. However, its potential to revitalize Africa’s energy sector stands as a pivotal catalyst in the upcoming renewal.
On the oil and gas front, Africa has seen rapid growth in recent years owing to rising global and local demand, as well as efforts to industrialize Africa. An uptick in million-barrel discoveries and the launch of billion-dollar projects has seen renewed interest in investing in African energy, presenting new opportunities for American E&P firms.
The same can be said for the minerals sector. As U.S. demand for critical minerals grows, the African market is expected to become a priority investment destination. According to research firm S&P Global, U.S. demand for minerals such as copper, nick and cobalt will be 23 times higher in 2035 than it was in 2021, with copper alone seeing a 12% increase. With the renewal, AGOA is expected to play an instrumental part in delivering African energy and mineral resources to the U.S. market.
AfCFTA Bolsters Intra-African Trade
While AGOA supports U.S.-African trade, the AfCFTA lays the foundation for enhanced intra-African trade. In the energy sector, the AfCFTA offers newfound opportunities for cross-border trade and collaboration, and as new supplies enter the market – following the development of both on- and offshore discoveries and the start of production at major projects – the AfCFTA is poised to play an even greater role in facilitating intra-African trade and commerce.
The United Nations shows that the AfCFTA could boost intra-African trade by 33%, reducing the continent’s trade deficit by approximately 51%. Additionally, by simplifying trade terms, incentivizing cross-border business and promoting regional connections, the AfCFTA is expected to draw billions of dollars of foreign investment, transforming Africa’s energy and trade dynamics.
The AGOA-AfCFTA Synergy
Working hand in hand, AGOA and the AfCFTA could facilitate streamlined processes for intra-African trade in energy, while strengthening U.S. investment in Africa. The synergy could address infrastructure gaps, improve logistical efficiency, and create a conducive environment for the movement of goods and services across borders. The result? Enhanced cooperation among African nations and with U.S. stakeholders, driving collective prosperity and energy security.
According to William Blackie, Standard Bank Group CEO: Business and Commercial Clients: “The synergy between these two initiatives is seen in the fact that AGOA offers significant opportunities for African countries to diversify their export markets, while AfCFTA enables African nations to reduce their dependence on traditional trade partners.” Blackie believes that, “To get the best of both worlds, African businesses should, therefore, be simultaneously exploring both agreements and maximizing their export opportunities.”
There has already been some success in this arena. The Lobito Corridor, for instance, is a strategic project linking the Democratic Republic of the Congo and Zambia to international markets via Angola’s Lobito Port. The project leverages the AfCFTA to facilitate regional trade and cooperation. Recently, the U.S. partnered with the European Union to support its development, combining financial resources and technical know-how to generate economic benefits. Through AGOA, the project would benefit from increased foreign investment, while the U.S. can tap into African mineral imports.
As the world pivots towards sustainable energy sources, the synergies between AGOA and AfCFTA become even more profound. AfCFTA’s mandate to create a single market for goods and services within Africa complements AGOA’s objectives, fostering intra-African trade and strengthening regional economic integration in the process.