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Swaziland’s Eligibility for AGOA at Risk

African Fabric

The immediate future of Swaziland's duty-free export market to the United States (US) through the Africa Growth and Opportunity Act (AGOA) is hanging by a thread this month. In April 2014, the US AGOA delegation and senior government officials in Swaziland, including the country's long serving Prime Minister Barnabas Sibusiso Dlamini, met over the country's eligibility status as an AGOA beneficiary. The meetings assessed progress made by the Swaziland government in implementing five benchmarks related to the country's continued eligibility for AGOA concerning labor and political rights law and regulation, before a May 15, 2014 deadline.

AGOA is a US non-reciprocal trade preference program that provides duty-free treatment to US imports of about 6,000 products from eligible sub-Saharan African countries. It is non-reciprocal in the sense that US imports from AGOA-beneficiary countries represent a very small share (2%) of total US imports, and are largely concentrated in energy-related products, oil being the top duty-free US import from AGOA countries. Among non-energy products, apparel is the top export for a number of AGOA countries, notably from Kenya and three southern African countries: Mauritius, Lesotho and Swaziland.

There has been criticism in and out of the US that Swaziland's beneficiary status undermines US self-proclaimed principles of democracy promotion. Swaziland, an AGOA beneficiary since 2001, is the only absolute monarchy in southern Africa and its operational environment contravenes some of the AGOA eligibility criteria. The country's benefit from AGOA is however apparent with about six big textile factories trading duty free with the US. In terms of foreign exchange earnings from textile and clothing exports to the US market, Swaziland gained USD 198.9 million, USD 66.6 million and 58. 9 million in 2005, 2012 and 2013 respectively. Moreover, for a country with an estimated 40% unemployment rate, the sectoral characterization of employment in Swaziland is such that manufacturing has the largest share at 19.5%, followed by wholesale and retail at 15.4%, followed by agriculture, forestry and fishing at 10%.

Is this the End of AGOA for Swaziland?

Each year, the US administration examines whether AGOA countries have met its eligibility criteria. The Swaziland AGOA review was not conducted in 2013 to allow time for the new Parliament and Cabinet to take up office and address the issues that had been raised as key concerns by the US government. The AGOA review was, therefore, postponed until May 15. The decision will be based on the findings of whether the Swaziland government has fully addressed the current US concerns that Swaziland demonstrates "concrete progress" on provisions concerning workers' rights and freedom of expression, association, and assembly as fundamental components to economic stability, responsible commerce, and best practices in doing business.

This week the US government determines Swaziland's future beneficiary status, and unfortunately, it is unlikely that the Swaziland government will have met its eligibility criteria. For instance, a key bill - the Industrial Relations (amendment) Bill of 2014, whose passing was crucial to the Swaziland's continued AGOA eligibility status - was withdrawn from parliament in late April 2014 amid reports that it was 'unsatisfactory.'

The requirements for Swaziland to improve labor and human rights as components for promoting competent governance and good business practice are thus the main sticking points in the AGOA partnership with Swaziland. These issues have escalated in the past year, necessitating 'urgent actions' if Swaziland is to continue benefiting from AGOA. These 'escalations' included ongoing arrests and trials of journalists, and labor and human rights activists for the publication of articles criticizing the judicial system and the monarchy.

However, the embassy also implied an up and down trajectory with regard to AGOA compliance in the last five years, reiterating that some of the preconditions in AGOA had been met by Swaziland and that there was some flexibility with eligibility since African countries are not expected to have fully implemented the complete list of preconditions. While the flexibility extends to Swaziland, its government is critiqued by the US for not having demonstrated political will to 'concrete progress' on meeting outstanding criteria for the last five years.

Potential Outcomes

What may explain the seeming lack of political will towards reform from the Swaziland government is the parallels between the current AGOA trajectory and the deadlocked South Africa-Swazi loan negotiations from 2012. Despite the economic benefit of a R2.4billion injection into the Swaziland economy then, the government - and the monarchy in particular - had deep-seated misgivings about overtures on reforming its political and governance system, no matter the (economic) gain. The calls for governance and political space reform conditional to the South African loan disbursement were similar to the current ones for AGOA eligibility; and indeed, such conditionalities were central to the reasons why the agreement fell through. Essentially, the Swaziland government's appetite for meeting eligibility on issues of workers and human rights in the recent past and currently continues to be low.

There is now a real possibility that Swaziland will fall out of AGOA completely, with very slim chances of re-admission if the status quo remains. It is therefore unlikely that the US will push for further engagement on AGOA criteria if there is no real political agency or will from the Swaziland government for concrete reforms – which, on the face of it, appears not to be a central objective of the government.

Three possible scenarios can be extrapolated for Swaziland going forward. First, the government reports progress on eligibility before the May 15 deadline. This is the best-case scenario for maintaining AGOA status, albeit unlikely because the Swaziland government, within its participation in AGOA from 2001, has generally overlooked these issues. In any case, there has been criticism that Swaziland's beneficiary status undermines US self-proclaimed principles of democracy promotion. It is unlikely that legislative amendments to otherwise 'politically sensitive' areas are expedited before May 15. 

Second, conditionalities will not be met and Swaziland will be deemed ineligible. The hypothesis is that the Swaziland government lacks political will to change the labor and political regulatory environment for fear that it will help outlawed political formations gain traction. The US will suspend Swaziland's eligibility for AGOA and move on, since there's no real American value from AGOA and a 'Swaziland fallout' does not threaten US interest. Swaziland will equally move on and the affected businesses will attempt to find alternative markets.

Third, the government reports progress on eligibility, but only after the May 15 deadline. Although late, this outcome would be welcomed by the US and Swaziland's eligibility will be reviewed again for the coming year. According to the US embassy, such a move would be positive since the AGOA instrument is one that simply integrates commercial gain for Swaziland, with diplomatic engagement for enhanced trade and economic relations capacities for the country.

Consequences of an 'AGOA Fallout'

If Swaziland were to fall out of AGOA completely, the consequences would be threefold:

  • Commercial: Eventually rendered unprofitable from losing duty free market access to the US, AGOA companies will likely struggle to find other markets. They may also relocate to neighboring countries with similar AGOA eligibilities – like Lesotho and Mauritius. This will impact overall Swazi economic performance and the country's image for attracting Foreign Direct Investment as a whole.
  • Social: 'AGOA' factories employ around 17,289 textile workers who stand to lose employment in a country with an estimated 40% unemployment rate.  Moreover, statistics from the Swaziland government confirm that the current wage earner may support an average of six dependents in extended families as a result of the impact of HIV/AIDS and poverty, which stands at 66% of Swazis unable to meet their basic food needs and 43% who live in chronic poverty.
  • Political: The domestic momentum for revising the labor law from government will wane notwithstanding pressure from the labour unions for amendments; and the possibility of protests from retrenched workers and unions. The status quo in legislative amendments is likely to be maintained under the tenure of the current Prime Minister, a 'Royalist' as a previous member of the powerful King Mswati's Advisory Council Licgocgo. He is also a long term Prime Minister, having served from 1996 to 2003; held the position again from October 2008 - 2013 and will serve another five years to 2018. He has an extensive history of inaction regards issues of governance and political reform.

For the US, it must be remembered that it benefits very little economically from the Swaziland AGOA arrangement, which is akin to goodwill. Most of AGOA's import revenue for the US is generally derived from the extractive industry, primarily from Nigeria and to a lesser extent from Angola, which constituted almost 92% of AGOA imports. Second to that are transportation equipment, and then primary nonpetroleum AGOA imports - textiles, apparel, leather and footwear - where Swaziland mainly falls. The ball therefore is squarely in Swaziland's court.

Dimpho Motsamai is a Researcher and Policy Analyst for Southern Africa at the Institute for Security Studies in Pretoria, South Africa. 

Photo Credit: James H via Flickr (License).

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