U.S. International Trade Commission

Address all communications to

Secretary to the Commission

United States International Trade Commission

Washington, DC 20436

COMMISSIONERS

Irving A. Williamson

Deanna Tanner Okun

Robert A. Rogowsky

Director of Operations

Karen Laney-Cummings

Director, Office of Industries

Charlotte R. Lane

Daniel R. Pearson, Chairman

Dean A. Pinkert

Shara L. Aranoff, Vice Chairman
U.S. International Trade Commission

Washington, DC 20436

Publication 3914 April 2007

www.usitc.gov

Sub-Saharan Africa:

Factors Affecting Trade Patterns

of Selected Industries

First Annual Report

Investigation No. 332--477
This report was prepared principally by Office of Industries

Project Leader

Brad Gehrke

Deputy Project Leader

Joanne Guth

Laura Bloodgood, Joanna Bonarriva, Samantha Brady, Roger Corey, Vincent DeSapio,

Alfred Forstall, Andrew Gately, Dawn Heuschel, Douglas Newman,

Philip Stone, and Alan Treat

Primary Reviewers

Cathy Jabara and Nanette Christ

Office of Economics

Jose Signoret

Administrative Support

Phyllis Boone, Sharon Greenfield, and Monica Reed

Under the direction of

Robert Carr, Chief

Natural Resources and Metals Division
i

Abstract

This report examines factors that affected trade patterns in sub-Saharan Africa (SSA)

during 2001–05. Twelve industries are discussed: nuts (primarily cashews), cocoa

butter and paste, cut flowers, prepared and preserved fish, acyclic alcohols, flat-rolled

steel, petroleum gases (primarily liquefied natural gas), textiles and apparel (primarily

apparel), unwrought aluminum, wood veneer, financial services, and tourism services. Most

industries demonstrated strong growth in the value of exports during 2001–05), ranging from

a 54 percent increase in the value of prepared and preserved fish exports to a nearly

300 percent increase in the value of cashew exports. Apparel was an exception, with growth

of only 13 percent. The volume of exports also grew, but at a more modest rate, ranging from

1 percent for wood veneer to 160 percent for cashews.

The Commission found that increased export values were predominantly linked to four

factors common among most of the selected industries: (1) demand growth and increased

prices; (2) investment in new and expanded production capacity; (3) implementation of

policies to promote industrial development, whether targeted to a specific industry or applied

generally to all industries; and (4) improvements in general and industry-specific

infrastructure. While SSA country governments had little control over global demand and

prices, in many cases, the Commission found that various policies implemented by SSA

governments contributed to the growth in exports. The Commission also identified other

underlying factors that contributed to the development of various industries and facilitated

African exporters' ability to respond to increased demand. These factors include: (1)

availability of natural resources, (2) long-standing trade agreements and tariff preference

programs, (3) abundant supply of low-wage labor, and (4) regional integration. In general,

increased political stability and reduced conflict also contributed to improvement in the

environment for economic and investment growth.

iii

CONTENTS

Page

Abstract ............................................................... i

Executive Summary ............................................... xi

Chapter 1 Introduction and Overview ...................... 1-1

Industry and country coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-1

Information used in the report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-1

Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-2

Organization of report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-4

Overview of SSA sector export trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-4

Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-5

Mining and manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-5

Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-5

Chapter 2 Agriculture and Fisheries Industry

Sector Profiles ................................................ 2-1

Cashews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-1

Summary of findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-1

Industry overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-3

Sub-Saharan Africa trade in the global context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-5

Leading exporters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-6

Leading export markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-8

Factors affecting trade patterns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-9

Demand growth and price increases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-9

Policies to promote the industry and increased investment . . . . . . . . . . . . . . . . . . 2-9

Benin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-11

Ghana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-12

Guinea-Bissau . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-12

Kenya . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-12

Mozambique . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-12

Tanzania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-13

Cocoa butter and paste . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-16

Summary of findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-16

Industry overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-16

Sub-Saharan Africa trade in the global context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-19

Leading exporters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-20

Leading export markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-20
iv

CONTENTS–Continued

Page

Chapter 2 Agriculture and Fisheries Industry

Sector Profiles—Continued

Cocoa butter and paste—Continued

Factors affecting trade patterns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-22

Demand growth and price increases .................................... 2-22

Increased investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-23

Policies to promote the industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-24

Côte d’Ivoire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-24

Ghana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-25

Nigeria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-25

Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-26

Civil strife . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-26

Cut flowers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-29

Summary of findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-29

Industry overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-29

Kenya . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-31

Uganda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-31

South Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-32

Ethiopia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-32

Sub-Saharan Africa trade in the global context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-33

Leading exporters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-33

Leading export markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-34

Factors affecting trade patterns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-35

Increased investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-36

Policies to promote the industry and infrastructure improvement . . . . . . . . . . . . . . 2-37

Kenya . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-38

Uganda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-39

Ethiopia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-39

Tariff preferences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-40

Prepared and preserved fish . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-43

Summary of findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-43

Industry overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-43

Sub-Saharan Africa trade in the global context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-46

Leading exporters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-46

Leading export markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-47

Factors affecting trade patterns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-48

Demand growth and price increases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-48

Increased investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-49

Policies to promote the industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-49

Natural resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-50
v

CONTENTS—Continued

Page

Chapter 3 Mining and Manufacturing Industry

Sector Profiles ................................................. 3-1

Acyclic alcohols . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-1

Summary of findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-1

Industry overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-2

Sub-Saharan Africa trade in the global context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-3

Leading exporters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-4

Leading export markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-5

Factors affecting trade patterns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-7

Demand growth and price increases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-7

Increased investment and natural resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-7

Flat-rolled steel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-10

Summary of findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-10

Industry overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-10

South Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-10

Kenya and Tanzania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-12

Sub-Saharan Africa trade in the global context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-13

Leading exporters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-13

Leading export markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-13

Factors affecting trade patterns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-16

Demand growth and price increases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-16

Increased investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-17

South Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-17

Kenya and Tanzania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-19

Fluctuating export supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-19

Liquified natural gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-23

Summary of findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-23

Industry overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-23

Sub-Saharan Africa trade in the global context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-26

Leading exporters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-26

Leading export markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-27

Factors affecting trade patterns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-29

Demand growth and price increases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-29

Increased investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-30

Nigeria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-30

Equatorial Guinea and Angola ...................................... 3-31

Policies to promote the industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-32

Nigeria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-32

Angola and Equatorial Guinea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-33
vi

CONTENTS—Continued

Page

Chapter 3 Mining and Manufacturing Industry

Sector Profiles—Continued

Apparel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-37

Summary of findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-37

Industry overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-39

Madagascar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-39

Lesotho . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-40

Kenya . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-40

Swaziland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-40

Botswana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-40

Ethiopia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-41

Sub-Saharan Africa trade in global context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-41

Leading exporters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-41

Leading export markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-42

Factors affecting trade patterns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-44

Tariff preferences and trade agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-44

The Multi-Fiber Arrangement and the Agreement on Textiles and Clothing . . . 3-44

Lomé Convention and Cotonou Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-44

The African Growth and Opportunity Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-45

Quotas on Chinese textile and apparel imports . . . . . . . . . . . . . . . . . . . . . . . . . . 3-45

Policies to promote the industry and other country-specific factors . . . . . . . . . . . . 3-46

Madagascar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-46

Lesotho . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-46

Kenya . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-47

Swaziland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-47

Botswana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-47

Ethiopia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-48

Regional integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-48

Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-49

Unwrought aluminum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-52

Summary of findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-52

Industry overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-52

Sub-Saharan Africa trade in the global context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-54

Leading exporters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-54

Leading export markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-55

Factors affecting trade patterns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-56

Demand growth and price increases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-56

Increased investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-57

Infrastructure improvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-58

Natural resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-59

Regional integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-60
vii

CONTENTS–Continued

Page

Chapter 3 Mining and Manufacturing Industry

Sector Profiles—Continued

Wood veneer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-63

Summary of findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-63

Industry overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-63

Sub-Saharan Africa trade in the global context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-65

Leading exporters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-66

Leading export markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-67

Factors affecting trade patterns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-69

Demand growth and price increases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-70

Natural resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-71

Gabon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-72

Côte d’Ivoire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-72

Ghana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-73

Cameroon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-73

Policies to promote the industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-74

Chapter 4 Services Sector Profiles............................. 4-1

Financial services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-2

Summary of findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-2

Industry overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-4

Sub-Saharan Africa trade in the global context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-5

Leading exporters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-5

Leading export markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-7

Factors affecting trade patterns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-8

Demand growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-8

Policies to promote the industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-8

Regional integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-9

Infrastructure improvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-9

Country profiles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-9

Côte d’Ivoire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-10

Mauritius . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-10

Swaziland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-11

Uganda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-12

Tourism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-18

Summary of findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-18

Industry overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-18

Sub-Saharan Africa trade in the global context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-18

Leading exporters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-20

Leading export markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-20
viii

CONTENTS–Continued

Page

Chapter 4 Services Sector Profiles—Continued

Tourism—Continued

Factors affecting trade patterns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-23

Demand growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-23

Policies to promote the industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-23

Infrastructure improvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-24

Country profiles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-24

South Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-24

Kenya . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-26

Angola . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-27

Botswana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-28

Cape Verde . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-28

Ethiopia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-28

Ghana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-29

Mali . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-29

Mauritius . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-30

Namibia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-30

Rwanda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-30

Sierra Leone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-30

Swaziland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-31

Tanzania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-31

Uganda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-31

Appendixes

A. Request Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1

B. Federal Register Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1

C. Summaries of views of interested parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1

D. Harmonized tariff schedule categories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-1

Boxes

2-1. Product description for cashews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-4

2-2. Product description for cocoa butter and paste . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-18

2-3. Product description for cut flowers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-30

2-4. Product description for prepared and preserved fish . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-44

3-1. Product description for acyclic alcohols . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-3

3-2. Product description for flat-rolled steel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-12

3-3. Product description for liquefied natural gas (LNG) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-24

3-4. Product description for apparel ............................................. 3-39

3-5. Product description for unwrought aluminum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-53
ix

CONTENTS–Continued

Page

Boxes—Continued

3-6. Product description for wood veneer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-65

4-1. Product description for financial services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-2

4-2. Product description for tourism services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-19

Tables

ES-1. Sub-Saharan Africa: Summary of findings for selected industries . . . . . . . . . . . . . . . . . . xv

ES-2. Sub-Saharan Africa, factors affecting trade patterns, by selected industry . . . . . . . . . . . xvii

ES-3. Sub-Saharan Africa: Summary of factors affecting increased imports trade patterns,

comparative advantage, and industry development . . . . . . . . . . . . . . . . . . . . . . . . . . . xviii

1-1. Sub-Saharan Africa merchandise and services exports: Value by sector, 2001–05 . . . . . 1-6

1.2. Sub-Saharan Africa commercial services exports: Value by country, 2000–04 . . . . . . . . 1-6

2-1. Sub-Saharan Africa cashew exports, by selected exporters and key markets,

2001–05 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-2

2-2. Sub-Saharan Africa cashew production, in-shell exports and shelled exports, by

leading countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-7

2-3. Sub-Saharan Africa exports of cocoa butter and cocoa paste, by selected exporters

and key markets, 2001–05 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-17

2-4. Sub-Saharan Africa cocoa bean yields, by major producers, 2001–05 . . . . . . . . . . . . . . . 2-18

2-5. Small-scale cocoa growers: Number of small-scale cocoa bean growers, global share of

small-scale growers, and global share of production, by SSA country . . . . . . . . . . . . 2-19

2-6. Sub-Saharan Africa: Number and capacity of cocoa processing plants, by selected

country and firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-24

2-7. Sub-Saharan Africa cut flower exports, by selected exporters and key markets,

2001–05 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-30

2-8. Sub-Saharan Africa exports of prepared and preserved fish, by selected exporters

and key markets, 2001–05 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-44

3-1. Sub-Saharan Africa exports of acyclic alcohols, by selected exporters and key

markets, 2001–05 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-2

3-2. Sub-Saharan Africa flat-rolled steel exports, by selected exporters and key markets,

2001–05 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-11

3-3. Ownership structure of LNG projects in sub-Saharan Africa . . . . . . . . . . . . . . . . . . . . . . 3-24

3-4. Sub-Saharan Africa exports of LNG, by selected exporters and key markets,

2001–05 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-28

3-5. Sub-Saharan Africa apparel exports, by selected exporters and key markets,

2001–05 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-38

3-6. Sub-Saharan Africa exports of unwrought aluminum, by selected exporters and key

markets, 2001–05 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-53

3-7. Sub-Saharan Africa exports of wood veneer, by selected exporters and key markets,

2001–05 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-64

3-8. Number of veneer mills and veneer production volume in selected SSA countries . . . . . 3-66

4-1. Sub-Saharan Africa financial services exports, 1999–2004 . . . . . . . . . . . . . . . . . . . . . . . 4-3
x

CONTENTS–Continued

Page

Tables—Continued

4-2. Sub-Saharan Africa travel services exports, value of expenditures, by selected

exporters, 2000–04 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-19

4-3. Sub-Saharan Africa travel services exports, total arrivals and leading sources by

selected exporter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-22

D-1. Harmonized tariff schedule categories included in selected industries . . . . . . . . . . . . . . . D-3

Figures

1-1. Sub-Saharan Africa merchandise exports: Average annual growth rates by

commodity sector, 2001–05 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-4

2-1. Leading global and sub-Saharan Africa exporters of cashews, 2005 . . . . . . . . . . . . . . . . 2-7

2-2. Leading markets for global and sub-Saharan Africa exports of cashews, 2005 . . . . . . . . 2-8

2-3. Leading global and sub-Saharan Africa exporters of cocoa butter and paste, 2005 . . . . . 2-20

2-4. Leading markets for global and sub-Saharan Africa exports of cocoa butter and

paste, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-21

2-5. Leading global and sub-Saharan Africa exporters of cut flowers, 2005 . . . . . . . . . . . . . . 2-33

2-6. Leading markets for global and sub-Saharan Africa exports of cut flowers, 2005 . . . . . . 2-35

2-7. Leading global and sub-Saharan Africa exporters of prepared and preserved fish,

2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-46

2-8. Leading markets for global and sub-Saharan Africa exports of prepared and

preserved fish, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-47

3-1. Leading global and sub-Saharan Africa exporters of acyclic alcohols, 2005 . . . . . . . . . . 3-4

3-2. Leading markets for global and sub-Saharan Africa exports of acyclic alcohols, 2005 . . 3-5

3-3. Leading global and sub-Saharan Africa exporters of flat-rolled steel, 2005 . . . . . . . . . . 3-14

3-4. Leading markets for global and sub-Saharan Africa exports of flat-rolled steel, 2005 . . 3-14

3-5. Leading global and sub-Saharan Africa exporters of LNG, 2005 . . . . . . . . . . . . . . . . . . 3-26

3-6. Leading markets for global and sub-Saharan Africa exports of LNG, 2005 . . . . . . . . . . 3-27

3-7. Leading global and sub-Saharan Africa exporters of apparel, 2005 . . . . . . . . . . . . . . . . . 3-42

3-8. Leading markets for global and sub-Saharan Africa exports of apparel, 2005 . . . . . . . . . 3-43

3-9. Leading global and sub-Saharan Africa exporters of unwrought aluminum, 2005 . . . . . 3-55

3-10. Leading markets for global and sub-Saharan Africa exports of unwrought aluminum,

2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-56

3-11. Leading global and sub-Saharan Africa exporters of wood veneer, 2005 . . . . . . . . . . . . 3-67

3-12. Leading markets for global and sub-Saharan Africa exports of wood veneer, 2005 . . . . 3-68

4-1. Leading global and sub-Saharan Africa exporters of financial services, 2003 . . . . . . . . . 4-6

4-2. Leading markets for global exports of financial services, 2003 . . . . . . . . . . . . . . . . . . . . 4-7

4-3. Global and sub-Saharan Africa tourism, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-21
xi

Executive Summary

This report examines factors affecting sub-Saharan African (SSA) trade patterns in

twelve industries selected by the United States Trade Representative that have

experienced significant changes in exports. The twelve industries selected for study

are: nuts (principally cashews), cocoa butter and paste, cut flowers, prepared and preserved

fish, acyclic alcohols, flat-rolled steel, petroleum gases (principally liquified natural gas

(LNG)), textiles and apparel (principally apparel), unwrought aluminum, wood veneer,

financial services, and travel or tourism services.

The Commission found that while increased demand was the predominant factor affecting

export growth in the selected industries during 2001–05, a number of government policies

and initiatives related to investment, infrastructure, trade agreements, and regional

integration also contributed significantly. Export values for most of the selected industries

increased sharply during 2001–05 and ranged from 54 percent for prepared and preserved

fish to nearly 300 percent for cashews, while apparel exports increased in value by

13 percent (table ES-1). Export volumes also grew, although at a more modest rate, ranging

from one percent for wood veneer to 160 percent for cashews. A summary of findings,

including the shifts in SSA exports, is presented in several tables at the end of this executive

summary.

 Summary of Factors Affecting Trade Patterns

The Commission compared the factors contributing to increased exports across the twelve

industries and found a high degree of commonality (table ES-2). Increased export values and

volumes for the selected products were predominantly linked to four factors:

• demand growth and increased prices in global and key SSA export markets;

• foreign and domestic investment in new and expanded production capacity;

• government policies (domestic and foreign) promoting SSA industry development,

including internal policies that created export processing zones and fostered

downstream processing, as well as external policies that provided tariff preferences,

such as the African Growth and Opportunity Act (AGOA); and

• improvements in general and industry-specific infrastructure.

The Commission also identified government policies implemented prior to the study period

that contributed to export growth, such as regional trade agreements and preference programs

of developed countries. Policies promoting regional integration further contributed to

investment and economic growth. In addition, abundant, relatively low-wage labor and

availability of natural resources remained fairly stable and contributed to SSA exporters

ability to meet growing demand.

SSA governments can affect these factors to varying degrees. Although SSA government

policies have little effect on external market factors such as increased global demand and

prices, they affect investment and production decisions that allow companies to increase

export volumes in response to increased global prices. Furthermore, SSA governments

implemented industrial policies, improved general and industry-specific infrastructure, and

implemented trade policies to promote development of export-oriented industries, all of

which contributed to increased exports. The factors contributing to increased exports from
xii

SSA countries are summarized below and details by industry are provided in table ES-3 at

the end of this section.

Demand Growth and Increased Prices

Much of the increased value of exports was linked to increased prices associated with

growing demand—globally and in key SSA export markets—although, in some cases,

increased export volumes also contributed to increases export values. For certain products,

such as prepared and preserved fish, wood veneer, and flat-rolled steel, increased prices

alone accounted for most of the growth in the export value. Increased quantities and values

were clearly evident for acyclic alcohols, LNG, unwrought aluminum, cashews, and cocoa

butter and paste.

Increased Investment in Production Capacity

Increased investment had a significant effect on export growth in the twelve SSA industries.

Although investment was often made in response to increased demand and prices, SSA

governments spurred the investment environment through various policies, including the

formation of export processing zones in countries such as Madagascar, Swaziland, Kenya,

and Lesotho. In many instances, all or some portion of the investment was financed by

foreign direct investment and/or joint-venture activity between foreign and domestic

investors, whereas in others, the government invested directly, such as the Nigerian joint

venture that expanded LNG facilities.

For acyclic alcohols, unwrought aluminum, LNG, and cut flowers, increased investment was

concentrated in the construction of new production and processing facilities. For flat-rolled

steel, petroleum gases, cashews, cocoa butter and paste, and prepared and preserved fish,

new investments resulted in expanded or updated plants. With respect to services, investment

was critical to the expansion and updating of hotel accommodations in countries such as

Angola and in banking facilities in countries such as Uganda.

Policies to Promote Industrial Development

A number of SSA government policies boosted export growth by supporting the expansion

of an industry. In the cashew industry, foreign aid agencies, supported by domestic

government policies, provided networking and marketing assistance to producers and

technical assistance to growers that helped the industry respond to increased demand by

expanding production, facilitating trade, and repairing and reopening closed processing

facilities. Government policies to promote expansion of downstream processing, such as

policies limiting log exports, encouraged wood veneer production. Government policies also

stimulated Nigeria’s LNG production by providing incentives to capture and export natural

gas that previously had been lost through natural gas flaring. Increased tourism exports were

stimulated by expanded SSA government promotional efforts and advertising. SSA

governments licensed foreign-owned vessels to harvest fish in off-shore exclusive economic

zones to maintain supplies of raw fish to the prepared and preserved fish industry, although

various sources associated this practice with risk to domestic fishermen from overfishing.

Apparel exports benefited from the establishment of export processing and industrial zones.

Foreign government development policies and multilateral trade agreements played an

important role in enabling some SSA countries to increase exports, and policies in place

prior to 2001 contributed to the ability of exporters to respond to policy changes during
xiii

2001–05. This is particularly noteworthy in the apparel sector. For example, the MFA

(which was phased out in January 2005 by the Uruguary Round ATC agreement) and the

Cotonou Agreement (which gave preferential access to the EU market) played a key role in

the development of the apparel industry in SSA before 2001. AGOA, especially its thirdcountry fabric provision, contributed to SSA countries’ ability to increase exports of apparel

to the United States during 2001–05. Although the phaseout of the MFA quotas led to a

significant drop in SSA apparel exports in 2005, SSA apparel exports benefited from

bilateral quotas on various apparel exports from China in 2005.

Various agreements enabling greater regional integration contributed to several SSA

countries’ ability to increase exports. Increased investment in apparel production was

attracted to Lesotho, Botswana, and Swaziland by benefits linked to membership in the

South African Customs Union. Mozambique's participation in the South African Power Pool

facilitated expansion of unwrought aluminum production by providing Mozambique's

aluminum smelter with reliable low-cost electricity produced from South African coal. In

turn, Mozambique is able to export excess hydroelectric power to South Africa. Côte

d'Ivoire's financial services exports benefit from its membership in a regional monetary

union and as host of the regional stock exchange.

Other Factors Affecting Exports

The success of some SSA governments in achieving stable, more democratic political

conditions and an improved economic environment has facilitated domestic and foreign

investment, thereby promoting production and export growth. The increased country risk

associated with political instability drives away investors as well as tourists, and as

previously indicated, the ability to attract both foreign and domestic investment was a key

factor associated with expanded export opportunities. 

The abundant supply of relatively low-cost labor contributed to the development of the

apparel industry, as well as the prepared and preserved fish and cut flower industries in SSA.

Lack of skilled labor in the petroleum industry contributed to tourism exports in Angola.

Infrastructure and transportation service improvements were especially beneficial to exports

of unwrought aluminum, cut flowers, tourism, and financial services. Aluminum smelters

in South Africa and Mozambique process imported alumina into aluminum ingots for export,

so adequate port facilities are a key component for the industry. Expansion and upgrades of

the Maputo port facilities were key in the location of a new smelter in Mozambique. Cut

flower exports require timely deliveries of a highly perishable product. Upgraded airports,

roads, and cold storage facilities contributed to increased SSA exports of cut flowers.

Improved airport facilities and increased direct routes contributed to increased tourism

exports.

Natural Resources

The availability of natural resources will only result in increased exports if governments

adopt appropriate trade and development policies. The Commission identified natural

resources that encouraged investment or development in most of the selected industries.

Investments in new and expanded production facilities for acyclic alcohol (methanol)

production in Equatorial Guinea and LNG production in Nigeria are linked to those

countries' abundant supplies of natural gas. South Africa's large coal reserves contribute to

its comparative advantage in the production of acyclic alcohols (n-butanol), flat-rolled steel,
xiv

and unwrought aluminum as either a direct source of inputs or as a source of inexpensive

electrical energy. Climatic conditions favoring plant growth are linked to the production of

cashews, cocoa beans for processing into cocoa butter and paste, and cut flowers. Abundant

and unique tropical forest resources support the production of wood veneer. Abundant and

well-managed fisheries, particularly in the case of tuna, are able to supply raw fish to the

prepared and preserved fish industry. Tourism benefits from SSA's abundant natural beauty,

cultures, and wildlife.
xv

Table ES-1 Sub-Saharan Africa: Summary of findings for selected industries

Industry

SSA exporters

experiencing significant

export growth Key markets

Leading

competitors in key

markets

Factors affecting increased

exports

SSA export 

increase from

2001 through

2005

Agriculture

Cashews • Côte d’Ivoire

• Guinea-Bissau

• Benin

• India

• United States

• European Union

• China

• India

• Brazil

• Vietnam

• Demand growth and price

increases

• Increased investment

• Policies to promote the

industry

Value:

• $309 million

• 298 percent

Volume:

• 275 mt

• 160 percent

Cocoa butter and

paste

• Côte d’Ivoire

• Ghana

• Guinea-Bissau

• Cameroon

• Nigeria

• European Union

• United States

• Canada

• Russia

• South Africa

• Ukraine

• Malaysia

• Indonesia

• Brazil

• China

• European Union

• Ukraine

• Domestic

production in

certain key 

markets

• Demand growth and price

increases

• Increased investment

• Policies to promote the

industry

Value:

• $435 million

• 117 percent

Volume:

• 63,000 mt

• 24 percent

Cut flowers • Kenya

• Uganda

• South Africa

• Ethiopia

• European Union

• Switzerland

• Japan

• Norway

• South Africa

• United States

• Russia

• Colombia

• Ecuador

• Israel

• Netherlands

• Italy

• Increased investment

• Policies to promote the

industry

• Infrastructure improvement

Value:

• $207 million

• 66 percent

Prepared and

preserved fish

• Seychelles

• Côte d’Ivoire

• Mauritius

• Ghana

• Madagascar

• Kenya

• Senegal

• South Africa

• Namibia

• European Union • Thailand

• Philippines

• Ecuador

• Domestic

production in

certain key

markets

• Demand growth and price

increases

• Increased investment

• Policies to promote the

industry

Value:

• $216 million

• 54 percent

Volume:

• 4,000 mt

• 2 percent

Mining and Manufacturing

Acyclic alcohols • Equatorial Guinea

• South Africa

• United States

• European Union

• China

• Trinidad and

Tobago

• Venezuela

• Chile

• Russia

• United States

• Canada

• Domestic

production in

certain key

markets

• Demand growth and price

increases

• Increased investment

Value:

• $254 million

• 271 percent

Volume:

• 482,000 mt

• 75 percent

Flat-rolled steel • South Africa

• Kenya

• Tanzania

• European Union

• China

• South Korea

• Kenya

• Uganda

• Tanzania

• Malawi

• Rwanda

• Russia

• China

• Japan

• India

• Domestic

production in

certain key

markets

• Demand growth and price

increases

• Increased investment

• Policies to promote the

industry

Value:

• $886 million

• 106 percent

Volume:

• 94,000 mt

• 5 percent

LNG • Nigeria

• Angola

• Equatorial Guinea

• European Union

• United States

• Turkey

• Ecuador

• Brazil

• Algeria

• Qatar

• Egypt

• Norway

• Russia

• Saudi Arabia

• Trinidad and

Tobago

• Canada

• Demand growth and price

increases

• Increased investment

• Policies to promote the

industry

Value:

• $879 million

• 163 percent

Volume:

• 3 million mt

• 52 percent
xvi

Table ES-1 Sub-Saharan Africa: Summary of findings for selected industries—Continued

Industry

SSA exporters

experiencing significant

export growth Key markets

Leading global

comp

etitors in key

markets

Factors affecting increased

exports

SSA export 

increase from

2001 through

2005

Mining and Manufacturing—Continued

Apparel • Madagascar

• Lesotho

• Kenya

• Swaziland

• Botswana

• Ethiopia

• United States

• European Union

• Canada

• Mexico

• South Africa

• China

• Mexico

• Hong Kong

• India

• Turkey

• Romania

• Bangladesh

• Tariff preferences and

trade agreements

• Regional integration

• Monetary policy

• Policies to promote the

industry

Value:

• $283 million

• 13 percent

Unwrought

aluminum

• South Africa

• Mozambique

• Japan

• United States

• South Korea

• European Union

• Russia

• Australia

• Domestic

production in

certain key

markets

• Demand growth and price

increases

• Increased investment

• Policies to promote the

industry

• Infrastructure improvement

• Regional integration

Value:

• $784 million

• 64 percent

Volume:

• 219,300 mt

• 27 percent

Wood veneer • Gabon

• Côte d’Ivoire

• Ghana

• Cameroon

• Equatorial Guinea

• European Union

• United States

• China

• Morocco

• Romania

• Canada

• Russia

• Australia

• China

• Canada

• Domestic

production in

certain key

markets

• Demand growth and price

increases

• Increased investment

• Policies to promote the

industry

• Infrastructure improvement

• Regional integration

Value:

• $135 million

• 61 percent

Volume:

• 5,200 m3

• 1 percent

Services

Financial services • Côte d’Ivoire

• Uganda

• Mauritius

• Swaziland

• United Kingdom

• United States

• Luxembourg

• Switzerland

• Domestic

suppliers

• Demand growth related to

increased merchandise

trade

• Increased investment

• Policies to promote the

industry

• Infrastructure improvement

• Regional integration

Value:

• $140 million

(1999 to 2003)

• 230 percent

Tourism • Angola

• Botswana

• Cape Verde

• Ethiopia

• Ghana

• Kenya

• Mali

• Mauritius

• Namibia

• Rwanda

• Sierra Leone

• South Africa

• Swaziland

• Tanzania

• Uganda

• European Union

• Other SSA

• United States

• Brazil

• United States

• European Union

(Spain, France,

Germany)

• Other SSA

suppliers

• Demand growth and price

increases

• Increased investment

• Policies to promote the

industry

• Infrastructure improvement

Value:

• $5.1 billion

(2000 to 2004)

• 61 percent

Source: Compiled by Commission staff.
xvii

ES-2 Sub-Saharan Africa, factors affecting trade patterns, by selected industryFactors

 Agriculture and Fisheries Mining and Manufacturing Services

Cashews 

Cocoa

butter and

paste

Cut

flowers 

Prepared

 and

 preserved fish

Acyclic

alcohols 

Flat-rolled 

steel LNG Apparel

Unwrought

aluminum

Wood

veneer

Financial

services Tourism

Dynamic factors (factors that changed during 2001–05 and contributed to increased exports)Demand growthand/or priceincreases

XXX X XX X X X XX

Increased investment X X X X X X X X X X XPolicies to promotethe industry XXX X X X X XXInfrastructureimprovement X X XX

Tariff preferences XUnderlying factors (factors that remained relatively stable during 2001–05 and that supported industry development and are indirectly linked to increased exports)

Natural resources X X X X X X X X X XTariff preferences X XLabor supply X X X X XRegional integration X XX XSource: Compiled by USITC staff.
xviii

Table ES-3 Sub-Saharan Africa: Summary of factors affecting increased imports, trade patterns, comparative

advantage, and industry development

Cashews • Coordinated support effort by international development agencies, NGOs,

(Nongovernmental Organizations) foreign governments, and global traders to provide

technical assistance at the grower level, provide marketing assistance, and coordinate

public and private investment initiatives. National governments have also partnered with

business organizations and others to promote the sector. 

• Strong global demand.

Cocoa butter and

paste

• Growth in global demand and increased prices.

• Increased capacity to process cocoa beans into paste and butter, probably driven by

strong global demand and government policies designed to encourage downstream

processing. In Ghana, a relatively stable business environment has prompted an

increase in capacity.

• Ready supply of cocoa beans for processing into paste and butter. Productivity

improvements throughout the period generally yielded increased production, tempered

by weather conditions. However, civil strife in Côte d’Ivoire has led to uncertainties

regarding cocoa bean supplies and volatile cocoa bean prices.

• Nigeria offers exemptions from taxes to encourage investment in processing.

Cut flowers • Favorable climate, low wages relative to other developing suppliers in Latin America

and Asia, and proximity to the EU market support industry development.

• Preferential tariff treatment of exports to the EU market under the Cotonou Agreement

and to the United States under AGOA.

• Favorable investment environment, including infrastructure improvements and duty-free

treatment of packaging, seeds, agrochemicals, and other inputs for flower farms in

Kenya and Uganda.

• A dynamic private sector environment with minimal government interference has led to

the creation of large- and medium-scale companies in Kenya, which provide stability,

technological leadership, a well-trained work force, and close linkages with European

importers. 

• Status as a signatory to the International Union for the Protection of New Varieties of

Plants provides the Kenyan industry with better access to new and better plant

varieties. Increasingly sophisticated technology has improved productivity and the

quality of the flowers, and local propagators now supply a large portion of the planting

material needed by Kenyan producers.

• USAID support for a cold storage facility at the airport in Uganda and subsequent

shipping improvements have reduced freight rates and improved the quality and

reputation of Ugandan flowers. USAID also supported the development of an active

industry export association and provided technical support to facilitate new exports to

the United States under AGOA.

Prepared and

preserved fish

• Increased prices resulting primarily from the inability of worldwide fisheries production to

keep pace with increasing global demand. 

• Because technology generally limits domestic fishing to in-shore waters, SSA

governments are maintaining or increasing the supply of fish to canneries through

licensing agreements with foreign-flaged vessels, which land their catches in SSA ports.

Many SSA countries have such licensing arrangements, including Kenya, Mauritius,

Ghana, and Madagascar, which have increased exports as a result.

• Foreign direct investment has increasingly provided capital to build and efficiently

operate onshore canneries and other processing facilities, particularly in Kenya, Ghana,

Seychelles, and Mauritius.
xix

Table ES-3 Sub-Saharan Africa: Summary of factors affecting increased imports, trade patterns, comparative

advantage, and industry development—Continued

Acyclic alcohols • Growth in global demand for methanol and n-butanol. 

• Increase in SSA production capacity with opening of two major production facilities–one

producing n-butanol in South Africa and one producing methanol in Equatorial Guinea.

Both facilities take advantage of natural resource endowments (coal in South Africa and

natural gas in Equatorial Guinea) to supply low-cost feedstocks in acyclic alcohol

production.

• Increase in the global price of acyclic alcohols due largely to the increased cost of

crude oil and natural gas used as feedstocks and as energy sources in acyclic alcohol

production.

Flat-rolled steel • Growth in global and East African demand.

• Increase in the global price of steel, reflecting increased costs for raw materials,

particularly nickel used in stainless steel production.

• Increased production capacity in South Africa, the major SSA exporter, as well as in

Kenya and Tanzania.

LNG • Strong global demand for natural gas and higher global prices in response to the

increased demand.

• Increased liquefaction and transport capacities in Nigeria, by far the largest SSA

producer and exporter of petroleum gases.

• Nigerian government policies aimed at diversifying the country’s energy sector away

from a reliance on oil to one based on both oil and natural gas. Policies include those to

eliminate natural gas flaring by 2008 and to stimulate natural gas investment and

commercialization.

Apparel • U.S. trade preferences under the African Growth and Opportunity Act (AGOA), which

has a third-country fabric provision. The EU also offers trade preferences under the

Cotonou Agreement, but they are more restrictive.

• Firms constrained by the Multi-Fiber Arrangement (MFA) established production

facilities in SSA.

• Abundant, inexpensive supply of labor for the relatively labor-intensive, cut-make-trim

part of the production process common in SSA.

• Membership in the Southern African Customs Union facilitated exports from Botswana,

Swaziland, and Lesotho, attracting increased investment in apparel production facilities.

• Export processing zones (EPZs) and industrial zones encouraged apparel investment.

EPZ incentives vary by country but generally include duty reductions on fabric and

inputs, capital investments, and tax holidays. Industrial zones are similar but generally

do not require that products be exclusively for export.

• Other SSA government incentives in the sector include provision of factory shells,

preferential access to land, tax holidays for investors, preferential financing, rebates on

machinery used in the production process, technical assistance, and infrastructure

improvements. 

Unwrought

aluminum

• Strong global demand and increased prices resulting from the higher global demand.

• Increased smelting capacity in South Africa and Mozambique, the primary SSA

exporters of unwrought aluminum. Both countries possess the necessary combination

of port access and access to an abundant, low-cost supply of electricity, which

accounts for nearly 30 percent of production costs. South Africa uses its coal to

generate low-cost electricity. Mozambique has an excess supply of hydro electric power

and also uses South African electricity.
Table ES-3 Sub-Saharan Africa: Summary of factors affecting increased imports, trade patterns, comparative

advantage, and industry development—Continued

xx

Wood veneer • Higher global prices for veneer and rising ocean freight rates increased the value of

exports.

• Shift in product mix of exports to include higher-valued veneer, particularly from Ghana.

• Increased demand from Asia to supply its expanding furniture industry and from the

United States in response to a disruption in its supply of mahogany from Latin America.

• Ready supply of forest resources, including indigenous hardwood species that are

particularly suitable for high-value end uses and are not available in other parts of the

world.

• SSA countries are developing supplies of certified wood products in response to

growing demand. Wood products firms in Cameroon, the Republic of Congo, and

Ghana are developing products to meet the requirements of an international

certification scheme, the Forest Stewardship Council certification.

• Government policies supporting veneer production include the development of new

forest regulation and policies designed to encourage further local value-added

processing of forest resources.

Financial services • Increased merchandise trade has increased the demand for trade financing.

• Increased investment in local branches by regional and multinational financial services

companies.

• Reform of government policies related to firm governance have contributed to

increased investment in local branches.

• Availability of highly educated workforce in selected SSA countries facilitates expansion

of financial services offerings.

• Regional integration promotes increased intra-regional trade in financial services,

particularly in West Africa and Côte d’Ivoire.

Tourism • Increased political stability and the associated decline in conflict helped increase

demand for travel services in SSA.

• Increased investment in new and refurbished hotel accommodations.

• The natural sites, cultural sites, and wildlife attract tourists to SSA.

• Government policies to increase promotion and advertising, which increased tourist

arrivals.

• Increased demand for business travel by multinational companies importing skilled

labor that does not exist locally such as in the petroleum industry in Angola.

• Improved airports and increased levels of direct flights increase SSA’s accessability.

Source: Compiled by USITC staff.
 1

 On July 27, 2006, the Office of the United States Trade Representative (USTR) requested that the U.S.

International Trade Commission (Commission) prepare three annual reports under section 332(g) of the

Tariff Act of 1930 (19 U.S.C. 1332(g)) addressing factors affecting trade patterns of selected industries in

sub-Saharan Africa. This report is the first in that series. The USTR requested that the Commission submit its

report by April 3, 2007. A copy of the request letter is included in app. A, and the Commission’s notice of

investigation, published in the Federal Register of August 29, 2006 (71 F.R. 51212), is in app. B.

 2

 As in previous Commission reports and as defined by the World Bank, sub-Saharan Africa consists of

the following 48 countries: Angola, Benin, Botswana, Burkina Faso, Burundi, Cameroon, Cape Verde,

Central African Republic, Chad, Comoros, Democratic Republic of the Congo, Republic of the Congo, Côte

d’Ivoire, Djibouti, Equatorial Guinea, Eritrea, Ethiopia, Gabon, The Gambia, Ghana, Guinea, Guinea-Bissau,

Kenya, Lesotho, Liberia, Madagascar, Mali, Malawi, Mauritania, Mauritius, Mozambique, Namibia, Niger,

Nigeria, Rwanda, Sao Tome and Principe, Senegal, Seychelles, Sierra Leone, Somalia, South Africa, Sudan,

Swaziland, Tanzania, Togo, Uganda, Zambia, and Zimbabwe.

 3 Global Trade Atlas was the primary source of trade data for this report. Most data were collected as of

August 29, 2006; however, GTIS periodically updates its database and certain values were updated at later

times. All data are reported as nominal values unless otherwise indicated. Internal European Union trade was

excluded. Throughout this report, references to the European Union (EU) refer to the EU25: Austria,

Belgium, Cyprus, the Cyech Republic, Denmark Estonia, Finland, France, Germany, Greece, Hungary,

Ireland, Italy, Lotvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Slovakia, Slovenia,

Spain, Sweden, and the United Kingdom.

1-1

CHAPTER 1

Introduction and Overview

The purpose of this report is to provide information on competitive factors affecting

selected industries in sub-Saharan Africa (SSA) that have experienced significant

shifts in exports.1

 This report identifies the leading SSA exporters, their key markets,

and their global competitors; describes industry and market conditions; and identifies,

describes, and analyzes factors that have contributed to significant changes in export growth

and trade patterns in the selected SSA industries for the most recent five-year period for

which data are available. In addition, the report includes brief overviews of the trends in SSA

exports for the agriculture (including fisheries), mining and manufacturing, and services

sectors.

Industry and Country Coverage

This report analyzes twelve SSA industries selected by the United States Trade

Representative (USTR). USTR selected cut flowers, cocoa butter and paste, nuts, and

prepared and preserved fish in the agriculture and fisheries sector; acyclic alcohols,

unwrought aluminum, textiles and apparel, petroleum gases, flat-rolled steel, and wood

veneer from the mining and manufacturing sector; and tourism and financial services for

analysis in the services sector. For each industry, trade data were used to narrow the focus

of the analysis to those countries within SSA that demonstrated substantial or consistent

export value growth from 2001–05.2

Information Used in the Report

Merchandise trade data throughout this report, unless otherwise indicated, were obtained

from Global Trade Information Systems, Inc.’s (GTIS) Global Trade Atlas database.3

Industry sectors were defined based on 4-digit harmonized system (HS) classifications
 4

 Import valuation for most countries reporting to GTIS is based on the cost, insurance, and freight, or

C.I.F. value alt though this approach provided the broadest set of data, introduction of insurance and freight

into the export values may cause additional variation. For example, increased freight costs associated with

increased fuel costs over the period will also show up as increased exports.

 5

 Redding and Venables, “Geography and Export Performance”; Fugazza, “Export Performance and Its

Determinants”; and Damijan, Fejančič, and Rojec, “Growing Export Performance of Transition Economies.”

1-2

(appendix table D-1). To minimize the effect of incomplete trade data from SSA countries,

the data presented for exports in this report represent the value of apparent exports rather

than actual reported exports. That is, as import data are generally considered more reliable

than export data, and export data from a number of SSA countries was limited, export trade

values were derived by aggregating import data values (including insurance and freight)

from all countries reporting to GTIS.4

 Furthermore, complete and reliable 2005 data for some

industry sectors (e.g., financial services and steel) were not readily available.

Services industry definitions were based on the International Monetary Fund’s (IMF)

Balance of Payments Manual. Services sector data were compiled from various sources,

including the IMF’s Balance of Payments Manual, the United Nations World Tourism

Organization’s (UNWTO) Yearbook of Tourism Statistics, and the World Trade

Organization’s (WTO) International Trade Statistics 2006.

In addition to the trade data described above, information for this report was collected from

a variety of industry and government sources, including domestic and foreign industry

representatives; international organizations, including the WTO, the World Bank, the Food

and Agricultural Organization (FAO) of the United Nations, and the IMF; U.S. and foreign

government sources, including U.S. embassies in SSA countries and SSA countries’

embassies in the United States; and submissions of interested parties. In addition, a team of

Commission analysts traveled to Ethiopia, Kenya, and Tanzania to meet with local industry

and government officials to gather data and information not readily available elsewhere.

Approach

The approach employed by the Commission to identify factors that affected trade patterns

and increased exports in the selected industries included several steps. First, the Commission

analyzed export data in the selected industries to determine whether changes in exports over

the most recent five-year period primarily reflected changes in prices or changes in quantity.

Second, examination of data was combined with information gathered from domestic and

foreign industry and government sources, as well as international organizations, to identify

factors that were related to demand and supply conditions affecting each selected industry.

For example, factors relating to demand include growing global demand and changes in tariff

preferences extended to the respective SSA countries in world markets. Examples of factors

relating to supply include increased investment leading to increased capacity and changes

in domestic government policies, such as tax policies, or infrastructure improvements.

The process used by the Commission to identify various factors that affected trade patterns

and export changes is consistent with the process used by Redding and Venables; Fugazza;

and Damijan, Fejančič, and Rojec in recent studies evaluating the determinants of regional

export performance.5

 These studies decomposed total export performance into an external

component, which they called “foreign market access,” and an internal component, which

they called “supplier capacity.” The external component evaluated by these studies was

based on data related to factors such as foreign demand, foreign market access, entry
 6

 Redding and Venables, “Geography and Export Performance,” 21 and 30-31.

 7

 Fugazza, “Export Performance and Its Determinants,” 17.

 8

 Ibid., 23; Redding and Venables, “Explaining Cross-Country Export Performance,” 8.

1-3

conditions, and a country’s location via-a-vis international markets. The internal component

evaluated by these studies was based on data related to factors such as supply capacity,

domestic policy variables, size of internal markets, internal geography, input prices, public

investment in transportation infrastructure, institutional development, and technology. The

studies evaluated determinants of trade performance on both a regional and country-specific

basis.

Redding and Venables found that from 1970 to 1997, factors related to foreign market access

were the greatest contributor to increased export performance in the SSA region, though

some individual countries did demonstrate significant growth in exports related to supplier

capacity.6

 Fugazza found that foreign market access made a positive contribution to export

growth during 1988–95, while supply capacity growth made a positive contribution to export

growth during 1992–09.7

 The Commission’s finding that external factors related to increased

global demand and prices contributed substantially to SSA export growth during 2001–05

was generally consistent with Redding and Venables, and Fugazza, who found that external

factors related to foreign market access were the primary contributors to SSA countries’

export performance during the periods they observed.8

The sources of data for this report include public sources of export data, telephone

interviews, and e-mail correspondence with domestic and foreign industry representatives,

as well as information from U.S. Embassy personnel via State Department cables. As noted,

foreign travel was also undertaken to Ethiopia, Kenya, and Tanzania, where Commission

staff met with government and industry representatives. The relative diversity of exports

from this subset of countries allowed the Commission to obtain primary research information

for several industries. In Kenya, Commission staff visited cut flower operations and apparel

operations and met with cashew and flat-rolled steel industry representatives, as well as a

number of association representatives at the Export Promotion Council. In Tanzania,

Commission staff met with cashew industry representatives; Confederation of Tanzania

Industries officials; Ministry of Industry, Trade, and Marketing officials; Tanzania

Investment Centre officials; and representatives of the Tanzania Tourist Board; as well as

visited the Urafiki textile mill. In Ethiopia, Commission staff met with Ministry of Trade and

Industry officials, Ministry of Culture and Tourism officials, United Nations Economic

Commission for Africa officials, and a number of representatives from the apparel and cut

flower industries.

The factors identified in this report are not an exhaustive list and are not ranked according

to significance. Any level of relative significance suggested in the report is based on the

information gathered and is not the result of any statistical analysis, which was beyond the

scope of this study.
 9

 International Monetary Fund, World Economic Outlook Database.

 10 Ibid.

 11 World Bank, Africa Development Indicators 2006.

 12 IMF, World Economic Outlook, 218.

1-4

-20% -10% 0% 10% 20% 30% 40%

Source: GTIS, Global Trade Atlas , annual data compiled from 

reporting countries' official statistics, including EU external trade.

 F o o twear

 M ac hinery

 E le c tro nic pro duc ts

 T e xt ile s a nd a ppa re l

 M iscellaneous manufactures

 F o re s t pro duc ts

Chemicals and related products

 Transportation equipment

 A gricultura l pro duc ts

 M inerals a nd m e ta ls

 Energy-related pro ducts

T o tal Expo rts 

Figure 1-1 Sub-Saharan Africa merchandise exports: Average annual growth 

rates by commodity sector, 2001–05

Organization of Report

The remainder of chapter 1 provides an overview of SSA sector exports and a summary of

the report’s findings. Chapter 2 discusses the selected agriculture (including fisheries)

industries. Chapter 3 profiles the selected mining and manufacturing industries, and chapter

4 discusses the selected services industries.

Overview of SSA Sector Export Trade

After years of conflict and sluggish real economic growth, measuring just 2.4 percent on

average during the 1990s, beginning in 2001 SSA registered its best economic performance

since 1980.9

 Region-wide real Gross Domestic Product (GDP) grew at an average annual rate

of 4.6 percent from 2001 through 2005, and is estimated to have grown at an annual rate of

5.8 percent during 2006.10 Increased exports have helped fuel this economic growth, and

from 2001–5, the value of merchandise exports from SSA increased by nearly 19 percent

annually (figure 1-1).11 By comparison, global exports increased by 14.3 percent annually

over the same period.12 The mining and manufacturing sector has increasingly dominated

SSA’s merchandise exports, accounting for 89 percent of the total (not including special

provisions) in 2005. Although much smaller on an absolute basis, SSA services exports also

increased significantly, growing by 68 percent from 2001–04.
 13 GTIS, Global Trade Atlas, reporting countries’ imports from around the world.

 14 “Services” refers to commercial services as defined by the IMF and consist of transportation, travel and

tourism, and other services; other services include communications, construction, insurance, financial,

computer and information, royalties and license fees, and other business services.

1-5

Agriculture

Despite decreasing by 5.3 percent, from $20.9 billion in 2004 to $19.8 billion in 2005, the

total value of agricultural sector (including fishery) exports was still 20.7 percent greater in

2005 than it was in 2001 (average annual growth of 5.2 percent). Growth in export value in

agriculture lagged significantly behind the growth in mining and manufacturing. As a result,

the share of SSA merchandise exports accounted for by agriculture fell from 16.3 percent

of the total value of merchandise exports in 2001 to 11.3 percent in 2005. Furthermore, SSA

export growth in the agricultural sector lagged behind growth in global trade in agriculture,

which increased by 33.2 percent during the same period.13 Seven SSA agricultural sectors

each generated total export earnings of more than $1 billion in 2005: cocoa and cocoa

preparations, fruits and nuts, fish, coffee and tea, cotton, tobacco, and sugar. These seven

sub-sectors accounted for 74 percent of all SSA agricultural exports.

Four SSA agricultural industries are discussed in chapter 2. Ranked by 2005 export value

they are: cocoa butter and paste, nuts, cut flowers, and prepared and preserved fish. From

2001–05, SSA exports in each of these industries grew by more than $100 million.

Mining and Manufacturing

Growth in mining and manufacturing exports was strong during 2001–05; however, it was

concentrated in energy-related products and minerals and metals, which grew at average

annual rates of 35 and 17 percent, respectively by value (figure 1-1). SSA exports of energyrelated products grew nearly 140 percent by value during 2001–05, reflecting increased

world petroleum prices as well as increased volume (table 1-1). Similarly, SSA exports of

minerals and metals increased by 68 percent from 2001–05 as strong global demand

increased the volume of exports and fueled higher prices for items such as gold, aluminum,

steel, and copper. SSA exports of all other commodities in the mining and manufacturing

sector rose just 9 percent from 2001–05.

Six industries in the SSA mining and manufacturing sector are analyzed in chapter 3. Ranked

by 2005 export value, they are textiles and apparel, natural gas, unwrought aluminum, flatrolled steel, veneer sheets, and acyclic alcohols. Exports increased significantly in five of the

six sectors from 2001–05, with increases ranging from 61 to 271 percent. The one exception

was textiles and apparel, which increased by 13 percent.

Services

Services exports represented about 15 percent of total SSA exports during 2001–04

(table 1-1).14 The value of services exports increased irregularly during 2000–04. Services

data were not completely available for 2005 (table 1-2). From the low of $14.9 billion in

2001, services exports increased by 68 percent to $25.0 billion in 2004. Although the value

of all types of services increased during 2000–04, the value of each type of service did not

increase at the same rate. As a result, the distribution among the types of services changed
 15 WTO, Statistical databases, Travel services will hereafter be referred to as tourism.

1-6

Table 1-1 Sub-Saharan Africa merchandise and services exports: Value by sector, 2001–05

Industry sector 2001 2002 2003 2004 2005

Million dollars

Merchandise exports:

Energy-related products 38,348 36,232 47,695 66,786 91,747

Minerals and metals 23,995 23,230 27,518 35,693 40,311

Transportation equipment 5,280 4,867 6,333 6,742 6,137

Chemicals and related products 3,995 4,005 4,165 4,594 4,466

Forest products 3,889 3,701 4,036 4,423 4,308

Textiles and apparel 2,949 2,859 3,342 3,573 3,027

Machinery 2,480 2,184 2,262 2,603 2,446

Electronic products 1,208 1,084 1,130 1,239 1,207

Miscellaneous manufactured products 900 944 1,060 1,126 967

Footwear 102 89 58 53 25

Sub-total mining and manufacturing 83,146 79,195 97,599 126,832 154,641

Agricultural products (including fishery products) 16,386 17,280 20,079 20,883 19,783

Total merchandise exports 99,492 96,475 117,676 147,716 174,426

Total services exports 14,851 16,006 21,679 24,963 n/a

Total exports 114,343 112,481 139,355 172,679 n/a

Percent

Merchandise exports as a percent of total trade 87 86 84 86 n/a

Source: GTIS, Global Trade Atlas, annual data compiled from reporting countries’ official statistics, including EU external trade

and WTO International Trade Statistics 2006.

Table 1-2 Sub-Saharan Africa commercial services exports: Value by country, 2000–04

Country 2000 2001 2002 2003 2004

Million dollars

Total Africa 31,300 31,300 33,300 42,100 50,700

Total Sub-Saharan Africa 15,033 14,851 16,006 21,679 24,963

South Africa 4,888 4,533 4,578 7,722 8,772

Nigeria 1,833 1,653 2,524 3,473 3,336

Mauritius 1,066 1,218 1,146 1,274 1,449

Kenya 727 793 737 832 1,150

Tanzania 575 646 615 659 845

Other Sub-Saharan African countries 5,944 6,008 6,406 7,719 9,411

Source: WTO International Trade Statistics 2006.

over the period. Travel or tourism services accounted for 50 percent ($12.5 billion) of all

SSA services exports in 2004, an increase from 41 percent ($6.2 billion) in 2000.15

Transportation services accounted for 20 percent of all services exports in 2004, but this

represented a decrease from 23 percent in 2000. All other services (including

communications, construction, insurance, financial, computer and information services)

decreased from 33 to 28 percent of all services exports during 2000–04.

Services exports from SSA are concentrated in the five leading exporters (South Africa,

Nigeria, Mauritius, Kenya, and Tanzania), which accounted for $15.5 billion in services

exports, representing 62 percent of all SSA services exports (table 1-2). Among these top

SSA services exporters, levels of the types of services exported varied. In 2005, for example,
 16 WTO, Statistical Databases.

1-7

tourism services dominated the services exports from South Africa (74 percent) and

Tanzania (71 percent).16 Other services (including communications, construction, insurance,

financial, computer, and information services) dominated the services exports from Nigeria

(79 percent) in 2005. For Mauritius, tourism (55 percent) and transportation (24 percent)

services accounted for most of the services exports in 2005. In Kenya, services exports were

divided between transportation services (49 percent) and tourism services (43 percent) in

2005. Tourism services and financial services are discussed in detail in chapter 4.

 1

 HTS subheading 0801 includes coconuts, Brazil nuts, and cashew nuts. The positive shift in SSA exports

for the category, almost 300 percent by value, was driven mainly by cashews. Brazil nuts are not produced in

Africa, and exports of coconuts remained steady throughout the period. During the 2001–05 period, the

volume of coconut exports by Côte d’Ivoire, the only SSA exporter of significance, fluctuated downward

slightly to approximately 15,500 metric tons while unit values increased slightly so that total value began and

ended the period at $7.2 million. This section, therefore, covers cashews only. 

2-1

CHAPTER 2

Agriculture and Fisheries Industry

Sector Profiles

The value of agricultural and fisheries exports from sub-Saharan Africa (SSA) grew

moderately from 2001–04, before decreasing in 2005. Agriculture and fisheries

exports decreased as a share of the total value of SSA exports because the value of

mining and manufacturing exports grew at a much greater rate than agriculture and fisheries

exports. The increased value of exports was generally driven by increased prices, although

the quantity of cashew exports increased substantially as well. The following tabulation

summarizes dynamic factors that contributed to increased exports and underlying factors that

contributed to industry development in the agriculture and fisheries sector.

Factors Cashews

Cocoa

butter and

paste Cut flowers

Prepared and

preserved fish

Dynamic factors (factors that changed during 2001–05 and contributed to increased exports)

Demand growth and/or price increases X X X X

Increased Investment X X X X

Policies to promote the industry XX X X

Infrastructure Improvement X

Underlying factors (factors that were relatively stable during 2001–05)

Natural Resources X X X X

Tariff Preferences X

Labor supply X X

Cashews1

Summary of Findings

SSA producers account for approximately one-quarter of the value of global trade in

cashews, mainly in the unprocessed, in-shell form. The value of SSA cashew exports

increased by nearly 300 percent during 2001–05, while export volumes also increased
 2

 East African cashew industries, which currently process approximately 20 percent of cashew production,

have made more strides than their West African counterparts with regard to processed kernels.

2-2

steadily (table 2-1). In-shell cashew exports increased at a faster rate than shelled nuts

exports—161 percent and 59 percent, respectively. 

Table 2-1 Sub-Saharan Africa cashew exports, by selected exporters and key markets, 2001–05

Exporters Key markets

Exports

Percent

change

2001 2002 2003 2004 2005 2001–05

Côte

d’Ivoire

India 1,000 dollars 19,701 49,410 46,062 80,427 114,334 480

Metric tons 38,685 85,987 77,802 117,685 138,151 257

USA 1,000 dollars 382 300 0 0 253 -34

Metric tons 120 104 0 0 58 -52

EU 1,000 dollars 1,170 239 62 32 25 -98

Metric tons 331 73 25 5 5 -98

All other 1,000 dollars 229 612 957 47 78 -66

Metric tons 62 < 0.5 6,264 1,418 16 -74

Total 1,000 dollars 21,483 49,950 47,081 80,505 114,690 434

Metric tons 39,198 86,164 84,091 119,108 138,230 253

GuineaBissau

India 1,000 dollars 9,648 47,071 51,536 68,388 93,064 865

Metric tons 16,897 62,319 70,841 81,444 89,078 427

EU 1,000 dollars 8 103 126 389 1 -88

Metric tons 2 39 43 81 1 -50

USA 1,000 dollars 0 0 49,389 249,696 43,891 n/a

Metric tons 0 0 12 70 25 n/a

All other 1,000 dollars 0 0 0 0 0 n/a

Metric tons 0 0 0 0 0 n/a

Total 1,000 dollars 9,656 47,174 51,712 69,027 93,109 864

Metric tons 16,899 62,358 70,896 81,595 89,104 427

Benin

India 1,000 dollars 7,956 21,255 30,419 35,075 49,830 526

Metric tons 15,093 35,690 47,084 48,611 55,215 266

China 1,000 dollars 41 37 0 0 0 -100

Metric tons 206 184 0 0 0 -100

EU 1,000 dollars 330 24 0 0 0 -100

Metric tons 102 11 0 0 0 -100

All other 1,000 dollars 92 4 2 0 0 -100

Metric tons 205 0.5 2 0 0 -100

Total 1,000 dollars 8,419 21,320 30,421 35,075 49,830 492

Metric tons 15,606 35,885 47,086 48,611 55,215 254

SubSaharan

Africa

Total

1,000 dollars 104,027 2,100,275 253,851 344,420 413,828 298

Metric tons 171,990 3,233,775 390,304 439,714 446,513 160

Source: GTIS, Global Trade Atlas, annual data compiled from reporting countries’ official statistics, including EU external

trade. 

Cashew-processing (shelling) industries have traditionally been small or nonexistent in most

SSA producing countries, and shelled cashew exports accounted for only 1-2 percent of the

volume of total cashew exports during 2001–05.2

In the last five years, international attention has focused on the development of the cashew
 3

 TechnoServe, “Tanzania Cashew Industry.”

 4

 Ibid.

 5

 Interview by Commission staff, Dar es Salaam, Tanzania, December 8, 2006.

 6

 GTIS, Global Trade Atlas.

 7

 Azam-Ali and Judge, Small-scale Cashew Nut Processing. 

 8

 U.S. Department of State, U.S. Embassy, Dakar, “Guinea-Bissau 2418B.”

2-3

sector as a driver for economic growth in the SSA region. The increase in exports of shelled

cashews, although relatively small, reflects national and international efforts to promote

cashew processing in SSA in order to capture more of the downstream value for the domestic

cashew industry. The efforts of international aid agencies, foreign governments, traders, and

marketers have led to increased technical assistance at the grower level, public and private

investment in new or refurbished processing facilities with investor oversight, and

networking and marketing assistance for SSA producers. These efforts and the increasing

global consumption of cashews are the key factors contributing to SSA export growth.

Industry Overview

Cashew production in SSA is highly dispersed; more than five million small-scale farmers

in more than a dozen countries produce cashews.3

 In the largest producing countries, up to

two-thirds of the population may depend on cashews for their livelihood, and holdings can

range from a few trees to a few acres per farmer. In some countries, such as Mozambique,

cashew production is an important component of GDP (Gross Domestic Product); and taxes

on export earnings are an important revenue stream for the national government. However,

in most of Africa, tree productivity is less than one-third of its potential; and a dearth of

processing facilities allows producers access to only the lowest-value portion of the

production chain—raw in-shell nuts, which garner less than 10 percent of the value of

shelled kernels.4

 The most productive age span for a cashew tree is five to twenty-five years,

but many trees in SSA are over forty years old, contributing to low productivity.5

Furthermore, farmers generally do not use fertilizers or pest control products, tree pruning

is rare, and nuts are collected for harvest after they have fallen to the ground.

Marketing has traditionally been informal, characterized by few linkages between producers

and buyers. Currently, SSA producers of in-shell nuts rely primarily on a single export

market, India. The highly competitive Indian processing industry is the dominant global

buyer of in-shell nuts. Indian processors imported more than 99 percent of global export

volumes in 2005.6

 Typically, Indian buyers’ representatives in SSA countries make offers

on in-shell product based on global supply-and-demand conditions. Inconsistent SSA

supplies, due to the small size and disorganization of SSA growers, contribute to volatile

prices at the grower level.7

 Some national growers’ organizations exist in the region but,

until recently, have been characterized as only loosely organized, not involved in quality

training, and not providing information on global market prices. For this reason, farmers

generally have had a limited ability to make informed decisions on the timing and price of

sales.8

 While relatively lower in-shell prices for SSA cashews may provide some advantage,

the irregular quality of SSA cashews has decreased customer loyalty.

Processing, where it exists, is primarily home-based (box 2-1). Some SSA farmers have

made home-based processing work by using pruned tree branches, shells, and pieces of testa
 9

 Kanji, et al., “Liberalization, Gender and Livelihoods.”

 10 Azam-Ali and Judge, Small-scale Cashew Nut Processing. 

2-4

Box 2-1 Product Description for Cashews

Cashews are generally viewed as a high-value, luxury commodity, although of all edible nuts produced in the world,

cashews are the second largest industry after peanuts. Cashews compete in the same market as other edible nuts,

and demand for them is rising due to improved quality and consumer interest in the health benefits associated with

nuts. Cashew trees flourish near the equator in the extreme heat of the tropics.1

 Nuts grow as a kidney bean-shaped

leathery appendage on the bottom of the fruit of the cashew tree. When the ripe fruit falls to the ground, it is collected

by harvesters, who then separate soft cashew shells from the fruit. The cashew nuts are washed in water and stored

hydrated, during which time the kernels absorb moisture making them less likely to scorch or crack during the

subsequent roasting and shelling process. Most SSA cashew production is exported in-shell because shelling and

further processing do not generally take place in SSA countries.

Processing cashew nuts consists of removing the shells and the inner brown skin (testa) covering the kernel and is

complicated by the presence of a toxic resinous fluid naturally present between the kernel and the shell. The fluid

is caustic, causing blistering to human skin. Small-scale production generally involves roasting cashew nuts on trays

in closed ovens fitted with an exhaust pipe. Modern processing operations heat large volumes of cashew nuts in large

perforated cylinders rotating above a heat source, or by submerging them in heated oil. As the cashew nuts heat,

the cashew nut shell liquid (CNSL) flows from the shell and can be collected and commercially sold.2

Once most of the fluid is released from the shell during the heating process, nuts are cracked manually on a hard

surface with a wooden mallet. Even for large-scale processing, as is done in India, nuts are cracked manually to

ensure the greatest percentage of whole kernels. The liquid residue that remains in the shell is harmful to skin, and

thus gloves are worn or the nuts are rolled in sawdust or ashes before cracking to absorb the harmful liquid.

Considerable skill is necessary to optimize the quantity of whole kernels, because broken kernels bring a lower

market price. Various mechanized systems, involving small curved knives or projection against a solid casing, can

be used but results in lower whole-kernel quality.3

 Shell pieces are then separated from kernels and kernel pieces,

and the kernels are graded by size, color, and whole or broken pieces. Kernels are then dried, and the testa is

removed by rubbing with fingers and/or peeling with a knife. Mechanical testa removal, which can include air-blasting,

suction, or rubber rollers, also results in lower whole-kernel recovery. Kernels are further graded and vacuum-packed

in airtight tins flushed with carbon dioxide. One hundred metric tons (mt) of in-shell cashews is roughly equivalent

to 22 mt of kernels.4

_________________ 1

 “The Story of Cashews,” retrieved from www.thenutfactory.com on August 21, 2006. 2 CNSL is used in applications where resistance to heat, friction, or acids is paramount, such as in the

manufacture of brake linings, varnish, and plastic materials. Collection of the liquid, which is a mixture of

anacardic acid and cardol, in large quantities for commercial use requires special hot-oil roasting equipment. 3

 Indian manual shelling results in up to 90 percent whole kernels, while mechanized shelling yields are

generally lower, in the 70-75 percent range.

as fuel for cooking and drying nuts. In some cases, former plant managers have encouraged

home-based processing by purchasing and supplying small quantities of in-shell cashews to

home-based shellers and then selling the shelled nuts in local and regional markets.9

 The sale

of the processed nuts provides year-round employment, compared to the sale of the raw inshell nuts, which can only take place for a few months after harvesting.10 Some processing

plants have operated sporadically for decades. Plants have shut down for lack of resources

to purchase cashew stocks. Insufficient supplies linked to the limited productivity of trees

contributes to inefficient operation. Over the last decade, government-run plants in some

countries have become privatized, with varying success. In the last several years, new and

refurbished medium-scale processing capacity has come on line as the result of international

public and private initiatives.
 11 Ibid.

 12 Wakabi, “African Cashews to Indian Factories.”

 13 African Cashew Alliance Newsletter,“Export of raw cashews in Guinea-Bissau.”

 14 U.S. Department of State, U.S. Embassy, Nairobi, Kenya, December 7, 2006.

 15 Ibid.

 16 African Cashew Alliance Newsletter, “Price Trends.”

2-5

Medium-scale cashew processing plants in SSA have typically been mechanized (by

externally powered machinery) or semi-mechanized (foot- or hand-operated equipment).

These methods tend to result in lower yields of whole kernels than the semi-skilled manual

processing practiced in India.11 Processing plants throughout SSA have been hindered by

breakdowns of machinery, shortages of spare parts, and inefficiencies due to low nut

volumes and poor shelling performance of certain grades and sizes. Some improvements

have been made. For example, in Guinea-Bissau, manually operated machines once imported

from Brazil are now made locally, allowing repairs or replacements to occur more quickly.

However, overall low levels of processing are also attributable to the lack of financing for

raw materials purchases, lack of buyers, no national export brand, no credible quality

certification, and a lack of product recognition in the international market.12 Domestic

processors in SSA are generally in the difficult situation of needing to pay low prices for raw

nuts, so growers hold their supplies back and wait to sell to Indian processing representatives

who generally pay more. SSA producers have not generally exploited valuable cashew byproducts, such as cashew nut shell liquid, due to the prohibitive cost of specialized

machinery and fuel.

Rapidly increasing cashew supplies, particularly from Vietnam and SSA suppliers like Côte

d’Ivoire, have contributed to decreased prices for growers in the last few years. Irregular nut

quality, due to improper processing in some cases, further reduces prices. The lack of

adequate local transportation infrastructure, such as ports, harbors and roadways, as well as

warehousing, increases costs.13 In addition, industry representatives report that large buyers,

especially in the United States, desire larger volumes of kernels than SSA processors are

currently able to supply.14 Other factors that increase costs and constrain SSA exports to the

United States include transportation costs, product certifications that vary by state, and the

increased cost of compliance with new U.S. government container security initiatives.15

In other markets, nut producers have been able to overcome the price-depressing effects of

increased supplies. Almond producers have successfully increased almond consumption and

value by promoting recent international research of the health benefits of the nuts. Similar

research has been done on other nuts, including cashews; additional promotion could boost

consumption and prices for the cashew industry.16 The well-established cashew processing

sector of India increases revenue by producing value-added cashew by-products such as

juice, wine, and jam from the cashew apple, and the cashew nut shell liquid.

Sub-Saharan Africa Trade in the Global Context

SSA countries currently account for roughly one-third of global production of raw cashew

nuts. In the early 1970s, more than two-thirds of global cashew production took place in

Africa, led by Mozambique and Tanzania. However, in the mid-1970s, African production

began to decline due to a combination of biologic, agronomic, and socio-political factors.

The decline continued steadily until the late 1980s. In addition, depressed global prices for

in-shell cashews at the end of the 1970s discouraged improvement in cultivation techniques

and the replanting of cashew plantations throughout Africa. Today, SSA cashew production
 17 Northern Hemisphere crops are generally available between February and June, while Southern

Hemisphere crops are available between September and January.

 18 Interview by Commission staff, Dar es Salaam, Tanzania, December 8, 2006.

 19 Vietnam News: The Online English Daily, “Cashew Industry to Crack Targets.”

2-6

is concentrated in two main regions: West Africa, led by Nigeria, Côte d’Ivoire, and GuineaBissau; and East Africa, led by Tanzania and Mozambique. West African production is

harvested in the same period as harvests in other Northern Hemisphere producers such as

India and Vietnam, while East African production competes with that of other Southern

Hemisphere producers such as Brazil.17 Traditionally, much of SSA cashew production has

been shipped in-shell to India for shelling and further processing.

Leading Exporters

During 2001–05, global exports of cashews increased by 107 percent to $1.6 billion. By

comparison, SSA exports grew by 298 percent to $414 million. In terms of value, the leading

global exporters of cashews include India, Vietnam, and Brazil (see figure 2-1). Exports

from these countries consist primarily of shelled kernels. India’s leading position is

facilitated by its stable production of raw cashews—between 450,000 and 470,000 metric

tons (mt) annually during 2001–05—along with its large volume of raw cashew imports and

large, established shelling industry. Industry reports indicate that India is currently

implementing a replanting program with the intention of sourcing its in-shell nuts completely

domestically in the future, possibly due to both transportation cost and traceability

concerns.18 Under such a scenario, India’s demand for African in-shell product would likely

diminish, providing further impetus for increased processing in SSA.

Vietnam and Brazil are the second and third largest exporters of cashew kernels, shipping

81,000 mt (valued at more than $377 million) and 38,000 mt (valued at more than

$172 million) of kernels, respectively, in 2005. Vietnam produced 300,000 mt of raw

cashews in 2003, well on its way to reach the goal of 450,000 mt by 2010 set by the Ministry

of Agriculture and Rural Development.19

The SSA countries that experienced the largest increases in the volume of in-shell cashew

nut exports from 2001–05 are Côte d’Ivoire, Guinea-Bissau, Benin, Ghana, Mozambique,

Nigeria, and Gambia. Tanzania, Mozambique, and Kenya had the greatest increase of shelled

cashew exports during the same period (table 2-2). Less than one percent of total SSA

cashew exports were shelled in 2005. A slightly higher proportion was exported shelled in

2001 (1.3 percent). The decline in the ratio of shelled-to-in-shell exports reflects the rapid

rise in exports of in-shell cashews (from about 170,000 mt to 443,000 mt) compared to

shelled exports (from 2,265 mt to 3,604 mt). 
2-7

Table 2-2 Sub-Saharan Africa cashew production, in-shell exports and shelled exports, by leading countries

Cashew production

(in-shell weight) 2004 Exports (in-shell cashews) 2005 Exports (shelled cashews) 2005

Leading

producer

Metric 

tons

Leading

exporter

Metric

 tons $1,000

Average

unit value

$ per

metric ton

Leading

exporter

Metric

tons $1,000

Average

unit value

$ per 

metric ton

Nigeria 213,000 Côte d’Ivoire 138,151 114,334 828 Tanzania 1,422 7,073 4,974

Tanzania 100,000 Guinea-Bissau 89,079 93,066 1,045 Mozambique 971 4,312 4,441

Côte d’Ivoire 90,000 Benin 55,177 49,741 901 Kenya 531 2,774 5,224

GuineaBissau81,000 Tanzania 46,369 42,629 919 Guinea 227 928 4,088

Mozambique 58,000 Mozambique 32,213 27,988 869 Nigeria 157 420 2,675

Benin 40,000 Ghana 31,503 28,275 898 Côte d’Ivoire 81 356 4,395

Kenya 10,000 Nigeria 16,522 11,802 714 Malawi 65 307 4,723

Ghana 7,500 Gambia 12,498 11,396 912 Benin 37 89 2,405

SSA total 615,800 SSA total 442,909 397,115 897 SSA total 3,604 16,713 4,637

Sources: Production: Food and Agriculture Organization; Exports: GTIS, Global Trade Atlas, annual data compiled from

reporting countries’ official statistics, including EU external trade.

Note.—Intra-SSA trade data were incomplete and inventory data do not exist. Therefore, differences in production and

shipments may be attributable to transshipments and inventory changes, as well as to the difference in reporting years.

India

34%

SSA

26%

Vietnam

23%

Brazil

11%

Indonesia

6%

Other

1%

Global Exporters

Côte d'lvoire

28% Guinea-Bissau

22%

Benin

12%

Tanzania

12%

Mozambique

8%

Ghana

7%

Nigeria

3%

Other

8%

SSA Exporters

Figure 2-1 Leading global and sub-Saharan Africa exporters of cashews, 2005

$1,620 million $414 million 

Source: GTIS, Global Trade Atlas, annual data compiled from reporting countries’ official statistics, including

EU external trade.
 20 Azam-Ali and Judge, Small-scale Cashew Nut Processing.

2-8

Leading Export Markets

The United States is the largest global importer of cashews (kernels), primarily because U.S.

demand for all types of edible nuts is high and no domestic production of cashews exists.

India is the second largest importer, but primarily of in-shell nuts, which are an input into

its extremely large cashew processing industry (figure 2-2). The European Union (EU) is

also a large importer of cashew kernels due to high per capita consumption and lack of a

commercial cashew industry. There are no import tariffs for cashews in the United States or

the EU and, in general, governments in Northern Hemisphere countries have not imposed

other import barriers or sector support for cashew industries.20

SSA exports of cashews are shipped almost exclusively to India for processing. More than

84 percent of East African export shipments and more than 99 percent of West African

exports in 2005 went to India (figure 2-2). On a much smaller scale, SSA kernel exporters

ship to the EU and the United States. The following tabulation identifies the principal

competitors in SSA’s leading export markets.

United States

34%

India

29%

EU

21%

SSA

1%

Other

15%

Global Export Markets

India

94%

Other

6%

SSA Export Markets

Figure 2-2 Leading markets for global and sub-Saharan Africa exports of cashews, 2005

Source: GTIS, Global Trade Atlas, annual data compiled from reporting countries’ official statistics, 

including EU external trade.

$1,622 million $414 million 
 21 TechnoServe, “Tanzania Cashew Industry.”

 22 Wakabi, “African Cashews to Indian Factories.”

 23 Ibid.

 24 U.S. Department of State, U.S. Embassy, Nairobi, “Kenya 4230A.”

2-9

Market SSA competitors

India (in-shell) Indian domestic producers and Indonesia

EU (kernels) Brazil, India, and Vietnam

United States (kernels) Brazil, India, and Vietnam

Factors Affecting Trade Patterns

Development assistance and rising global demand were the key factors contributing to the

growth in cashew exports from SSA during 2001–05. International development agencies

have typically encouraged developing countries to increase higher-value agricultural exports

to promote economic growth and reduce poverty. The cashew is an attractive export

opportunity because international market demand for the nut is growing, few import barriers

exist in consuming markets, and large portions of the African population are already engaged

in production. However, revenues from in-shell cashews are only a small fraction of revenue

from processed kernels African countries have traditionally produced very few processed

kernels. In Tanzania alone, the forgone value of domestic processing has been estimated at

30,000 direct jobs paying $30 million, $40 million in processing revenues, and a 50 percent

increase in export earnings.21

Demand Growth and Price Increases

Cashews are viewed as a luxury commodity with strong sales growth projected globally, due

to improved nut quality; interest in the documented health benefits; and increasing incomes,

particularly in Asia. Global demand for cashew kernel exports is currently estimated at

200,000 mt per year and is projected to grow at a rate of 5-8 percent annually over the next

five years.22 SSA cashew industry officials note the robust demand and acknowledge there

is a need to solidify processing on the continent and to accelerate the production of quality

nuts.23 Low demand within SSA is attributed to a lack of awareness of cashews’ nutritional

value and their prohibitive prices for low-income consumers. However, the market for

healthy foods is growing, and regional demand for cashew kernels is expected to increase.24

Policies to Promote the Industry and Increased Investment

During 2001–05, another factor that contributed to increased exports of SSA cashews was

a coordinated support effort by international development agencies, non-governmental

organizations (NGOs), and global traders. These groups facilitated sector development at the

national and regional levels; oversaw comprehensive sector analysis to prioritize activity;

provided technical assistance regarding high-yield varieties, improved tree
 25 Spore,“Cashew: Shell Up and Ship Out.” See also, Cramer, “Can Africa Industrialize by Processing

Primary Commodities? The Case of Mozambican Cashew Nuts”; Waithaka, “Kenya: Assessment of the

Situation and Development Prospects for the Cashew Nut Sector”; Sijaona, “Tanzania: Assessment of the

Situation and Development Prospects for the Cashew Nut Sector”; Kanji, et al. “Liberalization, Gender and

Livelihoods: The Mozambique Cashew Nut Case”; and Mitchell, “Tanzania’s Cashew Sector: Constraints

and Challenges in a Global Environment.” 

 26 Spore, “Cashew: Shell Up and Ship Out,” Issue 123.

 27 EnterpriseWorks brochure. Enterprise Works, “Cashew Processing.”

www.vita.org/PDFs/Cashews_073003.pdf (accessed October 12, 2006).

 28 Founding members include Ahold, a leading food retail and food service provider; Kraft, one of the

largest global marketers of cashews; Olam International, the largest global trader of cashews; and USAID. A

complete membership listing can be found at http://www.africancashewalliance.com.

2-10

management, and processing efficiencies; assisted in the development of marketing channels;

and coordinated private and public investment initiatives.

This support effort was precipitated by a number of published studies that examined the

African cashew sector and its prospects for economic development.25 These studies

supported the idea that well-managed factories run by associations, local cooperatives, and

small- and medium-scale private business operators could be viable in Africa.26 A 2002

regional conference in Africa, sponsored by the International Trade Center UNCTAD/WTO

Global Trust Fund (ITC/UNCTAD), highlighted the need to rehabilitate Africa’s cashew

sector. Subsequently, an initiative named “Trade Expansion in Cashew Nuts from Africa”

was funded by ITC/UNCTAD and co-financed by the Common Fund for Commodities to

establish a strong regional network and structure to support export development objectives

for the cashew nut sectors in each of the participating countries. These included Tanzania,

Mozambique, Guinea-Bissau, Côte d’Ivoire, Nigeria, Benin, Kenya, Senegal, and

Madagascar. Regionally, the ITC/UNCTAD project has begun to build a network of players

throughout the cashew value chain for improved communication, marketing, and information

sharing of supply and demand conditions, including prices.

Development organizations, national governments, and private companies collaborated for

the benefit of African cashew producers during the period. The U.S. government has

supported SSA cashew industries through the U.S. Agency for International Development

(USAID). The Sustainable Tree Crops Program, a regional public-private partnership based

in Nigeria, supports smallholder tree crop farmers in West/Central Africa. The Netherlands

Development Agency is providing business development, market access promotion, and

supply chain development advisory services through its African regional offices. NGOs

operating in the region provide agriculture extension services to growers, develop

commercial channels for the product, and train local artisans to produce improved processing

equipment to decrease the scorching and breakage of kernels that reduces kernel value.27

U.S.- and EU-based cashew brokers representing African producers have increased market

awareness of the African cashew industry.

In an effort to centralize the various efforts regarding African cashews, the African Cashew

Alliance (ACA) was established in June 2005 as a public-private partnership. The ACA’s

main goals are to increase cashew farmer income, create jobs in the domestic cashew

processing industries, and increase export earnings and economic growth. Membership in

the Alliance includes representatives across the complete value chain, such as producers,

processors, traders, and international buyers.28 The ACA promotes information sharing, the

development of a strategic plan for the sector, facilitation of fund raising efforts,

prioritization of interventions to increase competitiveness, and promotion of African cashews
 29 Spore, “Cashew: Shell Up and Ship Out.”

 30 Business Ethics Online, “Olam and TechnoServe Form Partnership.”

 31 U.S. Department of State, U.S. Embassy, Abidjan, “Ivory Coast 1134.”

 32 Spore, “Cashew: Shell Up and Ship Out.”

 33 Spore, “Cashew: Shell Up and Ship Out.”

 34 African Cashew Alliance Newsletter, “New Processor Gets Cracking in Benin.”

2-11

in the global marketplace. The coordinated effort has created incentives to invest in the SSA

processing industry.

One broad private initiative, in particular, is having a significant effect on SSA cashew

exports of processed kernels. Olam International (Olam) is a Singapore-based multinational

firm at the forefront of cashew processing in the three main processing centers—India,

Vietnam, and Brazil. In addition to processing cashews in these three traditional processing

centers, Olam launched a multi-origin cashew processing initiative in the key producing

countries across Africa in 2003, including Tanzania, Mozambique, Nigeria, and Côte

d'Ivoire. The firm reportedly has plans to open facilities in Ghana and Guinea-Bissau. An

initiative in Mozambique will reportedly supply finance and technology to assist in

rebuilding its industry.29 The company has indicated that cashew processing in Africa is a

logical and integral step as a part of its overall cashew strategy, helping the company

enhance its margins through freight savings and strengthening its competitive position in the

industry.30 Olam’s investment in a cashew processing facility in Abidjan, Côte d’Ivoire, in

2003 contributed to a 37 percent increase in production there during 2003–05.31

Private investment initiatives and partnerships with African producers, such as those by

Olam, have been attributed in part to rising transportation costs that make processing at the

point of production an effective business strategy.32 Also, new EU sanitary standards

introduced in 2005 require traceability of foodstuffs back to the field where they were

grown. This places the responsibility for safety with EU importers, who now demand that

their suppliers guarantee product safety back to its origins. Additional country-specific

efforts to increase cashew exports are described below.

Benin

In Benin, building up the cashew industry is seen as a way to reduce dependence on cotton.

Farmers are being trained to grow cashews, and a guarantee fund has been established to

help processors obtain loans from microfinance institutions. Since 2003, six small shelling

units have opened.33 In the first large, private cashew project in the past thirty years,

Afokantan Benin Cashew SA, with a capacity to shell 1,500–2,000 mt of raw cashews,

started processing Beninese cashew nuts in September 2006 under the brand name ‘Pride of

Africa Benin!’ This initiative was started with the help of PSOM, an investment program of

the Dutch government.34
 35 Ibid., “Ghana goes for cashew production,” www.africancashewalliance.com

 36 Ibid., “Sectoral activity,” www.africancashewalliance.com.

 37 Wakabi, “African Cashews to Indian Factories.”

 38 Nouwligbeto, “African Cashew Nuts in a Harsh World.”

 39 U.S. Department of State, U.S. Embassy, Dakar, “Guinea-Bissau 2418B.”

 40 Ibid.

 41 U.S. Department of State, U.S. Embassy, Nairobi, “Kenya 4230A.”

 42 Ibid.

 43 USDA, FAO, FAOstat database.

2-12

Ghana

A six-year African Development Bank-sponsored project on behalf of the government of

Ghana aims to increase raw and processed cashew production.35 The Cashew Processors and

Exporters Association of Ghana is active in promoting an organized national marketing

scheme.36 Five new processing plants are being established in Ghana.37

Guinea-Bissau

In Guinea-Bissau, the processing sector is limited; but it is improving its efficiency, quality,

and international marketing with support from USAID contracts, the NGO EnterpriseWorks,

and participation in the African Cashew Alliance. As recently as 2003, there were no

processing plants operating. 38 However, home-based processing is now common and is seen

as an activity suitable for small- or domestic-scale producers. A U.S. company, ROTA, and

its processing division, Crown Cashew, are active in Guinea-Bissau in buying, shelling, and

distributing cashews, particularly organic cashews, to the U.S. market. The firm ships nuts

from its small cooperatives of cashew processors and from two larger-scale shellers, SiCajou

and Agri-Bissau.39 In addition, since 2000 technical and credit assistance from Fundei, a

local foundation, has been tapped to establish several processing plants with a total capacity

of 5,000 mt.40 Sicaju, with a capacity of 1,000 mt, produces for the export market. Two other

plants, Emicor and Djonde Lda mainly produce for the domestic and regional markets,

although both facilities occasionally export their product through ROTA International and

Global Trading.

Kenya

A four-year, $7.5 million program to enhance the competitiveness of the Kenyan horticulture

sector was launched in 2003 by USAID-Kenya and implemented by Fintrac Inc. About 5,000

cashew nut farmers along coastal Kenya have received training in better tree management,

and to date, yields for about 250 producer groups have increased from 3kg to 15kg per tree.

As a result of this program, Kenya is expected to increase its cashew kernel exports to the

United States.41 Kenya’s Ministry of Agriculture and the Kenyan Agricultural Research

Institute have also funded programs to help cashew farmers meet EurepGAP standards,

allowing them to remain in the EU market.42

Mozambique

Civil war in Mozambique during 1982–92 sharply cut production levels to below 25,000 mt.

Production has gradually increased since then, reaching 58,000 mt in 2005.43 The

Mozambique Nut Processors Association, a business trade association, is currently working
 44 African Cashew Alliance, “ACA Memorandum of Understanding Signed.”

www.africancashewalliance.com.

 45 Interview by Commission staff, Dar es Salaam, Tanzania, December 8, 2006.

 46 USAID Mission to Tanzania, “U.S. Ambassador Wants to Increase Cashew Processing and Exports.”

 47 Interview by Commission staff, Dar es Salaam, Tanzania, December 8, 2006.

2-13

with internationally based organizations and cashew alliances as well as with the

Mozambique government to define and implement a competitive growth strategy for the

industry.44 In June 2005, USAID announced that newly branded ‘Zambique’ cashew nuts

from Mozambique would be shipped to the United States. In 2006, fourteen processing

plants with a combined annual capacity of 40,000 mt were operating, and 20,000 mt of

cashew kernels were processed.45

Tanzania

In 2005 the government of Tanzania and the cashew nut producers of Tanzania developed

and executed a joint Memorandum Of Understanding (MOU) that contained an incentive

package of reduced government taxes and levies and a commitment from the processors to

expand domestic processing.46 USAID provided $393,000 to facilitate the effort. The MOU's

goal is to increase processing in Tanzania by 10,000 mt per year over five years, resulting

in 30,000 additional jobs and over $10 million in increased export earnings. The Cashew

Board of Tanzania has recently overseen the reopening of four processing plants, three of

which account for 80 percent of Tanzania’s kernel exports.47 Two of these were acquired by

a private company, Micronix Systems Limited. Another, the Masasi Cashewnut Factory, is

owned by an association of cashew processors.
2-14

Cashews Bibliography

African Cashew Alliance. “ACA Memorandum of Understanding Signed.”

http://www.africancashewalliance.com/content/view/7/1/lang,en/ (accessed December 15, 2006).

African Cashew Alliance Newsletter. “Tanzania Leads the Way in Increasing Cashew Producer Income.”

Issue 2, November 2006. www.africancashewalliance.com/content/blogcategory/2/2/lang,en

(accessed December 15, 2006).

African Cashew Alliance Newsletter. “Price Trends.” Issue 2, November 2006. 

www.africancashewalliance.com/content/blogcategory/2/2/lang,en (accessed December 15, 2006).

African Cashew Alliance Newsletter. “Export of Raw Cashews in Guinea-Bissau.” Issue 1, August 15,

2006. www.africancashewalliance.com/content/blogcategory/2/2/lang,en (accessed November 23,

2006).

African Cashew Alliance Newsletter. “New Processor Gets Cracking in Benin.” Issue 1, August 15, 2006.

www.africancashewalliance.com/content/view/2/1/lang,en (accessed August 15, 2006).

Azam-Ali, S. H. and E. C. Judge. Small-scale Cashew Nut Processing. Food and Agriculture

Organization of the United Nations, 2004.

www.fao.org/inpho/content/documents/vlibrary/ac306e/ac306e00.htm (accessed

November 13, 2006).

Business Ethics Online, “Olam and TechnoServe Form Partnership to Develop a Sustainable Cashew

Industry in Africa, February 25, 2005.” Press Release.

http://www.csrwire.com/synd/business-ethics/article.cgi/3565.html (accessed February 21, 2007). 

Cramer, Christopher. “Can Africa Industrialize by Processing Primary Commodities? The Case of

Mozambican Cashew Nuts.” World Development. Elsevier, vol. 27(7), 1247–1266, July.

Enterpriseworks. “Cashew Processing.” www.vita.org/PDFs/Cashews_073003.pdf (accessed 

October 12, 2006).

Food and Agriculture Organization of the United Nations (FAO). FAOSTAT. 

http://faostat.fao.org/site/567/default.aspx (accessed November 14, 2006).

Global Trade Information System, Inc. (GTIS). Global Trade Atlas. Annual data compiled from reporting

countries’ official statistics, including EU25 external trade. http://www.gtis.com/gta/usitc

(accessed various dates).

Kanji, Nazneen, Carin Vijfhuizen, Luis Artur, and Carla Braga. “Liberalization, Gender and Livelihoods:

The Mozambique Cashew Nut Case.” Eduardo Mondlane University and International Institute

for Environment and Development, Maputo, Mozambique: March 2004. 

Mitchell, Donald. “Tanzania’s Cashew Sector: Constraints and Challenges in a Global Environment.”

Africa Region Working Paper Series, No. 70, World Bank Group. June 2004.
2-15

Nouwligbeto, Fernand Dansi. “African cashew nuts in a harsh world.” The Courier ACP-EU. No. 196,

January–February 2003.

www.ec.europa.eu/comm/development/body/publications/courier/courier196/en/en_045.pdf

(accessed August 24, 2006).

Sijaona, M.E.R. “United Republic of Tanzania, Assessment of the Situation and Development Prospects

for the Cashew Nut Sector.” International Trade Center UNCTAD/WTO. July 2002.

Spore. “Cashew: Shell up and ship out.” Technical Centre for Agriculture and Rural Cooperations (CTA) 

- ACP-EU Cotonou Agreement. Issue 123. June 2006.

Technoserve. “Tanzania Cashew Industry: Briefing for Donor Partners’ Group Agriculture Group.”

Powerpoint presentation, December 7, 2006.

The Nut Factory. “The Story of Cashews.” http://www.thenutfactory.com (accessed August 21, 2006).

United States Agency for International Development, Mission to Tanzania, “U.S. Ambassador Wants to

Increase Cashew Processing and Exports.” Press Release, November 1, 2005.

United States Department of State. Cable. Guinea-Bissau 2418A.

———. U.S. Embassy, Guinea-Bissau 2418B.

 ———. U.S. Embassy. Ivory Coast 1134.

 ———. U.S. Embassy. Kenya 4230A.

Vietnam News: The Online English Daily. “Cashew Industry to Crack Targets.” Vol. VI, no. 1998,

 February 28, 2004.

Waithaka, J.H.G. “Kenya, Assessment of the Situation and Development Prospects for the Cashew Nut

Sector.” International Trade Center UNCTAD/WTO. July 2002.

Wakabi, Wairagala. “African Cashews to Indian Factories: How the Continent Exports its Profits and

Jobs.” The EastAfrican. December 20, 2004.
 48 GTIS, Global Trade Atlas.

 49 ICCO, Calculated based on grindings of cocoa beans using a conversion factor of two-thirds.

 50 Chocolate & Confectionery International, “Chinese Acquiring a Taste for Ivorian Cocoa”; and

Chocolate & Confectionery International, “China Holds Key to Cocoa Prices.”

 51 USDA, FAO, FAOstat database.

2-16

Cocoa Butter and Paste

Summary of Findings

SSA exports of cocoa butter and paste increased by 117 percent in value during 2001–05,

reaching $808 million (table 2-3), while global exports increased by 133 percent to

$2.4 billion.48 The SSA increase resulted from a combination of a general increase in the unit

value of exports and an increase in the quantity exported from Côte d’Ivoire and Nigeria

during the period. Contributing to SSA’s ability to export cocoa butter and paste is the fact

that SSA is the world’s leading producer of cocoa beans, the raw material used in the

production of these intermediate products. However, SSA accounts for a substantially

smaller share of global production of cocoa butter and paste (14 percent) than of cocoa beans

(70 percent).49 SSA countries historically export a large share of raw cocoa beans to grinding

facilities in consumer markets such as the EU and the United States and grind a smaller share

domestically, producing cocoa butter and paste for export.

Growth in consumer demand for chocolate in the major consuming markets, Europe and the

United States, was a factor contributing to increased SSA exports of cocoa butter and paste

during the period under review. In addition, rising income and population levels bolstered

the demand for cocoa products in nontraditional markets, particularly in Asia.50 In response

to higher demand, major global producers increased regional production to serve expanding

global markets for intermediate cocoa products. Furthermore, SSA cocoa processing capacity

benefitted from government efforts to increase downstream processing. A combination of

other factors, including the availability of raw cocoa beans, government policies, labor

issues, and civil strife, also affected SSA exports of cocoa butter and paste.

Industry Overview

The availability of a large and steady supply of cocoa beans has contributed to the

development of a cocoa processing industry in the SSA region. SSA dominates the world in

terms of land area devoted to growing cocoa beans. During 2001–05, SSA accounted for

approximately 70 percent of the global area harvested for cocoa beans, or roughly 5 million

hectares.51 Ghana (2 million hectares), Côte d’Ivoire (1.8 million hectares), Nigeria

(1 million hectares), and Cameroon (400,000 hectares) are the leading SSA producers of

cocoa beans. The area harvested, as well as yields, increased during the period under review.

As a result, additional supplies were exported as raw cocoa beans or processed and exported

as cocoa butter and paste (box 2-2).

In addition to increased acreage, weather and productivity can affect cocoa bean production.

Weather can cause significant year-to-year variation. However, increased use of better
2-17

Table 2-3 Sub-Saharan Africa exports of cocoa butter and cocoa paste, by selected exporters and key markets, 2001–05

Exporters Key markets

Exports

2001 2002 2003 2004 2005

Percent

change

2001–05

Côte

d’Ivoire

EU 1,000 dollars 206,904 344,565 463,049 431,150 424,883 105

Metric tons 140,998 149,051 156,528 162,923 172,819 23

USA 1,000 dollars 8,605 18,119 36,243 46,833 67,699 687

Metric tons 8,336 8,820 14,280 22,978 28,340 240

Canada 1,000 dollars 2,716 6,990 23,162 28,344 37,796 1,292

Metric tons 1,787 3,165 8,340 10,004 12,206 583

All other 1,000 dollars 36,953 63,105 65,277 85,031 93,768 154

Metric tons 25,051 27,649 22,476 31,314 34,624 38

Total 1,000 dollars 255,177 432,781 587,730 591,359 624,145 145

Metric tons 176,172 188,685 201,264 227,219 247,989 41

Ghana

EU 1,000 dollars 38,833 45,744 53,815 87,468 71,157 83

Metric tons 35,456 27,907 21,727 33,069 33,753 -5

USA 1,000 dollars 13,965 12,636 6,072 9,983 9,361 -33

Metric tons 8,849 7,915 2,881 4,614 4,587 -48

Russia 1,000 dollars 5,066 6,726 5,664 4,804 3,493 -31

Metric tons 3,659 3,371 2,853 2,383 1,836 -50

All other 1,000 dollars 5,542 15,248 7,834 9,376 14,882 169

Metric tons 3,814 6,614 2,900 3,377 6,136 61

Total 1,000 dollars 63,405 80,355 73,385 111,632 98,893 56

Metric tons 51,778 45,807 30,361 43,443 46,312 -11

Cameroon

EU 1,000 dollars 33,803 34,546 29,449 25,887 22,272 -34

Metric tons 24,556 16,173 10,622 10,328 9,516 -61

USA 1,000 dollars 1,191 13,669 18,002 12,826 15,778 1,225

Metric tons 948 5,925 7,202 5,973 7,180 657

Canada 1,000 dollars 0 0 0 446 906 n/a

Metric tons 0 0 0 125 281 n/a

All other 1,000 dollars 11 0 75 0 0 -100

Metric tons 10 0 50 0 1 -90

Total 1,000 dollars 35,005 48,215 47,526 39,158 38,956 11

Metric tons 25,514 22,098 17,874 16,426 16,978 -33

Nigeria

EU 1,000 dollars 12,217 17,753 27,669 29,546 33,132 171

Metric tons 7,633 7,394 8,907 9,680 11,653 53

South

Africa

1,000 dollars 999 676 1,042 1,266 1,913 91

Metric tons 242 240 304 258 420 74

Ukraine 1,000 dollars 0 154 156 388 469 n/a

Metric tons 0 75 80 134 186 n/a

All other 1,000 dollars 1,281 3,590 3,151 1,496 197 -85

Metric tons 815 1,785 1,362 646 103 -87

Total 1,000 dollars 14,496 22,173 32,018 32,696 35,710 146

Metric tons 8,690 9,494 10,653 10,718 12,362 42

SubSaharan

Africa

Total

1,000 dollars 372,535 604,433 767,314 794,843 807,571 117

Metric tons 264,777 274,202 269,926 305,334 327,197 24

Source: GTIS, Global Trade Atlas, annual data compiled from reporting countries’ official statistics, including EU external trade.
 52 ICCO, “Information on the Effects of Liberalisation on Ivory Coast’s Cocoa Market”; and Chocolate &

Confectionery International, “Grower export co-ops encouraged in Ivory Coast.”

 53 U.S. Department of State, Embassy, Abidjan, “Côte d’Ivoire: Cocoa Producers Go On Strike.”

2-18

production technologies such as fertilizer, insecticides, fungicides, plant varieties, and

improved postharvest handling of cocoa beans have improved yields (table 2-4). Despite the

improvement in productivity, yields in SSA substantially trail yields in Indonesia

(1,245 metric tons/hectare), a major world competitor.

Cocoa bean production in SSA is characterized by a large number of small-scale farmers

(table 2-5). Traditionally, these small holder farmers have not been well organized, which

limits their bargaining position in markets dominated by large multinational buyers.52

However, some farmers are organized into producer groups or cooperatives in order to

bargain with cocoa buyers, and efforts are underway to improve the organization of SSA

cocoa farmers. Ivorian cocoa farmers conducted a strike in October 2006, in part to demand

higher cocoa bean prices.53

Table 2-4 Sub-Saharan Africa cocoa bean yields, by major producers, 2001–05

Country 2001 2002 2003 2004 2005

Metric tons per hectare

Côte d’Ivoire 711 744 751 782 757

Ghana 289 285 331 369 400

Cameroon 330 338 413 445 446

Nigeria 352 351 384 388 415

Source: FAO.

Box 2-2 Product Description for Cocoa Butter and Paste

Cocoa butter and paste are derived from the beans of the cocoa tree (Theobroma cacao). Cocoa trees generally grow

in tropical climates throughout the world between 20 degrees north and 20 degrees south of the equator.1 Cocoa

beans are contained inside pods that grow on the trees. The pods are harvested and opened and the beans are

removed, cleaned, fermented, and dried. The beans are then roasted, ground, and screened to produce cocoa nibs.

The nibs are milled to produce cocoa liquor, which consists of cocoa particles and cocoa butter. The cocoa liquor can

then be pressed to extract the cocoa butter. The solid mass that remains is cocoa paste, which is also referred to as

cocoa presscake. The cocoa butter content of the paste varies according to customer specification. The paste can

be further processed to produce cocoa powder. Cocoa butter and cocoa paste are intermediate products and are used

mainly in the production of candy and confectionery products, baked goods, beverages, and cosmetics.

_________________

1

 UNCTAD, http://r0.unctad.org/infocomm/anglais/cocoa/characteristics.htm.
 54 ICCO, “Which are the top cocoa processing companies and how much cocoa do they grind?”

 55 GTIS, Global Trade Atlas.

2-19

Table 2-5 Small-scale cocoa growers: Number of small-scale cocoa bean growers, global share of small-scale

growers, and global share of production, by SSA country

Region

Number of 

small-scale

growersa

Share of global

small-scale

growers

Share of global production 

1998 2005

Millions Percent

Côte d’Ivoire 3.6 26 36 34

Ghana 3.2 23 12 16

Cameroon 1.6 11 4 5

Nigeria 1.2 9 11 12

Other sub-Saharan Africa 0.9 6 3 2

Total sub-Saharan Africa 10.5 75 66 70

Global total 14.0 100 100 100

Source: Lattre-Gasquet, Despreaux, and Barel, obtained from ICCO and FAO.

a

Farms with fewer than 10 hectares, with cocoa as the main activity. Data are for 1998 but are not believed to

have changed significantly.

Raw cocoa bean processing in the region is dominated by a relatively small number of

companies operating one or a few plants in each country. A substantial share of SSA cocoa

butter and paste production capacity is accounted for by subsidiaries of U.S. and EU firms,

principally Archer Daniels Midland, Cargill, and Barry/Callebaut. These firms are the top

three cocoa processors in the world.54 The industry is heavily dependent on export markets,

as domestic consumption of cocoa products in SSA countries is small (about 2 percent of the

global total). 

Sub-Saharan Africa Trade in the Global Context 

Global trade in cocoa butter and paste totaled $2.4 billion in 2005.55 Major exporters of

cocoa butter and paste, with the exception of the Netherlands and the United States, are also

major producers of cocoa beans. The Netherlands and the United States are major consumers

of cocoa products and import raw cocoa beans for processing. A fraction of their cocoa

product production is also exported.

Many of the major markets for cocoa butter and paste have extensive cocoa products

industries that rely on imported inputs to produce chocolate and confectionery products, as

well as large, relatively affluent populations that consume these finished products. Most

chocolate and confectionery manufacturers obtain cocoa products from a variety of sources

and blend them in order to maintain a consistent final product.
 56 GTIS, Global Trade Atlas.

2-20

Leading Exporters

The primary global exporters of cocoa butter and paste in 2005 were Côte d’Ivoire,

Malaysia, the Netherlands, Indonesia, Brazil, Ghana, and the United States (figure 2-3).56 Of

the value of global cocoa butter and paste exports in 2005, Côte d’Ivoire accounted for

26 percent and Ghana accounted for 4 percent. As the world’s largest cocoa butter and paste

exporter, Côte d’Ivoire accounted for over three-quarters of the SSA export value in 2005,

followed by Ghana, Cameroon, and Nigeria (figure 2-3). Although the value of cocoa butter

and paste exports from each of these countries increased during 2001–05, most of the value

increase was accounted for by price increases. The volume of exports rose at a lower rate or,

in some cases, fell during the period.

Leading Export Markets

The leading global markets for cocoa butter and paste are the EU and the United States,

which together account for more than 50 percent of global imports (figure 2-4). These are

also the leading markets for SSA exports of cocoa butter and paste. These countries are

major producers of chocolate and confectionery products and import cocoa butter and paste

Figure 2-3 Leading global and sub-Saharan Africa exporters of cocoa butter and paste, 2005

SSA

34%

Malaysia

15%

Brazil

9%

Netherlands

9%

Indonesia

9%

United States

4%

Other

21%

Global Exporters

Côte d'lvoire

78%

Ghana

12%

Cameroon

5%

Nigeria

4%

Other

1%

SSA Exporters

Source: GTIS, Global Trade Atlas, annual data compiled from reporting countries’ official statistics, 

including EU external trade.

$2,428 million $808 million
2-21

to supplement their domestic production of cocoa butter and paste, which is manufactured

exclusively from imported cocoa beans. SSA exports to the EU are free of duty for both

butter and paste under the Lomé Convention. SSA exports to the United States are free of

duty under Generalized System of Preferences (GSP) provisions for some products and

under Most Favored Nation (MFN) duty-free rates for other products.

Côte d’Ivoire is, by far, the largest foreign supplier to the EU market, accounting for

47 percent of the value of extra-EU imports of cocoa butter and paste in 2005. EU imports

of these products from Côte d’Ivoire increased by 22 percent in quantity and doubled in

value during 2001–05. Ghana was the fourth-leading supplier in 2005, accounting for about

8 percent of the total value that year. In the U.S. market, Côte d’Ivoire was the third-leading

supplier in 2005 (14 percent of the total value), while Ghana was a relatively minor supplier

(about 2 percent). Côte d’Ivoire was the second-leading import supplier to Canada,

accounting for about 22 percent of the total value, and the third-leading supplier to the

Russian market, accounting for 16 percent of the total in 2005. Other SSA countries were

minor suppliers in both markets. For the key markets, the following tabulation identifies the

leading competitors for SSA exports.

EU

37%

United States

20%

Canada

7%

Russia

6%

Other

30%

Global Export Markets

EU

68%

United States

11% Canada

5%

Russia

3%

Other

12%

SSA Export Markets

Figure 2-4 Leading markets for global and sub-Saharan Africa exports of cocoa butter and 

paste, 2005

Source: GTIS, Global Trade Atlas, annual data compiled from reporting countries’ official statistics,

including EU external trade.

$2,428 million $808 million
 57 The long-term price elasticity of demand for cocoa in major consuming markets has been estimated to

range between 0.2 and 0.4, and the income elasticity of demand between 0.3 and 0.9. ICCO, “What is the

price elasticity of demand for cocoa?” The long-term income elasticity of demand for chocolate in major

consuming markets has been estimated to range between .08 and 1. ICCO, “Income Elasticity of Chocolate.”

The lower value is for Japan.

 58 Chocolate & Confectionery International, “Chocolate & Confectionery 2006: Review of the Year.”

 59 See, for example, Chocolate Manufacturers Association, “Nutritional Information.”

2-22

Market SSA competitor

EU EU domestic producers, Malaysia, Indonesia, and Brazil

United States U.S. domestic producers, Malaysia, Brazil, Indonesia, and China

Canada Canadian domestic producers, United States, and Brazil

Russia Russian domestic producers, EU, Malaysia, and Ukraine

Factors Affecting Trade Patterns

Increased prices associated with growth in global demand drove up export unit values and

was the primary factor affecting the increased value of SSA cocoa butter and paste exports.

The volume of SSA exports also showed a healthy increase during the period. The volume

of cocoa butter and paste exports, however, is dependent upon a number of factors, including

the level of domestic cocoa bean production and the portion of domestic cocoa bean

production that is exported versus that which is processed regionally. In turn, the quantity

of cocoa butter and paste exports is influenced by the growth and utilization of SSA

processing capacity and the variations in the supply of cocoa beans available for processing.

Foremost among the factors affecting the supply of cocoa beans available for processing are

climatic and soil conditions in SSA, especially West Africa. Other factors include

government policies, infrastructure, product quality, productivity, civil strife, labor issues,

and development policies. To varying degrees, all of these have affected the structure of

industry in SSA countries and, therefore, have also affected the proportion of beans that are

processed in the region.

Demand Growth and Price Increases

Demand factors were similar for all SSA suppliers during the period. Cocoa and cocoa

products are relatively high-priced luxury goods, the demand for which is affected more by

income than by price.57 Factors that contributed to increased demand during 2001–05

included rising populations and incomes in both the large, mature markets (Europe and the

United States) and emerging markets (mainly in Asia).58 The rising demand for high-quality,

high-cocoa-content chocolate products also likely had a positive impact on SSA exports of

cocoa butter and paste. Several recent studies have concluded that the consumption of certain

cocoa products provides health benefits, which also may have affected the demand for cocoa

butter and paste.59 The impact of consumer health issues during the period was mixed, as
 60 Chocolate & Confectionery International, “Chocolate & Confectionery 2006: Review of the Year.”

 61 USDA, FAO, FAOstat database.

 62 Ibid.

 63 ICCO. Based on cocoa bean grindings, with a conversion rate of two-thirds.

2-23

concerns regarding obesity had a negative effect and scientific evidence of health benefits

of cocoa had a positive impact.60

Increased global demand for chocolate contributed to a strong general increase in market

prices for cocoa butter and paste during 2001–05. During this period, the price of cocoa

beans and cocoa paste peaked in 2002 before decreasing, albeit to levels in 2005 that were

still 26-52 percent higher than in 2001 in certain markets. This fluctuation mainly reflected

supply disruptions associated with civil strife in Côte d’Ivoire. The price of cocoa butter

increased throughout the period, nearly doubling in a number of key markets.

Prices affect the SSA cocoa production sector mainly in terms of returns to farmers, which

affect the availability of raw cocoa bean supplies, costs to cocoa processors for raw

materials; and returns to cocoa processors. Increased returns to farmers appear to have

contributed to increased production of raw cocoa beans. SSA accounts for approximately

70 percent of the global area harvested for cocoa beans, or roughly 5 million hectares, up

from about 4.5 million hectares during the period under review.61 Consequently, production

in the four primary producing countries increased from 2.1 million mt to 2.5 million mt

during 2001–05.62 Because of low local demand for chocolate and cocoa products, the

additional production must be either exported as raw cocoa beans or processed and exported

as cocoa butter and paste.

Increased Investment

SSA cocoa processing capacity has increased recently, with additional expansions on the

horizon (table 2-6). Increasing prices for cocoa products likely stimulated much of the new

investment in SSA cocoa processing facilities, as major multinational processors expanded

output to meet rising global demand for cocoa products.

However, increased processing capacity did not result in a greater portion of cocoa beans

being processed regionally. Côte d’Ivoire ground about 27 percent of its raw bean production

and Ghana ground 13 percent in 2005. The share of total SSA raw cocoa bean production

processed in the region ranged from 18 to 21 percent during 2001–05. During this time, SSA

production of cocoa butter and paste increased from 276,000 mt in 2001 to 315,000 mt in

2005, or by 14 percent.63 Despite increased regional production of cocoa butter and paste,

SSA’s share of global cocoa butter and paste production remained at about 14 percent

annually during the period.

Production decisions of the multinational cocoa processing companies are another factor that

affects the proportion of cocoa beans exported raw versus being processed domestically and

exported as cocoa butter and paste. Processors own plants within the SSA region, as well as

outside the region; therefore, company decisions concerning where to process cocoa beans

affect the quantity of beans processed regionally and thus have a direct impact on the

quantity of cocoa butter and paste available for export. For example, in Côte d’Ivoire
 64 U.S. Department of State, Embassy, Abidjan, “Côte d’Ivoire: Cocoa Producers Go On Strike.”

 65 USDA, FAS, “Côte d’Ivoire, Cocoa, New Marketing For Cocoa and Coffee, 2001,” 2.

 66 The tax is 220 francs (about $0.45) per kilogram for cocoa beans and 210 francs (about $0.43) per

kilogram for cocoa paste and butter. Bourse due Café et du Cacao, available at http://www.bcc.ci/dus.asp.

Retrieved February 20, 2007.

2-24

Table 2-6 Sub-Saharan Africa: Number and capacity of cocoa processing plants, by selected country and firm

Country Firm

Number of

plants

Number of

employees

Capacity 

Current Planned

Metric tons, raw basis

Côte d’Ivoire Cargill 1 450 120,000 (a)

Saco (Barry/Callebaut) 3 300 (a

) (a)

Unicao (ADM Cacao) 1 (a

) (a) (a)

Cemoi (Cantalou) 1 200 (a

) (a)

Pronibes 1 (a

) (a) (a)

Ghana Barry Callebaut 1 (a) 60,000 (a)

Cocoa Processing Co. 1 569 30,000 65,000

West African Mills 1 341 75,000 (a

)

Afrotropic Cocoa Processing 1 (a

) 15,000 45,000

Cargill 1 (a

) 60,000 120,000

Rakhat 1 (a

) (a) 50,000

Nigeria Cocoa Industries Ltd. 1 (a

) 30,000 (a)

Ile-Oluji Cocoa Prod. Co. Ltd. 1 (a

) 30,000 (a)

Fantastic Traders 1 (a

) 15,000 (a)

Stanmark Cocoa Proc. Col Ltd. 1 (a

) 10,000 (a)

Multi-Trex Co. 1 (a

) 10,000 (a)

Source: ICCO, Cargill, Barry/Callebaut, Orbis.

a

Information not available or not applicable.

multinational buyers purchase over 70 percent of the cocoa bean production, but export most

of these in raw form to be processed elsewhere.64

Policies to Promote the Industry

Côte d’Ivoire

Côte d’Ivoire liberalized its cocoa sector in the late 1990s as part of an IMF/World Bank

structural adjustment program.65 Government involvement in the cocoa sector currently is

coordinated by the Cocoa and Coffee Regulatory Authority (ARCC) and the Bourse du Café

et du Cacao (BCC). The ARCC approves cocoa bean buyers and exporters. The BCC

establishes minimum growers’ prices and prices for the collection and transport of cocoa

beans and allocates export rights. The government also imposes the Droit Unique de Sortie,

an export tax on cocoa products.66
 67 USDA, FAS, “Ghana, Cocoa, Annual Report, 2005,” 6.

 68 ICCO, “Information on How the Marketing of Cocoa is Organised in Nigeria.”

 69 USDA, FAS, “Nigeria, Market Development Reports, Nigeria’s Cocoa Processing Industry, 2007,” 4.

 70 Ibid. The reported annual capacity was more than 220,000 mt.

 71 USDA, FAS, “Nigeria, Market Development Reports, Nigeria’s Cocoa Processing Industry, 2007,” 6.

 72 Ibid.

 73 Ibid., 5.

 74 Ibid.

2-25

Ghana

Among the major SSA producers, Ghana has the most extensive government involvement

in the cocoa industry. The Ghana Cocoa Board’s (COCOBOD) activities include research

and development, setting quality grading standards, quality certification, and regulating

internal cocoa marketing, and exports. All of these activities directly or indirectly affect

Ghana’s exports of cocoa butter and paste. COCOBOD sets prices for farmers and finances

cocoa bean purchases with syndicated loans.67 A loan of $850 million for the 2004/05

marketing year was secured from a group of thirty-two banks. Such loans have been secured

for twelve consecutive years. There were twenty-two private-sector Licensed Buying

Companies in 2003/04. The Ghanaian government has also established the Cocoa Research

Institute of Ghana to conduct scientific research and development regarding such issues as

hybrid plants, pest and disease control, and the development of new cocoa products.

Nigeria

Government involvement in the Nigerian cocoa industry is concentrated in the processing

sector. The Nigerian cocoa industry was liberalized in 1986, which led to a decline in the

quality of cocoa beans, and in the reliability of supplier-buyer contracts.68 This encouraged

the entry of European trading houses to buy cocoa beans.69 In addition, market liberalization

contributed to the closure of most of the twenty cocoa processing facilities that were

operating at the time.70

The government of Nigeria grants export rebates and tax exemptions to cocoa processors.

The Export Expansion Grant (EEG) encourages local cocoa processing by providing a

5 percent export tax rebate for purchase of cocoa beans and a 30 percent export tax rebate

for processed cocoa products. Cocoa processors also are eligible for Export Processing

Factory status that provides exemptions from taxes and levies by federal, state, and local

governments. Investors reportedly have been purchasing and leasing idle cocoa processing

facilities as a result of the EEG.71 The number of active cocoa processing facilities has

increased from one to six since the EEG was introduced in 2002.72

Other government involvement includes support to farmers to encourage the use of

agricultural inputs and improved plant varieties and the development of new products. The

National Cocoa Development Project is attempting to replace existing cocoa plants with

improved, early-bearing, and disease-resistant varieties with the intent to double cocoa bean

production in the near term.73 The program reportedly has been ineffective due to the

reluctance of farmers to bear the initial planting costs and interruption in production.

The Cocoa Research Institute develops new cocoa products and provides assistance in

marketing and patenting these products.74 The government also may offer cocoa products in
 75 Ibid.

 76 Ibid.

 77 International Institute of Tropical Agriculture, Child Labor in the Cocoa Sector of West Africa; and

Cargill, “Cocoa Industry Labor.” 

 78 Chocolate Manufacturers Association, “Protocol for the Growing and Processing of Cocoa Beans.”

 79 Fairtrade Labeling Organizations International, “Cocoa”; and FairTrade USA, “Producer Profiles.” 

 80 U.S. Department of State, "Côte D'Ivoire: Cocoa Producers Go On Strike, Paralyzing Exports."

 81 Chocolate & Confectionery International, “Ivory Coast Security Concerns Prompt Price Spike”;

Chocolate & Confectionery International, “Barry Callebaut Keen on Ghanaian Expansion”; Chocolate &

Confectionery International, “Cargill to Construct Cocoa Processing Facility in Ghana”; and Barry Callebaut,

Annual Report 2004/05, 24.

 82 Barry Callebaut, Annual Report 2005/06, 26.

 83 Cargill, “Cargill to Build Cocoa Processing Facility in Ghana.”

2-26

its Universal Basic Education program, a nutrition program for school children.75 This policy

could increase local demand for cocoa products. In addition, the Cocoa Association of

Nigeria, a trade group, is involved with local promotion of cocoa products.76

Labor

Labor issues regarding cocoa bean production, especially child labor and fair returns to

farmers, have been a concern in the SSA cocoa industry in recent years. Child labor has been

an issue in SSA cocoa production for some time, and efforts have been made recently to

identify and rectify the use of children in cocoa production.77 The Harkin-Engel protocol

provided a framework to address this issue, including the establishment of the International

Cocoa Initiative and a certification system.78 The issue of fair returns to cocoa farmers has

been addressed by the establishment of a Fair Trade Certification Program.79 This program

guarantees a minimum price for participating growers. To date, two cocoa farm cooperatives

in Côte d’Ivoire and one in Ghana participate in the program. Demands by farmers for higher

returns led to a short-lived strike in Côte d’Ivoire in October 2006.80

Civil Strife

Recent civil strife in Côte d’Ivoire has affected the regional cocoa industry. Uncertainty

regarding the reliability of raw cocoa bean supplies has contributed to volatility in raw cocoa

bean prices during the period under review. Cocoa processors are seeking to diversify

sourcing of cocoa beans. Investment in cocoa processing increased in neighboring Ghana

because Ghana is viewed as having a relatively more stable business environment.81 For

example, Barry Callebaut recently doubled the capacity of its plant in Ghana.82 Cargill also

recently announced it would build a new cocoa processing plant in Ghana with an initial

annual capacity of 60,000 mt, expandable to 120,000 mt annually.83
2-27

Cocoa Butter and Paste Bibliography

Barry Callebaut. Annual Report 2005/06. Zurich, Switzerland. December 2006.

Cargill. “Cargill to Build Cocoa Processing Facility in Ghana.” June 2, 2006.

http://www.cargill.com/news/news_releases/2006/060602_ghana.htm (accessed

January 26, 2007).

Cargill, “Cocoa Industry Labor” http://www.cargill.com/news/issues/cocoaindustry.htm.

Chocolate & Confectionery International. “Barry Callebaut Keen on Ghanaian Expansion.” Agra

Informa Ltd. January 15, 2006.

 ———. “Cargill to Construct Cocoa Processing Facility in Ghana.” Agra Informa Ltd.

September 14, 2006.

 ———. “China Holds Key to Cocoa Prices.” Agra Informa Ltd. July 20, 2006.

 ———. “Chinese Acquiring a Taste for Ivorian Cocoa.” Agra Informa Ltd. February 20, 2004.

 ———. “Chocolate & Confectionery 2006: Review of the Year.” Agra Informa Ltd. 2006.

———. “Ivory Coast Security Concerns Prompt Price Spike.” Agra Informa Ltd. January 26,

2006.

Chocolate Manufacturers Association. “Nutritional Information.” 

http://www.chocolateusa.org/Science-and-Nutrition/nutrition.asp (accessed January 26, 2007).

Chocolate Manufacturers Association. “Protocol for the Growing and Processing of Cocoa Bean

and Their Derivative Products in a Manner That Complies With ILO Convention 182 Concerning

the Prohibition and Immediate Action for the Elimination of the Worst Forms of Child Labor.”

http://harkin.senate.gov/specials/chocolate-protocol.pdf (accessed January 22, 2007).

Fairtrade Labeling Organizations International. “Cocoa.” http://www.fairtrade.net/cocoa.html.

FairTrade USA. “Producer Profiles.”

http://www.transfairusa.org/content/certification/producer_profiles.php.

Food & Agriculture Organization of the United Nations (FAO). FAOSTAT Agriculture Production Data,

2005. http://faostat.fao.org/site/340/default.aspx (accessed

November 10, 2006).

Food and Agriculture Organization of the United Nations (FAO). FAOSTAT Agriculture Production

Data, 2005. http://faostat.fao.org/site/567/default.aspx (accessed November 14, 2006).
2-28

Global Trade Information System, Inc. (GTIS). Global Trade Atlas. Annual data compiled from reporting

countries’ official statistics, including EU25 external trade. http://www.gtis.com/gta/usitc

(accessed various dates).

International Cocoa Organization (ICCO). Quarterly Bulletin of Cocoa Statistics. Various issues.

http://www.ttf.co.uk/forests/responsible/producer_country_fact_sheets.pdf (accessed

October 27, 2006).

International Institute of Tropical Agriculture, “Child Labor in the Cocoa Sector of West Africa:

A Synthesis of Findings in Cameroon, Côte d’Ivoire, Ghana, and Nigeria.” August 2002.

U.S. Department of Agriculture (USDA). Foreign Agricultural Service (FAS). "Côte d’Ivoire,

Cocoa, Cocoa, New Marketing System for Cocoa and Coffee.” Global Agriculture Information

Network (GAIN) Report No. IV 1013, October 18, 2001.

———. "Ghana, Cocoa Annual Report 2005.” Global Agriculture Information Network (GAIN)

Report No. GH 5003, October 18, 2005.

———. "Nigeria, Market Development Reports, Nigeria’s Cocoa Processing Industry, 2007.”

Global Agriculture Information Network (GAIN) Report No. NI 7001, January 5, 2007.

U.S. Department of State. U.S. Embassy, Abidjan. "Côte d'Ivoire: Cocoa Producers Go On Strike,

Paralyzing Exports (ABIDJA 01167)," October 18, 2006.
 84 GTIS, Global Trade Atlas.

2-29

Cut Flowers

Summary of Findings

SSA exporters of cut flowers have been able to expand production and exports, despite low

grower and retail prices, because of their position as low cost producers. SSA exporters have

been able to increase market share in the EU market because of their proximity to the EU

relative to other major exporters (Colombia and Ecuador) and tariff preferences.

SSA exports account for just over one-fifth of global exports of cut flowers by value. Nearly

all of these exports go to the EU (99 percent in 2005). Kenya, the largest SSA producer,

recently became the top foreign supplier to the EU market. During 2001–05, SSA exports

rose steadily, increasing 65 percent over the period, as other SSA countries in East and

Southern Africa attempted to replicate Kenya’s success in floriculture (table 2-7). Global

exports increased by 41 percent, from $1.7 billion in 2001 to more than $2.4 billion in

2005.84

Sub-Saharan Africa’s favorable climate and low wages provide a comparative advantage that

has facilitated development and growth of the industry. Furthermore, increased exports

during 2001–05 were facilitated by increased consumption in the EU as a result of low

prices. In addition, exports from new SSA suppliers were facilitated by improved distribution

chains for these highly perishable products, made possible through increasing investment

attracted by government incentives.

Industry Overview

Kenya’s floriculture industry was the first of the current SSA exporters to develop, and its

industry is now maturing. A dynamic private sector environment, fostered by government

policies, contributed to growth in Kenya. Other industries, such as those in Uganda,

Ethiopia, Zambia, Senegal, and Malawi, are newer and much smaller, but are experiencing

rapid rates of growth. These new industries are now competing for floriculture investment,

from both outside and inside Africa (mainly Kenya).

The cut flower industry in SSA generally consists of a modest number of medium-sized

firms, though some large firms do exist (box 2-3). Most firms have fewer than 20 hectares

under cultivation, but large firms may cultivate up to 200 hectares of flowers. The industry

as a whole is a large employer, and while most medium-sized firms employ less than 250

persons, large firms can employ up to 6,000 people. Large firms are generally integrated,

with growing, packing, and shipping operations, while smaller firms tend to sell harvested

flowers directly to exporters. Most firms are domestically owned, but foreign investment is

increasing. The industry structures in the primary SSA exporters is described below.
2-30

Table 2-7 Sub-Saharan Africa cut flower exports, by selected exporters and key markets, 2001–05

Exporters Key markets

Exports

2001 2002 2003 2004 2005

Percent

change

2001–05

1,000 dollars

Kenya

EU 160,672 186,023 236,758 294,360 331,896 107

Switzerland 4,826 6,443 7,332 9,310 15,722 226

Japan 1,964 1,879 2,291 3,678 5,512 181

All other 1,920 1,411 2,259 3,267 4,617 140

Total 169,382 195,756 248,639 310,615 357,747 111

Uganda

EU 11,555 14,626 19,865 25,907 27,831 141

Norway 562 372 200 477 1,432 155

South Africa 0 1 4 19 23 n/a

All other 6 11 4 1 7 17

Total 12,124 15,010 20,073 26,404 29,293 142

South

Africa

EU 9,926 11,425 16,895 21,928 21,968 121

Japan 1,930 2,127 2,351 2,720 2,550 32

USA 1,058 866 833 883 1,064 1

All other 5,542 4,514 3,554 2,632 2,266 -59

Total 18,455 18,931 23,632 28,163 27,848 51

Ethiopia

EU 883 1,307 380 6,536 11,989 (a

)

Norway 3 622 1,434 473 748 (a

)

Russia 0 0 0 0 171 (a

)

All other 110 10 51 3 32 -71

Total 996 1,939 5,234 7,012 12,849 (a

)

SubSaharan

Africa

Total 313,015 342,474 412,217 473,154 520,414 66

Source: GTIS, Global Trade Atlas, annual data compiled from reporting countries’ official statistics, including EU external trade.

a

Percent change was greater than 1,000 percent.

Box 2-3 Product Description for Cut Flowers

Cut flowers are an internationally traded, high-value commodity. World-wide retail trade is worth over $25 billion

annually. Twenty to thirty types of cut flowers account for the vast majority of international sales. Roses are by far

the most traded, but carnations, chrysanthemums, tulips, lilies, and anthurium are also important. Within each flower

type multiple varieties exist, and new types are continually developed. In addition to typical aesthetic qualities, novelty

is an extremely important factor in the successful marketing of new varieties, as the cut flower industry is essentially

a fashion industry.

Although, as a category, cut flowers are highly perishable, certain varieties are relatively hardy and these varieties

are traded internationally in large volumes. Over time, improved air transport and special packaging also have

enhanced trade in cut flowers. Certain flowers are transported in flat boxes to minimize space, as air freight for cut

flowers is measured in volume, not weight. Other more fragile and higher-value flower types are shipped with

individual water holders on each stem end or in buckets of water.

Flowers take a number of routes to the consumer, depending on where they are grown and how they are to be sold.

Some growers cut and pack flowers at their nurseries, sending them directly out to the consumer by mail order. Some

flowers are sent to packing companies, who grade the flowers and arrange them in bunches for sale at retail outlets.

Some flowers are graded and sleeved by the growers and sold to wholesale markets; the wholesalers in turn sell

them to florists who sell completed arrangements to customers.
 85 U.S. Department of State, U.S. Embassy, Nairobi, “Kenya 4230B.”

 86 Kenya Export Promotion Council, “Kenya: Supply Survey on Horticultural Products.”

 87 Kenyan Export Processing Zones Authority, “Horticulture Industry in Kenya 2005.”

 88 Kenya Export Promotion Council, “Kenya: Supply Survey on Horticultural Products.”

 89 Ibid.

 90 Interview by Commission staff, Nairobi, Kenya, December 3, 2006.

 91 U.S. Department of State, U.S. Embassy, Nairobi, “Kenya 4230B.”

 92 Kenya Export Promotion Council, “Kenya: Supply Survey on Horticultural Products.”

 93 Ugandan Flower Exporters Association, “Uganda Provides Perfect Conditions for Cut Flower

Production.” 

 94 U.S. Department of State, U.S. Embassy, Kampala, “Uganda 146622.”

 95 Ibid.

2-31

Kenya

The Kenyan floriculture industry employs approximately 100,000 people directly and

500,000 in related services.85 There were approximately 2,000 hectares of cut flowers and

foliage in Kenya in 2004,86 almost all of which were dedicated to export. In 2005, flower

export earnings were second only to tea.87 The main growing area is Naivasha, several hours

drive from the airport in Nairobi. Flowers are also being grown in several more remote

regions. There are more than fifty types of flowers grown commercially in Kenya, but

exports are mainly roses (about 70-75 percent of exports), bouquets of mixed flowers (about

10 percent), and carnations (about 3 percent).88

Although there are approximately 140 companies in the industry, production is concentrated

on about twenty-five large- to medium-scale farms for nearly 75 percent of total exports.89

More than 90 percent of domestic production is shipped for export, and only small amounts

of flowers are sold by street vendors and florists in the urban centers of Nairobi and

Mombasa. Most exports are shipped by air on commercial airlines, but recently some

exporters have shipped flowers by sea out of the port of Mombasa.90

Kenyan exports grew 119 percent by value during 2001–05. Kenya supplies 31 percent of

overall EU demand for cut flowers and 25 percent of the EU market for roses.91 Increased

supplies of mixed-flower bouquets have been encouraged by Kenya’s growing direct trade

with supermarkets, particularly in the United Kingdom.92 Kenyan producers supply wrapped

bunches and ready-to-display bouquets, which are labeled and date-coded. Its major

customers are Marks and Spencer and Flamingo UK, which supplies other British

supermarkets. Kenyan producers also have a 25 percent market share in the European

supermarket chain Tesco.

Uganda

In 2005, cut flowers were Uganda’s eighth-largest export by value and amounted to

$35 million.93 Most flower farms are located near Kampala, near Lake Victoria and the

Entebbe Airport. There are nineteen farms on 240 hectares that annually export 7,200 tons

of roses and chrysanthemums and employ 6,000 people, mostly women.94 Industry estimates

indicate that 10,000 Ugandans will be employed by the flower sector by 2007.95 Uganda’s

soil and cool climate are well suited to flower production, and two rainy seasons per year

provide ample water for irrigation.
 96 Ugandan Flower Exporters Association, “Marketing: Auctions and Direct Sales.”

 97 FloraCulture International, “World Flower and Plant Production.”

 98 Tadesse, “Ethiopia Flower Exports to Challenge Coffee.”

 99 Ibid.

 100 Africa Research Bulletin: Economic, Financial and Technical Series, “Flowers: Ethiopia.”

 101 The Entomology Research Laboratory, http://www.uvm.edu/~entlab/ethiopia.html.

 102 Ibid.

2-32

Ugandan exports more than doubled by value during 2001–05. Virtually all Ugandan flowers

are exported to the EU, approximately 60 percent to the Dutch auctions and the remainder

directly to supermarkets and other EU retailers. Some of the Ugandan flowers sold at auction

are purchased and redistributed to other countries of the EU, the United States, and

Norway.96

South Africa

The South African cut flower and plant industry consisted of 900 companies on

1,050 hectares in 2004.97 Cut flowers are grown mainly in the Western Cape and Gauteng

Province. Western Cape production includes indigenous varieties, such as South Africa’s

national flower, the protea. The major cut flowers grown in Gauteng Province are roses,

dendranthemas, and carnations. South African cut flower exports reached $25 million in

2005, a 60 percent increase from 2001.

Ethiopia

Ethiopia has ideal climatic conditions for the production of cut flowers due to the high

altitude (2,000 meters above sea level) of the Addis Ababa region. There were thirty-two

existing cut flower farms in 2005, up from three in 2001, including fifteen foreign-owned

entities.98 According to industry representatives, multiple new foreign investments from the

Netherlands, Germany, India, and Israel may add 450 hectares with estimated total

production valued at $400 million by 2007.99 During 2002–05, the industry created seasonal

and permanent employment for over 25,000 people, more than 70 percent whom are female.

According to a recent study by the International Labor Organization, another 47,000 people

were expected to be employed in the sector by the close of 2006.100

Prospects for continued rapid industry growth in Ethiopia are reportedly favorable. Efforts

to increase greenhouse production are underway.101 Greenhouse production is a form of

intensive agriculture, with large amounts of high-value plant material grown in a relatively

small area. The income-generating potential of greenhouse-grown cut flowers is much higher

than that of traditional field crops in Ethiopia.102 Greenhouse production capacity for cut

flowers in Ethiopia is expected to increase three fold to four fold in the next one to two

years.
 103 GTIS, Global Trade Atlas.

2-33

Sub-Saharan Africa Trade in the Global Context

Global exports of cut flowers increased by 41 percent, from $1.7 billion in 2001 to more than

$2.4 billion in 2005.103 SSA cut flower exports of more than $520 million in 2005 accounted

for more than 21 percent of the total, up from 18 percent of the total in 2001.

Leading Exporters

The leading exporter of cut flowers to the world is Colombia, followed by Kenya, Ecuador,

and the Netherlands. Colombia exported just over one-quarter of total world exports in 2005

(figure 2-5). Since 2000, when Kenya trailed both the Netherlands and Ecuador in global

exports, global trade has increased by 38 percent. Kenya accounted for 31 percent of the

increase during 2000–05. The vast majority of Colombian and Ecuadorian flowers are

exported to the United States, while flowers from Kenya, Zimbabwe, and Uganda are almost

exclusively exported to the EU.

Reflective of its position in the global cut flower trade, Kenya was by far the largest SSA

exporter in 2005, with its exports accounting for more than two-thirds of the total.

Zimbabwe, Uganda, and South Africa are also important SSA exporters of cut flowers,

although small relative to Kenya. Kenya’s flower industry developed in the late 1990s.

Today, although 70 percent of its production is roses, Kenya is the most diversified of the

Colombia

28%

SSA

21%

Ecuador

14%

Netherlands

12%

Israel

5%

Other

20%

Global Exporters

Kenya

69%

Zimbabwe

9% Uganda

6%

South Africa

6%

Other

11%

SSA Exporters

Figure 2-5 Leading global and sub-Saharan Africa exporters of cut flowers, 2005

$2,426 million $520 million 

Source: GTIS, Global Trade Atlas, annual data compiled from reporting countries’ official statistics, 

including EU external trade.
 104 Goldfain, “The African Marketplace.”

 105 USDA, “USAID Helps Uganda’s Roses.”

2-34

SSA exporters. The rapid development of the industry included the construction of a modern

cargo facility near the Nairobi airport, and in 1999 Kenya became the largest foreign supplier

to the Dutch auction, surpassing Israel.

As the floriculture industry in Kenya begins to mature, other SSA suppliers that offer lower

wages and improved infrastructure, such as Ethiopia, are emerging as attractive locations for

flower production. Zimbabwe, whose production also developed rapidly in the late 1990s,

became the third-largest supplier to the Dutch auction, behind Israel and Kenya, in 2000.

Since that time, however, the floriculture industry in Zimbabwe has shrunk by 60 percent

and its exports have fallen by one-third as political instability and governmental

mismanagement have reduced productivity.104 The SSA countries that have had the largest

increases in exports of cut flowers during 2001–05 are Ethiopia, Uganda, Kenya, and South

Africa. Production for export in Ethiopia, Uganda, and South Africa is a relatively new

endeavor, and the cut flower industry in these countries has just recently begun to address

issues such as improved technology and training, transportation, quality, and courting

foreign investment.

Leading Export Markets

The EU and the United States are the world’s largest importers of cut flowers (figure 2-6).

Although the EU is one of the highest per capita consumers of flowers, much of what is

imported by the EU is reexported to other countries. The presence of large, long-established

flower auctions in the Netherlands makes it the world’s largest hub of import and reexport

of flowers. The Netherlands also has an important cut flower growing industry; the Dutch

have been growing flowers and plants commercially since the 1800s. In the United States,

cut flower consumption per capita is relatively low, although imported South American

roses, carnations, and chrysanthemums are increasingly available to U.S. consumers at low

prices. Japan is an important market for flower exporters and is being increasingly served

by Colombia and by Asian suppliers such as China and Malaysia, and less so by the EU.

Russia is a rapidly growing new market for flower exports, more than doubling its imports

during 2003–05. In 2005, the Russian market was served mainly by the EU, Ecuador, and

Colombia.

SSA exporters of cut flowers ship almost exclusively to the EU, where they compete

primarily against EU domestic producers and exports from Israel, Colombia, and

Ecuador.Kenya is the top supplier of flower imports to the EU market—providing mainly

roses and small quantities of mixed bouquets and carnations. The largest markets within the

EU are the Netherlands, the United Kingdom, Germany, and France. Although very small,

SSA exports to the United States have been growing; Kenya’s exports of roses to the United

States have more than doubled since 2002 to $803,000 in 2005. Ugandan exporters made

their first shipment of roses under AGOA to the United States in February 2006, and weekly

shipments have occurred since then.105 Tariffs faced by SSA exports in the EU and U.S.

markets are discussed later in this profile.
2-35

Factors Affecting Trade Patterns

Increased demand in the global cut flower market has been driven by greater availability of

a wider variety of good quality flowers, while low prices have also prompted increased

consumption. Low-cost producers in SSA have been able to expand exports to meet the

increased demand. Exports of cut flowers from SSA countries were originally encouraged

by the success of floriculture production and export in other developing countries,

particularly in South and Central America. South and Central America use export floriculture

as an increasingly important component of their agricultural economies and as a driver of

rural development. Moreover, traditional impediments to growth in SSA cut

flower industries have been addressed by development assistance and incentives. These

impediments have included an inability to maintain product quality throughout the

distribution chain; inadequate transportation infrastructure; an inability to meet SPS

requirements, as well as other entry regulations in foreign markets; and the lack of capital

and affordable credit.

SSA’s low labor and other costs relative to other developing suppliers (in the Americas and

in Asia) and its proximity to the major consuming EU market provide SSA suppliers with

a comparative advantage. These factors, combined with government incentives have

facilitated increased investment in and growth of SSA’s floriculture sectors. In addition, a

recent trend toward direct supermarket sales by SSA exporters has contributed to lower

EU

36%

United States

29%

Japan

9% Russia

7%

Switzerland

7%

Other

11%

Global Export Markets

EU

90%

Switzerland

4%

Other

5%

SSA Export Markets

Figure 2-6 Leading markets for global and sub-Saharan Africa exports of cut flowers, 2005

$2,426 million $520 million 

Source: GTIS, Global Trade Atlas, annual data compiled from reporting countries’ official statistics, 

including EU external trade.
 106 Kenyan Export Processing Zones Authority, “Horticulture Industry in Kenya 2005.”

 107 Kenya Export Promotion Council, “Kenya: Supply Survey on Horticultural Products.”

 108 Ibid.

 109 Ibid.

2-36

prices for flowers in the EU market and resulted in an increased export volume of mixed

bouquets, particularly from Kenya. These conditions are enhanced by development

assistance and preferential tariff treatment extended to SSA suppliers by major consuming

markets. Additionally, SSA governments are increasingly offering investment incentives.

SSA governments actively promote the relative benefits of their countries to potential

investors, such as recent infrastructure improvements, fewer security concerns relative to

other countries, and tax holidays (see below).

Increased Investment

In Kenya, a variety of private institutions and marketing arrangements have emerged that are

able to adapt to changing market conditions.106 The Kenya Flower Council (KFC) is active

in many aspects of the industry. In response to market requirements it developed voluntary

codes of practice for the health and safety of workers, pesticide use, environmental welfare,

resource stewardship, and social responsibility. The KFC code ensures that growers comply

with international standards on social, environmental, and technical issues.107 Private sector

initiatives are supported by the Horticulture Crops Development Authority (HCDA), a

government parastatal and the main regulatory body charged with promoting development

of the sector, licensing exporters, and disseminating marketing information. The HCDA also

advises and trains growers, conducts trials of new technologies or varieties, inspects

nurseries and planting materials, monitors and disseminates pricing and other market

information, identifies local and export market outlets, and designs and implements quality

standards. The consolidation and expansion of traditional markets and penetration into new

markets has been overseen by the Export Promotion Council, which conducts market

research, hosts trade missions, and arranges contact promotion programs between buyers and

sellers.108

Private sector participation in management of the industry has led to the creation of largeand medium-scale companies that give a degree of stability and technological leadership to

the sector. These companies have a well-trained labor force and close linkages with

European importers. The presence of international and local seed companies, due in large

part to Kenya’s explicit recognition of breeders’ rights through its status as a signatory to the

International Union for the Protection of New Varieties of Plants convention, gives the

industry better access to new and improved varieties. Improved technologies, including a

greater choice of varieties and shipping media (such as aquapacks systems for transportation

in water), result in improved product quality, but at a corresponding increased cost. As in

most SSA industries, the adoption of such improved technology is often hindered by high

credit rates.

The Kenyan cut flower industry has grown to the point where local propagators supply a

large portion of the planting material needed by Kenyan producers. Production methods are

becoming increasingly sophisticated, and improved technology has led to increased

production per unit area and enhanced the quality of the flowers.109 At the same time, the

required advanced production systems make starting production a relatively expensive

endeavor.
 110 Ugandan Flower Exporters Association, “Fresh Handling Facility.”

 111 Ibid.

 112 Ugandan Flower Exporters Association, “Performance.” 

 113 Ugandan Flower Exporters Association, “Publications.”

 114 USAID, “Success Story: Uganda’s Flower Industry is Up and Running.”

 115 U.S. Department of State, U.S. Embassy, Kampala, “Uganda 146622.”

 116 USAID, “USAID Helps Uganda’s Roses Break Into the U.S. Market for the First Time.”

 117 Ugandan Flower Exporters Association, “Training.”

2-37

Policies to Promote the Industry and Infrastructure Improvement

In 1997, with the assistance of USAID, a modern cold storage facility was built near the

Entebbe Airport for Uganda’s Civilian Aviation Authority. Prior to this, maintaining a “cold

chain” between the time the flowers leave a farm and the time they are placed on a cargo

plane was a challenge; and poor-quality wilted flowers would often be rejected by buyers.

The facility currently handles the majority of Ugandan flower exports.110 The coordination

of booking air freight and cargo space has been successful in preventing shipping bottlenecks

and has led to reduced freight rates and reliable product arrivals.111 Better coordination has

also enabled the industry to increase the number of cargo carriers to Uganda due to increased

throughput and efficiency of the facility. Increased Ugandan exports were also facilitated by

a decrease in air freight costs to EU destinations, from $2.40 per kg in 2000 to $1.60 per kg

in 2004. Subsequently, however, high world fuel prices reversed the downward trend.112

The development in 2000 of an active export association, the Ugandan Flower Exporters

Association (UFEA), provided significant benefits to Ugandan growers. In addition to setting

national quality standards, UFEA also provides producers with start-up advice, technical

assistance, price and market information, and business contacts.113 The UFEA is working on

behalf of growers to reduce transportation costs through lower prices on jet fuel and tax

credits on fuel for refrigerated trucks and to provide for the widespread use of refrigerated

trucks throughout the industry.114

USAID also assisted the Ugandan industry in its efforts to export to the United States, where

certain rose varieties can garner 20 cents per stem versus 12 cents in the Dutch market.115

Exporters were trained by USDA’s Animal and Plant Health Inspection Service on U.S.

entry regulations, export documentation, and certification of origin necessary to take

advantage of the duty-free status of roses under AGOA. The first shipments of Ugandan

roses were made in February 2006.116 Other USAID assistance has included funding trials

for testing environmentally friendly hydroponics technology, which would improve both

efficiency and productivity; thereby increasing quality and yields; and funding training for

supervisors and managers in an Applied Tropical Floriculture Certificate course.117

The Japanese government is also providing assistance to the Ugandan floriculture industry.

Two Ugandan flower operations are participating in the Japan External Trade Organization

(JETRO) Flower Monitoring Project for East Africa. JETRO is a Japanese governmentrelated organization that promotes trade and investment. The program sponsored a Japanese

flower market survey conducted for Ugandan firms and their participation in the

International Flower EXPO in Tokyo.
 118 Kenyan Export Processing Zones Authority, “Horticulture Industry in Kenya 2005.” 

 119 Ibid. 

 120 Kenya Export Promotion Council, “Kenya: Supply Survey on Horticultural Products.”

 121 Ibid.

 122 Kenyan Export Processing Zones Authority, “Horticulture Industry in Kenya 2005.” 

 123 Goldfain, “The African Marketplace,” and U.S. Department of State, U.S. Embassy, Addis Ababa,

“Kenya 4230B.”

 124 U.S. Department of State, U.S. Embassy, Addis Ababa, “Kenya 4230B.”

 125 Ibid.

 126 Goldfain, “The African Marketplace,” 28.

2-38

Kenya

The Kenyan government attributes early growth of the floriculture sector in the 1990s, in

part, to the liberal macroeconomic policy environment and government encouragement of

foreign investment and international trade.118 Its main role in encouraging floriculture has

been through infrastructure development, incentives, and support services.119 The Kenyan

government’s National Export Strategy focuses on certain priority sectors, including

horticulture, which includes cut flowers.120 The Government Strategy for Revitalizing

Agriculture (2004–14) seeks to increase productivity and profitability in agriculture by

establishing a market-based agricultural credit and input system, reforming extension

services, and promoting downstream processing. The investment and business environment

in Kenya has been enhanced through government divestiture and privatization; the abolition

of import and export licensing; the removal of administrative and price controls; freedom of

movement of foreign exchange in and out of the country; liberalization in the banking sector;

and the removal of import duties on packaging, seeds, agrochemicals, and other necessary

inputs for floriculture exports.121

Certain government programs have been specifically designed as incentives to exportoriented investors, including export processing zones and the Tax Remission for Export

Office, which facilitates benefits for intermittent imports used in export production. Kenya

is also a member of the Multilateral Investment Guarantee Agency, the Africa Trade

Insurance Agency, and the International Center for Settlement of Investment Disputes, which

provide potential investors with protection for their investments in Kenya against a wide

range of non-commercial risks.122

Industry observers have noted that current conditions—such as the strong Kenyan shilling,

high energy costs in the production process, poor roads, corruption, crime, water shortages,

and bureaucratic hurdles—may have influenced the movement of cut flower operations to

other African countries during the period under review.123 Since 2002, twenty-eight flower

farms in Thika and Athi River have closed, five of which moved operations to Ethiopia. A

shortage of skilled labor has occurred as production managers were recruited to work

elsewhere.124 According to industry reports, managers of thirty-seven farms in Naivasha have

vocalized their discontent and expressed possible plans to relocate operations.125 However,

during the period under review, Kenyan growers stepped up efforts to diversify their product

offerings to supermarkets, particularly of mixed bouquets. At the same time, they are

increasingly selling directly to large retailers, bypassing the EU auction system, which has

lowered prices to consumers and increased the volume of shipments.126
 127 Ugandan Flower Exporters Association, “Uganda Provides Perfect Conditions for Cut Flower

Production.”

 128 Ugandan Flower Exporters Association, “New Rose Farm Means Promising Future for Uganda.”

 129 U.S. Department of State, U.S. Embassy, Kampala, “Uganda 146622.”

 130 Goldfain, “The African Marketplace”; Africa Research Bulletin: Economic, Financial and Technical

Series, “Flowers: Ethiopia”; and Interview by Commission staff, City, Ethiopia, December 13, 2006.

 131 Muriuki and Temple, “Ethiopia's Flowers Grow into New Forex Earner”; and Interview by

Commission staff, City, Ethiopia, December 13, 2006.

 132 Vishwanath, “Africa Promises Bed of Roses for Floriculture Sector.”

 133 Goldfain, “The African Marketplace.”

 134 Vishwanath, “Africa Promises Bed of Roses.”

2-39

Uganda

The government of Uganda encourages export-led growth by granting duty-free import of

most inputs for flower farms. The Uganda National Floriculture Industry Strategy Plan calls

for a doubling in size of the flower sector from its present 180 hectares to 360 hectares by

2007, when it is expected to employ 10,000 people and bring in annual export revenue in

excess of $50 million. The industry is now looking to expand the number of farms and the

range of flowers and cuttings for export in order to achieve economies of scale and minimize

freight rates. Investment is actively being encouraged.127

New investment expanding into western Uganda is part of a national strategy by the industry

to increase production and diversification by encouraging investment in other climatic

zones.128 It is hoped that a newly paved road and investment in refrigerated trucks will offset

the longer distance of the new operations from the main airport.129 A modern cold storage

facility near the airport and an organized export association that provides a statistical

tracking system and timely market information facilitate cut flower exports.

Ethiopia

In the early 1990s, the government adopted a policy of rural-centered agricultural

development for poverty reduction and economic development. With ideal growing

conditions for flowers, floriculture was a prime candidate for development. The government

has since encouraged foreign and local investment in agriculture in general; and floriculture

has emerged as a major non-traditional export sector, with export value growing by more

than ten fold from 2001–05. The government’s 2004 promotional investment campaign for

agriculture allocated land for flower farms and initiated infrastructure projects aimed at

raising productivity.130 Other incentives included an improved investment code, a five-year

tax holiday, duty-free import of machinery, and offers for low-cost land leasing.131 Investors

also have access to low interest rate loans from a $350 million World Bank fund for the

development of floriculture in Ethiopia.132

Relative to Kenya, labor, land, and freight rates in Ethiopia are inexpensive; and the

infrastructure, such as roads, telecommunications, and water, is adequate for cut flower

production and export.133 Indian investors report that the low freight cost advantage of

producing in and shipping from Ethiopia to the EU market is a key factor in their

investment.134 Since freight costs can account for over 50 percent of floriculture earnings,

the 50-60 percent cost advantage of shipping from Ethiopia to Europe, versus shipping from

India to Europe is significant.
 135 Kenya Flower Council, “Activities.”

2-40

Tariff Preferences

Duty-free treatment is extended to SSA cut flower exports to the EU market under the

Cotonou Agreement, an international aid and trade agreement between the ACP (African,

Caribbean, and Pacific) countries and the EU. Negotiations for ACP countries to enter into

Economic Partnership Agreements (EPA) with the EU are underway and are expected to

result in a series of new free trade agreements. According to the Kenya Flower Council,

under an EPA, Kenya is not expected to be considered a least-developed country for these

purposes and, in the absence of preferences, could potentially face duties of 9-11 percent on

its flower exports to the EU market.135 Of SSA countries that will continue to have least

developed country status in the EU, Ethiopia in particular would be well situated to make

the most of their duty-free status in the face of Kenya’s potential loss of preferential access.

Under AGOA, roses receive preferential duty-free treatment in the U.S. market, whereas

exports of other flower varieties continue to pay 3-7 percent duty. Though the volumes are

currently small, duty-free treatment has encouraged increased shipments of SSA-produced

roses to the United States.
2-41

Cut Flowers Bibliography

Africa Research Bulletin: Economic, Financial and Technical Series. “Flowers: Ethiopia,” Vol. 43. 

Issue 10, December 2006.

FloraCulture International. “World Flower and Plant Production.” 

www.floracultureintl.com/archive/articles/1476.asp (accessed November 10, 2006)

Global Trade Information System, Inc. (GTIS). Global Trade Atlas. Annual data compiled from reporting

countries’ official statistics, including EU25 external trade. http://www.gtis.com/gta/usitc (accessed

various dates).

Goldfain, Kathy. “The African Marketplace.” Floriculture International, November/December 2006.

Ball Publishing, Batavia, IL

Kenyan Export Processing Zones Authority. “Horticulture Industry in Kenya 2005.”

http://www.epzakenya.com/sector.php (accessed December 20, 2006). 

Kenya Export Promotion Council. “Kenya: Supply Survey on Horticultural Products.” August 2004.

Muriuki, Linda and Arnold Temple. “Ethiopia's Flowers Grow into New Forex Earner.” Reuters News

Service, May 7, 2006.

Tadesse, Tsegaye. “Ethiopia flower exports to challenge coffee.” Sudan Tribune, June 25, 2005.

http://www.sudantribune.com/article.php3?id_article=10334 (accessed on December 28, 2006).

The Entomology Research Laboratory. http://www.uvm.edu/~entlab/ethiopia.html.

Ugandan Flower Exporters Association. “Fresh Handling Facility.” www.ufea.com/marketing.html

 (accessed Dec. 21, 2006).

 ———. “Marketing: Auctions and Direct Sales,” http://www.ufea.com/marketing.html (accessed

December 21, 2006).

 ———. “New Rose Farm Means Promising Future for Uganda.” www.ufea.com/news.html

(accessed December 21, 2006).

———. “Performance.” http://www.ufea.com/marketing.html (accessed December 21, 2006).

 ———. “Publications.” http://www.ufea.com/ufeapricereports.html (accessed December 21, 2006).

 ———. “Training.” http://www.ufea.com/training.htm (accessed December 21, 2006).

 ———. “Uganda Provides Perfect Conditions for Cut Flower Production.”

http://www.ufea.com/news.html (accessed December 21, 2006).
2-42

 ———. “Ugandan Flower Farms Test Waters in the Japanese Flower Market.”

http://www.ufea.com/news.html (accessed December 21, 2006).

USAID. “Success Story: Uganda’s Flower Industry is Up and Running,” March 31, 2006. 

www.usaid.gov/stories/uganda/ss_uganda_fhlflowers.html (accessed September 5, 2006).

———. “USAID Helps Uganda’s Roses Break Into the U.S. Market for the First Time,”

(February 22, 2006). www.usaid.gov/press/releases/2006/pr060222.html (accessed

September 5, 2006).

United States Department of State. U.S. Embassy. Kenya 4230B.

———. U.S. Embassy. Nairobi, Kenya 161254Z.

 ———. U.S. Embassy. Uganda 146622.

Vishwanath, Kulkarni. “Africa Promises Bed of Roses for Floriculture Sector.” The Hindu Business Line,

January 4, 2006. http://www.thehindubusinessline.com/2006/01/04/stories/2006010402211200.htm

(accessed December 28, 2006).
2-43

Prepared and Preserved Fish

Summary of Findings

The principal SSA countries that produce and export prepared and preserved fish, primarily

canned and semiprocessed tuna, are Côte d’Ivoire, Ghana, Senegal, South Africa, Namibia,

Seychelles, Mauritius, Madagascar, Kenya, and South Africa. Together they accounted for

nearly all SSA exports of prepared and preserved fish, which grew by more than 54 percent,

from $396 million in 2001 to an estimated $612 million in 2005. However, the increase in

value was primarily the result of increased prices in the European market. Export quantities

varied by only 7 percent, from the low in 2003 to the peak in 2004 (table 2-8). In

comparison, the value of global exports increased by 50 percent over that period. Several

countries, such as South Africa and Namibia, showed decreased export volumes despite

increased export values. By far, the leading market for SSA exports, is the EU, largely owing

to historical ties between the two regions, as well as to the EU’s trade preference programs

for imports from developing nations. In the EU market, the main competitors for SSA

exports include EU producers themselves and developing country exporters in the Pacific

region and Latin America.

The main factors affecting the ability of SSA countries to maintain export quantities include

the availability of raw material (harvested fish) in SSA waters, and the investment of capital

to maintain and operate canneries. Fish availability is primarily a function of nature, but it

can be managed by government control of fishing effort. For example, to harvest fish located

offshore and out of the reach of local artisanal fishermen, countries such as Seychelles,

Mauritius, and Côte d’Ivoire have increasingly enlisted foreign-flag vessels. Fish caught by

such vessels tend to be landed in domestic ports and then exported. Another factor affecting

SSA exports is availability of capital to efficiently operate on-shore canneries and other

processing facilities, which are the main structural elements of the prepared and preserved

fish industry. In countries such as Côte d’Ivoire, Ghana, Seychelles, and Mauritius this

challenge has largely been met by foreign direct investment, including investment from fish

processors and distributors in key SSA markets.

Industry Overview

The industries producing prepared and preserved fish in each of the nine major SSA

exporting countries are comparable in structure (box 2-4). They mainly consist of factories

(canneries) that process tuna, sardines, mackerel, etc., plus the (typically affiliated) foreign

and domestic distributors that buy their output and the (typically unaffiliated) harvesters that

supply them with fish. These factories are of two types: full-scale canneries, in which the

loins are removed from whole fish and then further processed into canned product, and

loining plants that only produce loins from whole fish, to be shipped (usually exported) to

other canneries for final canning.
2-44

Box 2-4 Product Description for Prepared and Preserved Fish

Prepared and preserved fish products include canned fish (e.g., sardines, anchovies, and mackerel), breaded fish

(such as fish sticks), caviar and caviar substitutes, fish-based prepared meals, and semi-processed products such

as tuna meat (loins) used as raw material by canneries. Products of particular importance to SSA producers and

exporters include canned fish (tuna, pilchards, and sardines) and tuna loins. Domestic and export markets for these

products support an array of canneries and frozen-fish warehouses and transshipment facilities along the west and

east SSA coasts.

An industry closely associated with the prepared and preserved fish industry is fish harvesting, from which whole fish

are produced. This industry supplies raw material for the fresh/frozen fish industries and markets (not covered in this

chapter), but it is also essential for supplying raw material for the prepared and preserved fish industry. As discussed

below, the capital and labor for this industry that utilizes a resource from SSA waters are primarily supplied by nonSSA sources.

Table 2-8 Sub-Saharan Africa exports of prepared and preserved fish, by selected exporters and key markets, 2001–05

Exporters Key markets

Exports

2001 2002 2003 2004 2005

Percent

change

2001–05

Seychelles

EU Million dollars 110.2 155.6 193.7 168.6 177.9 61

Total 112.0 155.6 193.8 169.3 178.1 59

Total 1,000 metric tons 41.2 43.1 37.3 37.1 39.7 -4

Côte d’Ivoire

EU Million dollars 100.6 135.7 136.0 140.0 104.0 3

Total 100.6 135.7 136.2 140.0 104.0 3

Total 1,000 metric tons 47.3 53.3 45.6 50.1 31.0 -34

Mauritius

EU Million dollars 61.5 67.3 71.2 80.4 105.0 71

Total 62.2 68.0 73.0 81.5 109.5 76

Total 1,000 metric tons 27.2 28.7 31.6 32.2 38.3 41

Ghana

EU Million dollars 33.9 57.4 55.5 63.7 81.9 142

Total 34.8 59.0 56.6 66.7 81.9 135

Total 1,000 metric tons 15.0 26.1 25.9 30.4 31.2 108

Madagascar

EU Million dollars 28.1 28.7 54.2 53.4 49.7 77

Total 28.1 28.7 54.2 53.4 49.7 77

Total 1,000 metric tons 14.6 15.4 17.2 18.0 19.8 36

Kenya

EU Million dollars 21.2 8.2 10.7 31.8 40.8 92

Total 21.2 8.2 10.7 31.8 40.8 92

Total 1,000 metric tons 7.0 2.6 3.1 8.5 10.1 44

Senegal

EU Million dollars 16.4 22.7 22.7 20.9 21.1 29

Total 18.4 24.7 24.7 23.7 24.4 33

Total 1,000 metric tons 10.6 9.2 9.2 7.8 8.1 -24

South Africa

EU Million dollars 2.5 3.7 3.2 5.9 7.0 180

Total 9.3 11.4 9.4 12.2 13.9 49

Total 1,000 metric tons 11.2 12.1 6.7 6.6 7.4 -34

Namibia

EU Million dollars 3.3 1.2 1.4 4.1 7.8 136

Total 9.8 4.3 9.2 8.2 10.0 2

Total 1,000 metric tons 13.4 5.4 6.5 5.7 6.0 -55

Sub-Saharan

Africa

EU Million dollars 377.7 480.5 548.6 568.8 596.8 58

Total 396.4 495.6 567.8 586.8 612.3 54

Total 1,000 metric tons 187.5 195.9 183.1 196.4 191.6 2

Source: GTIS, Global Trade Atlas, annual data compiled from reporting countries’ official statistics, including EU external

trade; Food and Agriculture Organization of the United Nations; U.S. Department of Commerce; and Commission staff

estimates.
 136 International Trade Centre UNCTAD/WTO, “Supply Survey on Seychelles’ Fish and Fish Products,

July-August 1999”; and “Mauritius & Seychelles dominate the U.K. tuna market,” @tuna.com.

 137 Traditionally, production line employees have almost exclusively been women.

 138 Eurofish Magazine, “Africa’s Fish Industry,” 45–47.

 139 FAO, FAOstat database.

2-45

Fish processing factories are large enterprises, and there are only a few in each SSA country.

Some countries, such as Ghana and Seychelles, have only one cannery each.136 However,

each cannery can employ up to 2,000 production-line employees.137 Canneries are highly

capital-intensive, and the investment required to establish them has come mostly from

abroad. In most instances, EU sources have financed the processing facilities, but in a few

cases there also has been investment from U.S. sources (e.g., StarKist in Ghana) or Japanese

sources (Mitsubishi in Mauritius). Often the source of the financing is a canned-fish

distributor in a developed country, and that distributor becomes the cannery’s main

customer.

The tuna or other fish that are used by the canneries in almost all SSA exporting countries

are harvested mainly by foreign-owned vessels that either operate under the SSA country’s

flag or, if foreign-flagged, are licensed by the local country to fish in its waters. These

foreign-owned vessels usually employ non-SSA crews.138 Most fish species that are used for

prepared or preserved fish products are found several miles from shore, beyond the reach of

local, artisanal fishermen who use small boats in inshore fisheries. In each coastal SSA

country there are usually only a few dozen large offshore harvesting vessels, while there are

many hundreds of inshore harvesters.

As noted, there is little vertical integration between canneries and harvesters. Even the large

offshore foreign-flag harvesting vessels generally are independently owned, although they

might, in some cases, have short-term (e.g., annual) supply contracts with the canneries that

buy their catch. In contrast, there are several cases of ownership or other contractual

integration between SSA processing firms and their distributors in developed country

markets. These include UK-based Princes Ltd. (a Mitsubishi subsidiary that markets canned

food in Europe), which operates a tuna plant in Mauritius, and StarKist (a Del Monte

subsidiary that markets canned tuna in many countries), with operations in Ghana and

Seychelles. 

The size and nature of the domestic market for prepared and preserved fish is an important

structural determinant of the industry’s export performance: the smaller the domestic market,

the greater the dependence on exports in order to maintain the production levels needed to

operate large canneries at efficient capacity. With the exception of South Africa, SSA

markets for prepared and preserved fish are characterized by low consumer incomes (and

therefore low local market prices compared with export markets), difficulties in transporting

products from coastal facilities to inland population centers, and competition from alternative

foods (including other seafoods such as fresh or frozen fish). Thus, production of prepared

and preserved fish products throughout the SSA region is mainly for export.139
 140 FAO and Commission staff estimates.

2-46

Sub-Saharan Africa Trade in the Global Context

World exports of prepared and preserved fish have increased steadily in recent years, to an

estimated $8.4 billion in 2005, a 50 percent increase from $5.6 billion in 2001.140 SSA

exports increased at a similar rate,rising by more than 54 percent, from $396 million in 2001

to an estimated $612 million in 2005.

Leading Exporters

The world’s leading exporters are (in descending order) Thailand, China, Ecuador, United

States, Morocco, and Denmark, which together, with SSA, accounted for more than twothirds by value of world exports of prepared and preserved fish in 2005 (figure 2-7). The

leading SSA exporters of prepared and preserved fish in recent years include Seychelles,

Côte d’Ivoire, Mauritius, Ghana, Madagascar, and Kenya. Together these countries

accounted for almost 90 percent of SSA prepared and preserved fish exports. These countries

are also the SSA region’s leading harvesters of fish, although SSA fish processing frequently

is supplied by imported fish and fish harvested by foreign-flag vessels operating in SSA

waters.

Thailand

19%

China

18%

SSA

10%

Ecuador

8%

United States

5%

Morocco

5%

Philippines

4%

Other

32%

Global Exporters

Seychelles

30% Côte d'lvoire

17%

Mauritius

16%

Ghana

13% Madagascar

8%

Kenya

7%

Other

10%

SSA Exporters

Figure 2-7 Leading global and sub-Saharan Africa exporters of prepared and preserved fish,

2005

$6,259 million $612 million

Source: GTIS, Global Trade Atlas, annual data compiled from reporting countries’ official statistics,

including EU external trade.
 141 Based on FAO import data, which is typically greater than reported export data.

2-47

EU

34%

Japan

22%

United States

16%

Other

28%

Global Export Markets

EU

99%

Other

1%

SSA Export Markets

Figure 2-8 Leading markets for global and sub-Saharan Africa exports of prepared and

preserved fish, 2005

$6,259 million $612 million

Source: GTIS, Global Trade Atlas, annual data compiled from reporting countries’ official statistics, 

including EU external trade.

Leading Export Markets

Global markets for prepared and preserved fish reached an estimated $8.6 billion in 2005,

up by 45 percent from $5.9 billion in 2001.141 The world’s leading importers are (in

descending order) the EU, Japan, and the United States, which together accounted for about

72 percent by value of world imports of prepared and preserved fish in 2005 (figure 2-8).

The leading species traded worldwide include tuna, sardines, salmon, and herring, all of

which are traded mainly in canned form, although there also is an expanding trade in semiprocessed tuna loins used as raw material by canneries.

The EU accounts for nearly all SSA exports of prepared and preserved fish, owing in part

to the long-standing economic and cultural ties between certain EU members and several

SSA countries, as well as to duty-free treatment under EU tariff preference programs. These

ties have helped facilitate prepared and preserved fish exports to the EU. In 2005 such

exports reached an estimated $597 million, or 96 percent of the total value of all SSA

exports. The main competitors with SSA exporters in the EU market for prepared and

preserved fish include EU producers and exporting nations in Southeast Asia and the Pacific
 142 Conners Bros. Income Fund (owner of Bumble Bee Seafoods, a tuna canner), written submission

December 14, 2006.

 143 FAO, The State of World Fisheries and Aquaculture, 2004.

 144 For example, Spain’s Balearic Islands bluefin tuna fishery yielded less than 3,000 mt in 2006, down

from nearly 15,000 mt in 1995; ElAmin, “Plight of Bluefin Tuna Highlights EU’s Fish Crisis.”

2-48

Rim (e.g., Thailand and the Philippines) and Latin America (e.g., Ecuador). Some of these

exporters are competitive with SSA exporters for many of the same historical reasons. In

addition, several other developing countries benefit from preferential EU tariff treatment

programs.

Intra-SSA trade (in excess of $15 million in 2005) accounted for the next largest market for

prepared and preserved fish exports; for example canned or semi-processed sardines and

related species exported from Namibia to South Africa and Angola; South African exports

of similar products to Mauritius (which serves as a transshipment point for developedcountry markets), Mozambique, and Ghana; and Ghanian exports of canned fish to Nigeria.

Some of this trade is further processed and then reexported to the EU or other non-SSA

markets.

By comparison, the United States is a very small market for SSA fish exports, accounting

for an estimated $3.9 million (0.6 percent) of total SSA exports in 2005 (0.4 percent of total

U.S. imports of this product group). However, the U.S. market has been growing in

importance since 2005, due to increased U.S. tuna cannery demand for tuna loins from

Mauritius.142

Factors Affecting Trade Patterns

The main factor contributing to the growth in value of SSA exports of prepared and

preserved fish was increased prices in the European market. However, maintaining the

quantity of exports required abundant and well managed fisheries in SSA to supply raw

material (whole fish) to the canneries. Furthermore, SSA suppliers were able to obtain the

necessary capital to maintain and operate these canneries, primarily through foreign direct

investment by large multinational firms for export to their home markets.

Demand Growth and Price Increases

The primary factor affecting the increased export value of prepared and preserved fish

products from SSA was an increase in export unit values to the EU. Overall, export unit

values increased by 51 percent, from $2,114 per mt in 2001 to $3,196 per mt in 2005. The

quantity exported in 2005 was only 2 percent greater than that exported in 2001 (table 2-8).

As global demand for fish products has generally increased, production from marine

fisheries worldwide has not kept pace. Global fish consumption rose from nearly 94 to

103 million mt from 1999 through 2003, while marine production was stable at nearly

80 million mt in 1999 compared with slightly more than 81 million mt in 2003. Aquaculture

is increasingly relied upon to supply the difference.143 Prices for wild-caught fish for

processing in the EU, SSA’s primary market, have increased due to depleted EU fisheries

and EU Commission efforts to rebuild these fisheries by drastically cutting fishing quotas

in EU waters.144
 145 In fact, signatories to the United Nations Convention on the Law of the Sea (UNCLOS) are required to

make surplus fish resources (in excess of the local country’s capacity to harvest them) within their EEZ

available to foreign-flag fleets. All of the major SSA producers/exporters of prepared and preserved fish are

UNCLOS signatories.

 146 The largest element of this industry is a tuna plant in Mombassa operated by U.S.-based Tri Marine

International, Inc., which exports tuna loins mainly to EU canneries. Gitonga, Okai, and Mutegi, “The

Effects of the EU Ban on Lake Victoria Fish Exports on Kenyan Fisheries.”

 147 Mutume, “Africa Seeks to Safeguard its Fisheries,” 12.

 148 Ibid.

2-49

Increased Investment

As noted, another factor affecting SSA exports is capital availability to efficiently operate

on-shore canneries and other processing facilities, the main structural elements of the

prepared and preserved fish industry. This challenge has largely been met in the SSA region

by foreign direct investment, mainly from fish processors and distributors in key SSA

markets. Such investments include the previously noted plants operated by StarKist in Ghana

and Seychelles, Princes’ (Mitsubishi) plant in Mauritius, and Tri Marine’s plant in Kenya.

These plants produce primarily for the EU market, under labels owned by their parent firms.

Policies to Promote the Industry

Related to fishery abundance is the issue of licensing foreign-flag vessels to fish in a

country’s EEZ (Exclusive Economic Zone). As described below, many SSA countries issue

licenses (in exchange for a fee) to foreign-flag vessels to harvest certain species within their

EEZs. This is usually done when there is a surplus of fish relative to the SSA country’s own

fishing capacity.145 Such licensing is common. The EU is the most active foreign player in

the SSA region and has fishing agreements with Côte d’Ivoire, Madagascar, Mauritius, and

Seychelles, among others. All of these countries export significant amounts of processed

tuna to the EU.

The foreign licensing issue has several implications for exports. On one hand, the foreignflag harvesters frequently land their catches in the SSA country’s ports, which increases or

helps maintain the supply of fish to local canneries. Without such foreign-flag harvests,

canneries would be dependent on the limited catches provided by domestic harvesters. For

example, Kenya’s tuna processing industry relies mainly on harvests of tuna by foreignowned vessels licensed to fish in its waters, because its own harvesters operate boats too

small to traverse the distances needed to catch tuna.146 Such licensing arrangements have

allowed Kenya to be one of four SSA countries (the others being Mauritius, Ghana, and

Madagascar) that increased the quantity and value of its exports of prepared and preserved

fish during 2001–05. During that period, the volume share of exports from these four

countries increased from 35 percent to 51 percent of the SSA total.

On the other hand, it is reported that, by catching such large amounts of fish in waters just

beyond the reach of local fishermen, large foreign-flag harvesters may deplete the

availability of fish to such local fishermen, thereby inhibiting the development of the SSA

country’s own harvesting capacity.147 Senegal, after two decades of allowing EU harvesters

in its waters, chose to end such activity in 2002, reportedly because foreign harvests depleted

the availability of fish to local harvesters.148 The importance of foreign-flag fishing vessels

to maintaining export volume, however, is demonstrated by the fact that the quantity of
 149 FAO, “Fishery Country Profile: Seychelles,” 3.

 150 Tuna are typically caught outside Seychelles’ 12-mile territorial limit by foreign-flag craft; see FAO,

“Fishery Country Profile: Seychelles,” 4. As a result, the tuna are not considered a product of Seychelles

when they are landed at the nation’s port and re-exported, hence the use of the term “transshipped” rather

than “exported.”

 151 FAO, “Fishery Country Profile: Seychelles,” 5-6.

2-50

Senegal’s exports of prepared and preserved fish products actually declined by 24 percent

during 2001–05, after foreign-flag vessels were excluded from Senegal’s fishery.

Natural Resources

An abundant and sustainable supply of whole fish is necessary to maintain exports of

prepared and preserved fish products. As harvested wild fish are the primary source of this

input in SSA countries, maintaining or increasing export quantities requires increased fishing

effort as fish concentrations decline. However, increased fishing effort must be managed so

as not to deplete the supply of fish in SSA waters. In the case of SSA countries, efforts to

prevent depletion of fish stocks is typically managed by government control (such as through

catch quotas). Because local fishing technology limits domestic fishing effort to in-shore

waters (some of which is overfished), many SSA countries have increased off-shore fishing

efforts and thereby maintained or increased fish availability to processing plants. Off-shore

fishing has been increased by licensing of large foreign-owned harvesting vessels that fish

within the 200-mile maritime limits (Exclusive Economic Zones, or EEZs) of SSA countries.

Such licensed foreign fishing is common among SSA countries and contributes to the supply

of fish to SSA processors because much of the foreign catch is landed in SSA ports.

Seychelles is a good example of a country whose fish processing industry benefits from

adjacent abundant fish resources. Near-shore fish stocks include a number of mackerel

species, which are harvested by local fishermen and sold either in domestic markets or to

processors for export.149 Tuna stocks are found further from shore and are harvested mainly

by foreign-flag vessels. Such tuna are landed in Seychelles and either transshipped in whole

frozen form to canneries elsewhere (about 85 percent of tuna landings are transshipped) or

canned or cut into loins locally (mostly for export).150 Government management measures

for Seychelles fisheries include licensing of foreign-flag vessels and restrictions on the types

of fishing gear that may be used and the areas or seasons during which fishing is allowed.151
2-51

Prepared and Preserved Fish Bibliography

Connors Bros. Income Fund. Written submission in connection withUSITC Inv. No. 332-477 subSaharan Africa: Factors Affecting Trade Patterns of Selected Industries, December 14, 2006.

Eurofish. “Africa’s Fish Industry,” May 2006.

Eurofish. “ASADC fisheries: Good potential despite difficulties,” May 2006.

FAO, “Fishery Country Profile: Cote d’Ivoire,” January 2004. http://www.fao.org/fi/fcp/fcp.asp (accessed

January 22, 2007).

 ———. Ghana,” March 2004. http://www.fao.org/fi/fcp/fcp.asp (accessed January 22, 2007).

 ———. Mauritius,” January 2006. http://www.fao.org/fi/fcp/fcp.asp (accessed January 22, 2007).

 ———. Namibia,” November 2002. http://www.fao.org/fi/fcp/fcp.asp (accessed January 22, 2007).

 ———. Senegal,” April 2004. http://www.fao.org/fi/fcp/fcp.asp (accessed January 22, 2007).

 ———. Seychelles,” November 2005. http://www.fao.org/fi/fcp/fcp.asp (accessed January 22, 2007).

 ———. South Africa,” November 2005. http://www.fao.org/fi/fcp/fcp.asp (accessed January 22, 2007).

_______. FISHSTAT, downloadable fisheries trade and production database and accompanying software,

available at http://www.fao.org/fi/statist/statist.asp.

Gitonga, N.K., L. Okai, and E. Mutegi, “The Effects of the EU Ban on Lake Victoria Fish Exports on

Kenyan Fisheries.” Paper presented at the 7th FAO Expert Consulation on Fish Technology,

http://www.fao.org/docrep/008/y9155b/y9155b0h.htm (accessed January 22, 2007).

Global Trade Information System, Inc. (GTIS). Global Trade Atlas. Annual data compiled from reporting

countries’ official statistics, including EU25 external trade. http://www.gtis.com/gta/usitc (accessed

various dates).

Mutume, Gumisai, “Africa Seeks to Safeguard its Fisheries: With an Eye on Sustainability, Senegal Orders

EU Boats Out of its Waters.” Africa Recovery, 16, no. 1 (April 2002): 4.

UNCTAD/WTO International Trade Centre, “Supply Survey on Seychelles’ Fish and Fish Products,”

July-August 1999, http://www.intracen.org/sstp/Survey/fish/fishsey.html (accessed January 22,

2007).

World Wildlife Fund (WWF). “A WWF Report in Angola Highlights Controversial EU Fishing

Agreements with Developing Countries,” October 8, 2002, http://www.panda.org/index.cfm

(accessed January 22, 2007).

 1

 GTIS, Global Trade Atlas.

3-1

CHAPTER 3

Mining and Manufacturing Industry Sector

Profiles

Overall growth in mining and manufacturing exports from sub-Saharan Africa (SSA)

was strong from 2001 through 2005. Increased exports were driven by increased

global demand and prices for energy and certain chemicals, minerals, and metal

products. In many cases, multinational firms partnered with domestic entities, both private

and public, to expand production and distribution capacity, which resulted in increased use

of raw materials and natural resources. In some cases, exports benefitted from preferential

tariff policies in key markets. The following tabulation summarizes dynamic factors that

contributed to increased exports and underlying factors that contributed to industry

development in the mining and manufacturing sector.

Factors

Acyclic

alcohols

Flat-rolled

steel

LNG Textiles and

apparel

Unwrought

aluminum

Wood

veneer

Dynamic Factors (factors that changed during 2001–05 and contributed to increased exports)

Demand growth and/or 

price increases X XX X X

Increased Investment X X X X X

Policies to promote the 

industry XX X

Infrastructure 

Improvement X

Tariff Preferences X

Underlying Factors (factors that remained relatively stable during 2001–05)

Natural Resources X X X X X

Labor supply X

Regional Integration X X X

Acyclic Alcohols

Summary of Findings

Exports of acyclic alcohols from SSA increased in both value and quantity from 2001

through 2005. Export values rose steadily, increasing more than threefold, and export

quantities nearly doubled (table 3-1). By comparison, global exports of acyclic alcohols

roughly doubled in value over the same period.1

 SSA export volumes increased because two

new acyclic alcohol production facilities were constructed in the region, a methanol plant in

Equatorial Guinea and an n-butanol plant in South Africa. These production facilities made

use of Equatorial Guinea’s and South Africa’s natural resources (natural gas and coal
 2

 Industry official, interview by Commission staff, Houston, TX, November 3, 2006.

 3

 AMPCO, “Ownership of the Atlantic Methanol Companies.”

3-2

Table 3-1 Sub-Saharan Africa exports of acyclic alcohols, by selected exporters and key markets, 2001–05

Exporters Key markets

Exports

2001 2002 2003 2004 2005

Percent

change

2001–05

Equatorial

Guinea

USA 1,000 dollars 24,954 51,906 93,574 88,325 144,445 479

Metric tons 408,452 438,307 531,493 472,456 607,522 49

EU25 1,000. dollars 24,520 27,733 67,197 41,310 75,844 209

Metric tons 156,054 209,036 279,403 191,594 318,026 104

Total 1,000 dollars 49,474 79,640 160,771 129,635 220,289 345

Metric tons 564,506 647,343 810,896 664,050 925,548 64

South

Africa

EU25 1,000. dollars 4,192 4,373 19,768 8,416 30,654 631

Metric tons 7,025 7,908 31,634 12,914 40,349 474

China 1,000 dollars 1,983 4,129 17,771 27,342 21,291 974

Metric tons 2,371 5,809 31,325 40,042 24,051 914

USA 1,000 dollars 3,515 2,908 6,954 10,639 17,458 397

Metric tons 4,859 5,324 10,081 12,856 18,783 287

All other

1,000 dollars 29,211 36,927 62,029 100,791 79,661 173

Metric tons 68,083 79,329 108,316 148,978 120,232 77

Total 1,000 dollars 38,902 48,337 106,522 147,187 149,064 283

Metric tons 82,338 98,370 181,356 214,790 203,415 147

SubSaharan

Africa

Total

1,000 dollars 93,646 130,474 275,755 283,654 347,461 271

Metric tons 646,844 745,713 992,252 878,840 1,128,963 75

Source: GTIS, Global Trade Atlas, annual data compiled from reporting countries’ official statistics, including EU external trade.

feedstocks, respectively). Investment in these facilities was driven by increased global

demand and prices for acyclic alcohols. Together, Equatorial Guinea and South Africa

accounted for more than 99 percent of SSA exports of acyclic alcohols in 2005. South Africa

is the only SSA country that exported acyclic alcohols before the period under review.

Equatorial Guinea’s new facility, which began commercial production in 2001, was funded

by direct investment from U.S.-based companies (see below).

Industry Overview

Equatorial Guinea and South Africa account for nearly all SSA production of acyclic

alcohols; however, they do not generally compete against one another in the global market.

Equatorial Guinea produces and exports only methanol, whereas South Africa primarily

produces and exports propanol and n-butanol (box 3-1).

The SSA acyclic alcohols industry is highly concentrated. Methanol in Equatorial Guinea

is produced by one firm, Atlantic Methanol Production Company LLC (AMPCO).2

 AMPCO

is owned by subsidiaries of U.S.-based Noble Energy, Inc. (45 percent ownership), U.S.-

based Marathon Oil Company (45 percent), and SONAGAS, EG, the national gas company

of Equatorial Guinea (10 percent).3
 4

 EIU, “Country Profile 2005: South Africa.”

 5

 Sasol, Ltd, “Sasol: 50 Years of Innovation”; Bureau van Dijk, Orbis Database.

3-3

Box 3-1 Product Description for Acyclic Alcohols

Acyclic alcohols, as classified under HS heading 2905, encompass a wide range of organic chemicals. However,

methanol, propanol, and n-butanol accounted for 97 percent of SSA exports in this category. Methanol, propanol, and

n-butanol are often used as solvents or as inputs for other chemicals. Specifically, methanol is primarily used as an

input in the production of formaldehyde, MTBE, and acetic acid. Propanol isomers tend to be used as solvents or

inputs by the chemical industry, and to a lesser extent in consumer products such as cosmetics, perfumes, personal

care products, and cleansers.1

 n-Butanol is principally used as an input for the production of other chemicals, such

as acrylate monomers, which in turn are used to make plastics and textile fibers.2

 n-Butanol is also used as a solvent

in paints, cosmetics, and perfumes.

The production processes for acyclic alcohols center on the use of fossil fuels as feedstocks. For example, the most

common production method worldwide for methanol uses steam reacted with natural gas to form carbon monoxide

and hydrogen, which are further processed to form methanol.3 Most countries that produce propanol isomers also rely

on feedstocks produced from natural gas and crude petroleum. However, the prices for these feedstocks have risen

significantly, which has affected the cost of producing propanol. In contrast, the only SSA country to export nontrivial

amounts of propanol, South Africa, uses a Fischer-Tropsch process that relies on coal as the primary feedstock

instead of crude petroleum or natural gas. The dominant industrial process for n-butanol production worldwide uses

carbon monoxide from steam reforming of either natural gas or products from crude petroleum refining. However, in

South Africa, n-butanol is made from coal feedstocks.

_______________

1

 Unrun and Pearson, “n-Propyl Alcohol,” 6; Logsdon and Loke, “Isopropyl Alcohol,” 19. 2

 Billig, “Butyl Alcohols,” 398.

3 English, et al. “Methanol,” 302–3.

In South Africa, the chemical industry, including the production of acyclic alcohols, is also

dominated by one company, Sasol, Ltd. To reduce dependence on imported petroleum, Sasol

was established as a state-owned company in the 1950s to produce synthetic crude petroleum

from South Africa’s vast coal reserves.4

 Sasol became a publicly traded corporation (on the

Johannesburg Stock Exchange) in 1979 and currently has a market capitalization of over

$21 billion and over 30,000 employees.5

 Sasol continues to use coal as a major feedstock for

the production of certain chemicals (including acyclic alcohols).

Sub-Saharan Africa Trade in the Global Context

The leading global exporters of acyclic alcohols tend to have large reserves of crude

petroleum and natural gas or a long history of producing petrochemicals from imported

crude petroleum. Abundant crude petroleum and natural gas resources give acyclic alcohol

producers an advantage in terms of lower-cost feedstocks. Some producers that have more

limited crude petroleum and natural gas reserves have long histories of chemical production

that give them the infrastructure and technical expertise to be competitive in the global

market using imported feedstocks. Abundant supplies of natural gas and coal provide a large

part of SSA’s comparative advantage in the production of acyclic alcohols; South Africa’s

chemical industry has a unique history of using coal as a feedstock instead of crude

petroleum.
 6

 Saudi Arabia’s largest export in this category is ethylene glycol (72.7 percent of acyclic alcohol exports

in 2005), which is not exported in large quantities by SSA countries. Therefore, Saudi Arabian exports do not

compete directly with acyclic alcohol exports from SSA countries. GTIS, Global Trade Atlas.

 7

 The next largest SSA exporter of acyclic alcohols was Liberia, which accounted for 0.7 percent of total

SSA exports from 2001 through 2005.

 8

 Propanol and n-butanol accounted for 90.7 percent of South Africa’s total acyclic alcohol exports in

2005. The next largest export was “Other Butanols” (HS 2905.14) at 5.2 percent.

3-4

Leading Exporters

Saudi Arabia is the biggest single exporter of acyclic alcohols, due largely to its extensive

crude petroleum and natural gas supplies (figure 3-1).6

 Certain other top exporters, including

the United States, the EU, and Canada, are historical chemical producers. Chile, Russia,

Trinidad and Tobago, and Venezuela are other competing exporters.

SSA is a relatively small global supplier of acyclic alcohols, and Equatorial Guinea and

South Africa accounted for more than 99 percent of SSA exports in 2005 (figure 3-1).7

 From

2001 through 2005, methanol exports from Equatorial Guinea increased by 345 percent, and

propanol and n-butanol exports from South Africa increased by 283 percent.8

 In total, SSA

exports of acyclic alcohols rose by 271 percent during the period, compared with growth in

global exports of 108 percent.

Saudi Arabia

21%

United States

11%

EU

9%

Canada

8%

SSA

2%

Other

49%

Global Exporters

Equatorial Guinea

60%

South Africa

40%

SSA Exporters

Figure 3-1 Leading global and sub-Saharan Africa exporters of acyclic alcohols, 2005

$18,210 million $348 million

Source: GTIS, Global Trade Atlas, annual data compiled from reporting countries’ official statistics, 

including EU external trade.
 9

 Industry official, interview by Commission staff, Houston, TX, November 3, 2006.

 10 GTIS, Global Trade Atlas.

 11 Ibid.

3-5

Leading Export Markets

China, the United States, and the EU, were the largest global markets for acyclic alcohols

in 2005 (figure 3-2). China’s imports of acyclic alcohols have shown strong growth recently,

in part due to that country’s increased production of synthetic fibers to supply its textiles

industry.9

 These three leading importers also produce acyclic alcohols domestically.

The United States, the EU, and China were also the three largest markets for SSA exports

of acyclic alcohols (figure 3-2).10 SSA exports to the United States increased from

$29 million in 2001 to more than $162 million in 2005, and from 2.1 percent to 7.0 percent

of U.S. imports. For the same period, SSA exports to the EU increased from more than

$30 million to nearly $107 million, and from 2.5 percent to 4.8 percent of EU imports. SSA

exports to China increased 965 percent, from $2 million in 2001 to more than $21 million

in 2005. Equatorial Guinea principally exports methanol to the United States and the EU.11

China

29%

United States

13%

EU

12%

South Korea

7%

SSA

1%

Other

38%

Global Export Markets

United States

47%

EU

26%

China

6%

Taiwan

5%

Other

17%

SSA Export Markets

Figure 3-2 Leading markets for global and sub-Saharan Africa exports of acyclic alcohols, 2005

$18,210 million $348 million

Source: GTIS, Global Trade Atlas, annual data compiled from reporting countries’ official statistics, 

including EU external trade.
 12 Ibid.

 13 European Commission Taxation and Customs Union, Online Customs and Tariff Database.

 14 Ibid.

 15 GTIS, Global Trade Atlas.

 16 European Commission Taxation and Customs Union, Online Customs and Tariff Database.

 17 Ibid.

3-6

In 2005, Equatorial Guinea accounted for 10.5 percent of all U.S. methanol imports and

5.8 percent of all EU methanol imports.12 Although U.S. imports from Equatorial Guinea

enter free of duty under the Generalized Schedule of Preferences (GSP), U.S. imports from

all other leading suppliers receive similar tariff treatment under free trade agreements (FTAs)

or preference programs. Methanol from Equatorial Guinea enters the EU free of duty under

the Lome Convention and the Cotonou Agreement.13 Chile, a primary competitor in the EU

market, receives a similar duty preference due to a bilateral FTA. EU imports from Russia,

the other primary competitor, are subject to a 5.5 percent duty, but this tariff advantage has

not resulted in Equatorial Guinea taking market share away from Russia because of the lower

transportation costs related to Russia’s proximity to the EU market.14 The following

tabulation identifies the principal competitors in Equatorial Guinea’s leading export markets

for methanol.

Market Principal competitors 

United States Domestic U.S. producers, Trinidad & Tobago, Venezuela

EU Chile, Russia

The three primary markets for South African exports of acyclic alcohols are the EU, China,

and the United States. In 2005, South Africa accounted for 1.4 percent of EU acyclic alcohol

imports, 0.4 percent of China’s imports, and 0.7 percent of U.S. imports.15 Acyclic alcohols

from South Africa benefit from duty-free treatment in the U.S. market under GSP. Such tariff

treatment allows it to compete with domestically produced products and products from

Canada, which also enter free of duty under the North American Free Trade Agreement

(NAFTA). South Africa benefits from a tariff advantage in the EU market compared to its

primary competitors, the United States and Russia. South Africa has an FTA with the EU

that eliminated duties on propanol and n-butanol.16 In contrast, the United States and Russia

face duties of 5.5 percent.17 South Africa does not have a tariff advantage relative to its

primary competitors in the Chinese market. The following tabulation identifies the principal

competitors in South Africa’s leading export markets for acyclic alcohols. 

Market Principal competitors 

EU United States, Russia

China United States, Russia

United States Domestic U.S. producers, Canada
 18 Gibson, “Methanol High on Tight Supply.”

 19 Chemical Market Reporter, “Chemical Profile: n-Butanol.”

 20 GTIS, Global Trade Atlas.

 21 EIU, “Country Profile 2006: Equatorial Guinea.”

3-7

Factors Affecting Trade Patterns

Both Equatorial Guinea and South Africa built new acyclic alcohol production facilities

between 2001 and 2005 to leverage their natural resources in response to increasing global

demand and prices for methanol and n-butanol. Direct investment from U.S.-based energy

companies allowed Equatorial Guinea to take advantage of its natural gas reserves, while the

South African firm Sasol used its coal-to-chemicals experience to further exploit that

country’s vast coal reserves.

Demand Growth and Price Increases

From 2001 through 2005, global demand for methanol as an input for making other

chemicals and products, such as MTBE and polyurethane foam insulation, was very strong,

and is expected to remain high.18 Global demand for n-butanol increased in the period from

2001 through 2005 due to increased demand for butanol-derived chemicals used in waterbased coatings and adhesives.19 Environmental concerns drove the coatings and adhesives

industries away from formulations based on organic solvents and toward water-based

formulations that use n-butanol derivatives.

Prices for acyclic alcohols were also affected by increased global demand for crude

petroleum and natural gas. Price increases for these items, which are used as feedstocks and

as energy sources in acyclic alcohol production, resulted in increased production costs. To

maintain profit margins and production levels, increased production costs were passed

through to consumers in the form of higher prices for acyclic alcohol. A large share of the

increase in the value of exports of acyclic alcohols from SSA in the period under review was

due to a general worldwide increase in unit values for these and other petrochemicals, both

due to increased demand for acyclic alcohol and higher production costs due to increased

petroleum and natural gas prices. The unit price of acyclic alcohol exports from Equatorial

Guinea increased from $88 per metric ton (mt) in 2001 to $238 per mt in 2005. Over that

same period, the price of acyclic alcohol exports from South Africa rose from an average of

$472 per mt to $738 per mt. The increase in the average unit value of South African acyclic

alcohol exports was somewhat mitigated by an increase in the ratio of lower-valued nbutanol exports to propanol exports.20

Increased Investment and Natural Resources

In response to rising global demand and prices, AMPCO constructed a methanol plant in

Equatorial Guinea that began commercial production in April 2001. This plant accounts for

virtually all of Equatorial Guinea’s methanol exports. A leading factor in the decision to

construct a methanol plant in Equatorial Guinea was access to an inexpensive source of

natural gas, the primary feedstock for producing methanol. Equatorial Guinea’s natural gas

reserves are estimated to contain 6.9 trillion cubic feet of natural gas.21 Furthermore, natural

gas prices in Equatorial Guinea (approximately $0.25 per million Btu (British thermal units))

are significantly lower than in certain other methanol-producing countries such as the United
 22 In the United States, natural gas demand for electrical generation is driven by environmental regulations

and low capital costs of natural gas electrical generation plants relative to coal plants. Equatorial Guinea does

not have the same demand for natural gas for electrical generation. MMBtu stands for “million British

thermal units.” It is a measure of the energy in natural gas and the typical basis for natural gas prices.

Industry official, interview by Commission staff, Houston, TX, November 3, 2006.

 23 AMPCO, “Atlantic Methanol Production Company History.”

 24 Chemical Week, “Sasol Goes Ahead with N-Butanol."

3-8

States (approximately $8.00 per million Btu).22 The AMPCO plant is able to take advantage

of this price difference and produce a profitable product from the natural gas that is a byproduct of crude petroleum production in the coastal waters of Equatorial Guinea.23

To take advantage of increased demand and prices, Sasol opened a new n-butanol production

facility in 2002 in Sasolburg, South Africa. The new facility has an annual capacity of

150,000 mt and uses synthetic gas from coal as a feedstock.24 The South African chemical

industry is unique compared to chemical industries globally because it is based on South

Africa's vast coal resources instead of on petroleum, of which South Africa has only small

reserves. Since domestic coal prices do not tend to fluctuate as much as global crude

petroleum prices, Sasol has some protection against the rising feedstock costs that confront

industries in other countries. South Africa is currently the only country in the world with

extensive experience in converting coal into chemicals and transportation fuels.
3-9

Acyclic Alcohol Bibliography

Atlantic Methanol Production Company, LLC (AMPCO). “Atlantic Methanol Production Company

History.” http://www.atlanticmethanol.com/HISTORY.html (accessed November 13, 2006).

______. “Ownership of the Atlantic Methanol Companies.”

http://www.atlanticmethanol.com/OWNERS.html (accessed December 13, 2006).

Billig, Ernst. “Butyl Alcohols.” In Kirk-Othmer Encyclopedia of Chemical Technology, edited by Arza

Seidel, Vol. 4, 393–402. Hoboken, NJ: John Wiley & Son, Inc., 2001.

Bureau van Dijk Electronic Publishing. ORBIS Database. http://orbis.bvdep.com/ (accessed

November 13, 2006).

Chemical Market Reporter. “Chemical Profile: n-Butanol,” October 28, 2002.

Chemical Week. “Sasol Goes Ahead with N-Butanol,” December 22, 1999.

Economist Intelligence Unit. “Country Profile 2005: South Africa.” http://www.eiu.com/ (accessed

November 13, 2006).

———. “Country Profile 2006: Equatorial Guinea.” http://www.eiu.com/ (accessed November 13, 2006).

English, Alan, Jerry Rovner, John Brown, and Simon Davies. “Methanol.” In Kirk-Othmer Encyclopedia of

Chemical Technology, edited by Arza Seidel, Vol 16, 299–316. Hoboken, NJ: John Wiley & Son, Inc.,

2005.

European Commission Taxation and Customs Union. Online Customs and Tariff Database (TARIC).

http://ec.europa.eu/taxation_customs/customs/customs_duties/tariff_aspects/customs_tariff/index_en.htm

(accessed November 13, 2006).

Gibson, Jane. “Methanol high on tight supply.” ICIS Chemical Business 1, no. 6 (February 13, 2006): 35.

Global Trade Information System, Inc. (GTIS). Global Trade Atlas. Annual data compiled from reporting

countries’ official statistics, including EU25 external trade. http://www.gtis.com/gta/usitc/ (accessed

various dates).

Logsdon, John E., and Richard A. Loke. “Isopropyl Alcohol.” In Kirk-Othmer Encyclopedia of Chemical

Technology, edited by Arza Seidel, 1–23. Hoboken, NJ: John Wiley & Son, Inc., 2000.

Sasol, Ltd. “Sasol: 50 Years of Innovation.”

http://www.sasol.com/sasol_internet/downloads/Sasol%2050%20year%20Brochure_10390694

22306.pdf (accessed December 13, 2006).

USITC. Interactive Tariff and Trade Dataweb (Dataweb). http://dataweb.usitc.gov/ (accessed various

dates).

Unruh, J.D. and D. Pearson. “n-Propyl Alcohol.” In Kirk-Othmer Encyclopedia of Chemical Technology,

edited by Arza Seidel, 1–8. Hoboken, NJ: John Wiley & Son, Inc., 2000.
 44 South Africa accounted for less than 1 percent of global crude steel production and global flat hot-rolled

steel production in 2005. International Iron and Steel Institute, Steel Statistical Yearbook 2006, 51.

 45 In June 2004, LNM Holdings acquired Iscor, Ltd. (Iscor). As a result, Iscor changed its name to Ispat

Iscor, in line with other LNM companies. In December 2004, Ispat International merged with LNM Holdings

to form Mittal Steel Company. Ispat Iscor subsequently changed its name to Mittal Steel SA. See Mittal Steel

SA, Annual Report (2004), 16.

 46 Mittal Steel South Africa, Annual Report 2005, 10; “Evraz to Buy Interest in Highveld Steel,”

American Metal Market (July 14, 2006); Acerinox Group, Annual Report 2005.

3-10

Flat-rolled Steel

Summary of Findings

SSA exports of flat-rolled steel more than doubled from 2001 through 2005 to over

$1.7 billion, mirroring the expansion in global trade for such products (table 3-2). SSA

export growth benefited from increases in regional capacity and production of both carbon

and stainless flat-rolled steels, coupled with increasing international steel prices that rose as

a result of growing demand and escalating raw materials costs. In South Africa, the dominant

SSA flat-rolled steel exporter, fluctuations in domestic demand also influenced annual export

volumes, although overall export volumes increased during the period. Intra-SSA exports

rose as well, due to growing economic integration in areas such as East Africa, the growth

in South African shipments of flat-rolled products to Kenya and Tanzania for further

processing, and increasing regional demand for construction and roofing materials.

Industry Overview

The flat-rolled steel industry in SSA is heavily concentrated in South Africa, the largest steel

producer in Africa, and to a considerably lesser extent in Kenya and Tanzania. South

Africa’s industry is engaged in a variety of steel production processes, including production

of crude steel and hot-rolling, as well as cold-rolling, galvanizing, and finishing (box 3-2).

In contrast, the industries in Kenya and Tanzania are limited to cold-rolling, galvanizing, and

finishing.

South Africa

The South African industry accounted for about 90 percent of flat hot-rolled steel production

in SSA in 2005.44 The industry is heavily concentrated among three multinational steel

producers: Mittal Steel SA (formerly Iscor, Ltd.), which is the largest South African

producer and a subsidiary of the world’s largest steel producer; Highveld, recently acquired

by Russian steel producer Evraz from Anglo-American; and Columbus, which is majorityowned by Spanish stainless steel producer Acerinox Group.45 Mittal Steel SA produced

5 million mt of carbon flat-rolled steel in 2005, compared with 685,000 mt of carbon flatrolled steel produced by Highveld and 500,000 mt of stainless flat-rolled products by

Columbus.46
3-11

Table 3-2 Sub-Saharan Africa flat-rolled steel exports, by selected exporters and key markets, 2001–05

Exporters Key markets

Exports

2001 2002 2003 2004 2005

Percent

change

2001–05

South

Africa

EU 1,000 dollars 250,001 182,861 270,040 463,850 525,902 110

Metric tons 576,651 275,777 307,734 371,476 366,600 -36

China 1,000 dollars 62,151 112,218 322,787 277,042 365,085 487

Metric tons 153,462 261,537 527,994 391,390 360,663 135

South

Korea

1,000 dollars 30,553 55,006 95,554 70,135 127,423 317

Metric tons 82,454 105,758 215,274 62,968 159,543 93

Kenya 1,000 dollars 16,184 33,479 64,648 133,437 n/a n/a

Metric tons 63,164 100,025 152,852 236,829 n/a n/a

All other 1,000 dollars 441,916 457,593 565,266 824,129 646,437 46

Metric tons 809,419 829,915 1,037,808 1,001,516 886,383 10

Total 1,000 dollars 799,804 840,157 1,318,295 1,768,593 1,664,847 108

Metric tons 1,685,150 1,573,012 2,241,662 2,064,179 1,773,189 5

Kenya

Uganda 1,000 dollars 12,786 19,434 10,709 12,106 26,140 104

Metric tons 22,214 29,777 14,589 13,804 28,820 30

Tanzania 1,000 dollars 2,136 1,821 3,495 5,764 n/a n/a

Metric tons 2,581 2,108 4,620 6,388 n/a n/a

Malawi 1,000 dollars 988 1,758 3,000 6,9234 7,689 678

Metric tons 1,464 2,789 3,600 8,126 7,838 435

All other 1,000 dollars 7,190 9,195 17,912 21,158 14,486 101

Metric tons 12,213 12,221 19,651 15,637 16139 32

Total 1,000 dollars 23,100 32,208 35,116 45,621 48,315 109

Metric tons 38472 46,895 42,460 43,955 52,797 37

Tanzania

Uganda 1,000 dollars 370 756 3,341 7,590 6,765 1,728

Metric tons 648 1,131 5,511 10,152 8413 1,198

Rwanda 1,000 dollars 153 429 476 n/a n/a n/a

Metric tons 225 632 637 n/a n/a n/a

All other 1,000 dollars 376 97 42 315 512 36

Metric tons 2,179 176 39 357 237 -89

Total 1,000 dollars 899 1,282 3,859 7,905 7,277 709

Metric tons 3,052 1,939 6,187 10,509 8,650 183

SubSaharan

Africa

Total

1,000 dollars 838,661 893,948 1,377,557 1,830,592 1,724,645 106

Metric tons 1,748,580 1,651,043 2,460,913 2,130,452 1,842,984 5

Source: GTIS, Global Trade Atlas, annual data compiled from reporting countries’ official statistics, including EU external trade.

Note.—Export values and quantities are reported and aggregated at the 4-digit level for HS headings 7208, 7209, 7210, 7211, and 7212 (carbon

flat-rolled products); 7219 and 7220 (stainless flat-rolled products); and 7225 and 7226 (alloy flat-rolled products). Export values and quantities

were derived from reporting countries’ import data. The volume of exports to “all other” markets was derived by subtracting the sum of the volume

of principal export markets from the total volume of exports.
 47 Government of Kenya, Ministry of Trade and Industry, The Iron and Steel Sub-Sector in Kenya, 2.

 48 Aluminium Africa (ALAF) company representative, e-mail message to Commission staff,

January 23, 2007.

 49 Mabati Rolling Mills (MRM) official interview by Commission staff, Nairobi, Kenya,

December 4, 2006.

 50 ALAF company website. ALAF consumes most of its cold-rolled production in its galvanizing line. 

Thomas Yager, The Mineral Industry in Tanzania, 38.3.

3-12

Box 3-2 Product Description for Flat-rolled Steel

Flat-rolled steels include a variety of intermediate steel products that are either wound into coils or cut to discrete

straight lengths. Principal flat-rolled steel products include sheet, strip, and plate. These products are commonly

differentiated by their physical dimensions, width, and thickness (gauge). Flat-rolled steels can be produced from

carbon, stainless, or other alloy steels.

The manufacturing process for flat-rolled steel generally comprises three distinct stages: (1) melting and refining

of crude steel, (2) casting of molten steel into semi-finished forms such as slab, and (3) hot-rolling semi-finished

forms into hot-rolled mill products such as sheet, strip, and plate. These products may be sold as is or be subjected

to further processing, including cold-rolling to further reduce thickness and enhance certain properties of the steel,

and galvanizing to resist corrosion.

Flat-rolled steel is used in a diverse array of end-use market applications. Hot-rolled carbon steels are used in

automotive applications, such as body frames, as well as to produce welded pipe and tube. Cold-finished sheet also

is used in automotive applications, as well as in consumer appliances. Cut-to-length plate is used in load-bearing

or structural applications, such as bridge work, and heavy transportation equipment. Corrosion-resistant carbon flatrolled products and stainless steel flat-rolled products are used by the chemical and construction industries, as well

as by appliance and industrial equipment manufacturers in applications where the corrosion resistance, heat

resistance, or design characteristics of stainless steels are required.

Kenya and Tanzania

The steel industries in Kenya and Tanzania are considerably smaller in terms of production

capacity and output than the industry in South Africa. Furthermore, with no crude steel

production, these two industries depend on imported inputs, including imported hot-rolled

coils to be further processed into cold-rolled coils. Cold-rolled product is in turn processed

into galvanized sheet, as well as into color-coated sheet.47 Kenya’s four rolling mills have

a total cold-rolled steel capacity of 220,000 mt, and its three galvanizing mills have a

galvanizing capacity of 210,000 mt. By comparison, Tanzania’s cold-rolling capacity is

69,000 mt with galvanizing capacity of 69,000 mt.48 

In Kenya and Tanzania, and more generally East Africa, flat-rolled steel production is

largely concentrated among affiliates of the Safal Group, which principally seeks to serve

domestic and regional SSA markets. Mabati Rolling Mills, Ltd. (MRM), a member of the

Safal Group, is Kenya’s largest cold roller and galvanizer.49 Other leading Kenyan producers

include Standard Rolling Mills, Ltd., and Kenya United Steel Company, Ltd. Aluminium

Africa Ltd., an affiliate of the Safal Group, is the largest flat-rolled producer in Tanzania.50

M.M. Integrated Steel Mills, Ltd. (M.M. Steel), is Tanzania’s other significant flat-rolled

steel producer. 
3-13

Sub-Saharan Africa Trade in the Global Context

The largest global exporters of flat-rolled steel (by value) are also among the largest global

producers. Global exports of flat-rolled steel more than doubled to over $94 billion from

2001 through 2005. Flat-rolled steel exports from SSA also nearly doubled to over

$1.7 billion from 2001 through 2005.

Leading Exporters

In 2005, Japan was the largest exporter of flat-rolled products in terms of value, accounting

for almost one-fifth of total global exports. Japan was followed by South Korea, Taiwan,

Russia, the United States, and China (figure 3-3). South Africa, the SSA region’s largest

producer and exporter, is the 12th-largest global exporter and accounted for 2 percent of

global exports.

South Africa accounted for virtually all (more than 96 percent) of SSA flat-rolled steel

exports in terms of value in 2005 (figure 3-3). Kenya accounted for nearly 3 percent,

whereas Tanzania accounted for less than one-half percent.

South African exports of all flat-rolled steel products increased approximately 108 percent,

from $800 million in 2001 to $1.66 billion in 2005. During this time, the export value of

stainless steel products rose significantly. As a result, stainless steel grew to account for

51 percent of the total value of South African flat-rolled steel exports by 2005, up from

43 percent in 2001. Although the value of South African flat-rolled steel exports increased

substantially, the total quantity of exports increased by only 5 percent, from nearly

1.7 million mt in 2001 to approximately 1.8 million mt in 2005. Declining export volumes

of certain hot-rolled steel products were offset by increasing export volumes of highervalued items such as certain stainless flat-rolled products, certain cold-rolled products, and

certain plated or coated products.

Kenyan exports of flat-rolled steel products reached approximately $48.3 million in 2005,

representing a 109 percent increase since 2001. In terms of quantity, Kenyan exports of flatrolled steel products increased 37 percent to approximately 52,800 mt in 2005. From 2001

through 2005, overall growth in Kenyan exports of flat-rolled steel products was primarily

attributable to the increase in exports of galvanized sheet, which accounted for

approximately 70 percent of the value and quantity of all Kenyan flat-rolled exports in 2005.

Kenyan exports of galvanized sheet were largely shipped to the steel roofing market

throughout East Africa.

Leading Export Markets

China is the largest market for flat-rolled steel exports, with Chinese imports accounting for

21 percent of all global imports in terms of value, followed by the EU, the United States, and

South Korea (figure 3-4). Overall, the top ten importers of flat-rolled steel products

accounted for over 74 percent of global imports. By comparison, SSA imports of flat-rolled

steel products accounted for less than 1 percent of global imports, although this value is most

likely understated, as several markets for SSA countries that reported an increasing
3-14

China

23%

EU25

10%

United States

9%

South Korea

8%

All other

50%

Global Export Markets

EU25

China 31%

21%

South Korea

7%

United States

6%

Thailand

6%

Other

28%

SSA Export Markets

Figure 3-4 Leading markets for global and sub-Saharan Africa exports of flat-rolled steel, 2005

$89,310 million $1,725 million

Source: GTIS, Global Trade Atlas, annual data compiled from reporting countries’ official statistics,

including EU external trade.

Japan

19%

Korea South

Taiwan 11%

8%

Russia

7%

United States

6%

China

6%

SSA

2%

All other

42%

Global Exporters

South Africa 

97%

Kenya

3%

Other SSA

1%

SSA Exporters

Figure 3-3 Leading global and sub-Saharan Africa exporters of flat-rolled steel,

2005

$89,310 million $1,725 million

Source: GTIS, Global Trade Atlas, annual data compiled from reporting countries’ official statistics, 

including EU external trade.
 51 Data for 2005 Kenyan imports from South Africa (i.e., South African apparent exports to Kenya) are

unavailable. Based on 2001–04 data for Kenya imports from South Africa, Kenya continued to grow as a

regional market for South African exports.

 52 Although Uganda has a flat-rolled steel industry, exports volumes were small (i.e., under 2,000 mt per

year). Export volumes were smaller in 2004 than they were in 2001, despite slightly higher export volumes

in 2003.

 53 The Monitor (Uganda), “Roofings’ Investments Grow as Its Market Share Doubles.”

3-15

import trend between 2001 and 2004 have not yet reported 2005 imports. In 2004, SSA

imports of flat-rolled steel products accounted for about 1.2 percent of global imports.

The EU, China, South Korea, and the United States were the primary markets for SSA

(predominantly South African) exports of flat-rolled steel products in 2005.51 South African

export volumes of stainless steel flat-rolled products to the EU (the largest SSA export

market) increased while export volumes of carbon steel flat-rolled products declined. This

shift to greater export volumes of stainless steel flat-rolled products to the EU resulted in a

significant increase in the value of exports to the EU during the period, despite overall

declining export volumes. SSA exports to the EU of flat-rolled products are free of duty.

Declining South African exports of certain cold-rolled flat steel products and certain coated

flat-rolled steel products to the EU coincided with increased exports of these items to China.

SSA exports face tariffs ranging from 3 percent to 12 percent in the Chinese market.

Kenya has grown as an important regional market for South African exports of flat-rolled

steel products, which rose from $16 million in 2001 to over $130 million in 2004. The vast

majority of South African exports of flat-rolled steel products to Kenya are hot-rolled steel

coils. From 2001 through 2004, South African export volumes of flat-rolled steel products

to Kenya increased 275 percent, to almost 237,000 mt in 2004.

Although relatively small on an absolute basis, exports of flat-rolled steel products from

Kenya and Tanzania to other eastern African markets increased during the period.52 Regional

SSA markets that have experienced increased imports from Kenya and Tanzania in recent

years include Uganda, Malawi, and Rwanda. Other regional SSA markets for flat-rolled steel

products that have developed in recent years include Burundi, southern Sudan, and the

Democratic Republic of Congo.53

Primary global competitors for SSA exporters of flat-rolled steel products vary by principal

SSA export market and are presented in the following tabulation.

Market Competitor 

EU EU domestic producers, Russia, China

China Chinese domestic producers, Japan, Taiwan, South Korea

Regional SSA markets Japan, India

South Korea South Korea domestic producers, Japan, China, Russia
 54 Peter Dieterich (Secretary General of the South African Iron and Steel Institute), e-mail message to

Commission staff, September 13, 2006.

 55 Iscor Limited, Annual Report (2002), 15; and Annual Report (2003), 24.

 56 CRU Group, CRU Monitor: Steel.

3-16

Factors Affecting Trade Patterns

The increased value of flat-rolled steel exports during 2001–05 is primarily a function of

increasing international demand and prices for both carbon and stainless steel products,

coupled with production and capacity gains.54 In part, the dramatically increased costs of raw

materials used to make steel contributed to the growth in steel prices. In particular,

increasing global demand for nickel and chromium, two primary raw materials of stainless

steel, raised stainless input prices. This contributed to the increase in the value of exports of

stainless steel flat-rolled products.

The growth in SSA export volumes of flat-rolled steel is primarily a result of increases in

capacity and production of both carbon and stainless flat-rolled steel products in South

Africa in response to growth in regional and international demand. Furthermore, domestic

demand for flat-rolled carbon steel products in South Africa influenced export volumes.

Export volumes were reduced to accommodate periods of higher domestic consumption, and

vice versa.

Although smaller in scale, regional SSA trade among East African countries increased as

South Africa increasingly exported hot-rolled products to Kenya, and to a lesser extent

Tanzania, to supply those countries’ expanding cold-rolled and galvanizing operations.

Correspondingly, exports from Kenya and Tanzania to other regional markets, such as

Malawi, Rwanda, and Uganda have increased in response to growing demand for flat-rolled

steel products in the construction and roofing sectors.

Demand Growth and Price Increases

Demand and prices for both carbon and stainless flat-rolled steel products increased across

all major geographic areas of the world from 2001 through 2005, in contrast to a price

collapse brought on by global oversupply conditions and slowing global economic growth

in 2000 and 2001. Temporary safeguard measures introduced by, among others, the United

States and EU, coupled with a reduction in steel capacity and production, reportedly helped

boost carbon steel prices beginning in 2002.55 Increasing demand in major steel consuming

economies, such as China and the United States, drove the cost of raw materials, including

steel scrap, stainless steel scrap, and nickel to new highs. Increasing demand coupled with

rising raw materials costs contributed to the significant increase in flat-rolled carbon steel

prices, and flat-rolled stainless steel prices in the latter part of the period compared to 2001.

During 2001–05, prices for certain hot-rolled carbon steel products more than doubled in the

United States (143 percent increase to $599 per mt in 2005), Europe (124 percent to $477 per

mt) and China (120 percent to $449 per mt).56 Prices for certain cold-rolled carbon steel
 57 From 2001 through 2005, prices for certain cold-rolled carbon flat products increased by 101 percent to

$696 per mt in the United States, by 92 percent to $589 per mt in Europe, and by 116 percent to $592 per mt

in China. Between 2001 and 2005, prices for certain galvanized flat-rolled products increased by 94 percent

to $747 per mt in the United States, by 79 percent to $614 per mt in Europe, and by 70 percent to $627 per

mt in China. CRU Group, CRU Monitor: Steel.

 58 London Metal Exchange (LME) AM spot bid price as reported by American Metal Market.

 59 Stainless steel scrap grade 304 solids, c.i.f. Europe, as reported by Metal Bulletin.

 60 Purchasing Magazine.

 61 Member countries of the East African Community, or EAC, are Kenya, Tanzania, and Uganda. Burundi

and Rwanda are set to join in 2007. Member countries of the Common Market for Eastern and South Africa,

or COMESA are Angola, Burundi, Comoros, Democratic Republic of Congo, Djibouti, Egypt, Eritrea,

Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda,

Zambia, and Zimbabwe.

 62 MRM officials, interview by Commission staff, Nairobi, Kenya, December 4, 2006.

 63 Iscor Limited, Annual Reports (2001–03); and Mittal Steel South Africa, Annual Reports (2004–05).

3-17

products and galvanized carbon sheet products in these regions followed similar increasing

trends.57

Prices for stainless steel products soared during the period, driven by escalating raw

materials costs, notably for nickel. Nickel prices increased by 148 percent to around

$14,700 per mt, and continued to climb to over $30,000 per mt in late 2006.58 High nickel

prices drove stainless scrap prices to a five-year high of about $1,380 per mt in 2005, up over

135 percent compared to 2001.59 As a result, stainless steel flat-rolled prices, including raw

materials surcharges, increased significantly. For example, prices in the United States for

certain hot-rolled stainless steel plate, including surcharges, increased by over 150 percent

to an annual average of about $5,160 per mt in 2005 compared to 2001.60

Demand for flat-rolled steel in eastern and southern regional SSA markets also has increased

in recent years, albeit sporadically in some countries, as a result of growing demand from

the construction and roofing sectors.61 In response to growing regional demand, flat-rolled

steel producers such as Kenya’s MRM, as well as other affiliates of the Safal Group, are

focusing flat-rolled steel exports on the eastern and southern SSA region.62

Increased Investment

South Africa

Increased capacity and production in SSA during 2001–05 was largely a result of investment

programs undertaken in South Africa by Iscor in collaboration with LNM Holdings (at

facilities re-organized under Mittel Steel SA in late 2004), and Columbus to boost

productivity and design capacity for liquid steel production, as well as to increase both hotrolling and cold-rolling capacities to supply growing regional and international market

demand. Mittal Steel SA currently has two mills—Vanderbijlpark and Saldanha

Steel—devoted to the production of flat-rolled carbon steel products. Vanderbijlpark is an

integrated mill that produces 3.8 million mt of liquid steel per year. This is used to produce

hot-rolled plate and coil, as well as cold-rolled and finished strip and sheet. Saldanha Steel,

which is largely export focused, produces 1.2 million mt of liquid steel per year, primarily

used to produce thinner-gauged, hot-rolled coil.

From 2001 through 2005, the combined liquid steel production at both mills increased by

13 percent, from approximately 4.5 million mt in 2001 to almost 5.1 million mt in 2005.63

The factors behind these production increases are the integration of the two plants following

Iscor’s purchase of the remaining 50 percent share of Saldanha Steel from South Africa’s
 64 Ibid., Sinter production is the process of producing small iron pellets from iron-bearing particles used to

produce molten iron and steel.

 65 Iscor Limited, Annual Reports (2002).

 66 In 2002, Iscor signed a business assistance agreement with LNM Holdings. Through this performancebased agreement, LNM Holdings provided technical, marketing, and purchasing assistance to Iscor, subject

to Iscor meeting specified annual cost-savings targets for a 3-year duration ending in December 2004. In

return, Iscor issued a pre-determined percentage of shares to LNM Holdings. By June 2004, LNM Holdings

raised its shareholding in Iscor to 50.01 percent, thereby acquiring control of the company. See Iscor, Ltd.,

“Business Assistance Agreement Entered into Between Iscor and LNM”; Iscor, Ltd., Annual Report (2003),

54 and 92; and Mittal Steel SA, Annual Report (2004), 16.

 67 Mittal Steel South Africa, Annual Report (2005).

 68 Metal Bulletin, “Mittal Steel SA Adds Galv Line after Slab Caster Restart.”

 69 Ibid., “Mittal Steel SA Considers Imports As Demand Booms.”

 70 Acerinox, Annual Report (2001), 7.

 71 Ibid.

 72 Acerinox, Annual Reports (2003–05); Lucien Matthews (General Manager, Commercial, Columbus

Stainless), e-mail message to Commission staff, October 19, 2006.

 73 Lucien Matthews (General Manager, Commercial, Columbus Stainless), e-mail message to Commission

staff, October 19, 2006.

3-18

Industrial Development Corporation in 2001; increased capital spending to boost

productivity and design capacity at Saldanha and liquid steel production at Vanderbijlpark;

and operational improvements at major rolling units, and in coke making and sinter

production at Vanderbijlpark.64 Additionally, re-engineering efforts in 2002 to transfer

production of thinner-gauged, hot-rolled coil from Vanderbijlpark to Saldanha freed up an

estimated 120,000 mt of capacity.65 Technical and other business assistance was provided

to Iscor by LNM Holdings between 2002 and 2004.66 In 2005, the newly constituted Mittal

Steel SA announced plans to install a galvanizing line to focus production on thin-gauge

roofing material to meet demand from the low-cost housing market, as well as to expand

capacity at its electro-galvanizing plant by 35 percent to meet demand from the automotive

industry.67 In late 2006, Mittal Steel SA commissioned a new $15.6 million galvanizing line

with a capacity of 100,000 mt per year at Vanderbijlpark, with the objective of increasing

local and regional market share for galvanized flat-rolled products and thereby reducing the

need for imported material.68 Looking forward, Mittal Steel SA reportedly will invest

$1.1 billion to expand crude steel production by more than 2 million mt per year by 2010 at

Vanderbijlpark, thereby substantially increasing South Africa’s potential to supply its

domestic market and to further increase exports.69

Stainless steel production at Columbus increased 9.5 percent from 516,000 mt in 2001 to

approximately 565,000 mt in 2005. Production increases at Columbus resulted largely from

a €110 million ($123 million) investment program approved by Acerinox, following its

majority acquisition of Columbus in 2001, to increase production at the melt shop (crude

steel production) and hot-rolling mill, and to boost cold-rolling capacity in order to diversify

into thinner-gauged and higher-value cold-rolled products. Acerinox deemed Columbus an

attractive acquisition based on its integrated manufacturing process, its proximity to raw

materials, supply of inexpensive electricity, and high-growth domestic market for stainless

steel.70 Additionally, Acerinox pursued augmenting the growth of the plant’s output and sales

by providing its own technology and international commercial network.71 Between 2003 and

2005, the annealing and pickling lines were enlarged, permitting a slight increase in

production, while investments were made to undertake other process improvements.72

Technical assistance for process improvements during this time was provided by engineers

from Spanish parent Acerinox.73
 74 Acerinox, Annual Report (2005).

 75 Lucien Matthews (General Manager, Commercial, Columbus Stainless), e-mail message to Commission

staff, October 19, 2006.

 76 MRM officials, interview by Commission staff, Nairobi, Kenya, December 4, 2006; MRM company

Website; International Finance Corporation; and the European Investment Bank.

 77 Ibid..

 78 Thomas Yager, The Mineral Industry of Tanzania (2001–2003).

 79 M.M. Integrated Steel Mills, Ltd. company Website.

3-19

Although Columbus increased the capacity and production of stainless steel at the melt shop

and the hot-rolling and cold-rolling mills between 2001 and 2005, Columbus’ hot-rolled

production exceeded the capacity limitations of its cold-rolling mill during the period. As

a result, excess hot-rolled product was generally exported to Asian market customers with

cold-rolling capacity. From 2004 through 2005, demand for hot-rolled coil declined from

Asian buyers and there was a relative price increase of South African stainless steel exports

resulting from the appreciation of the rand relative to the U.S. dollar and the euro. These

developments prompted Columbus to reduce liquid steel production and hot-rolled stainless

steel sheet production by more than 20 percent.74 Although demand in Asian markets for hotrolled product reportedly rebounded in 2006, Columbus has continued to increase

investments in downstream cold-rolling capacity in order to diversify its product mix,

thereby reducing Columbus’s dependence on foreign demand for its hot-rolled products that

was concentrated in a few select export markets.75

Kenya and Tanzania

In Kenya and Tanzania, increased cold-rolling and galvanizing capacities, primarily by

affiliate companies of the Safal Group, led to increased production and exports of coldrolled, coated, and galvanized flat-rolled steel products. In 1999, MRM began construction

of a $30 million continuous galvanizing plant in Kenya, co-financed by the International

Finance Corporation (IFC) and the European Investment Bank (EIB), to meet increasing

demand in both domestic and export markets. This resulted in the production of galvanized

sheet and coils beginning the following year.76 In 2001, MRM established an aluminum-zinc

coating line, as well as a color coating line in the Athi River Export Processing Zone near

Nairobi.77

In Tanzania, increased production from 2001 through 2005 corresponded with growth in

export volumes over the period. Production growth was achieved through increases in

capacity utilization and capacity expansion. ALAF increased production of galvanized sheets

by over 40 percent to 33,000 mt per year, from 2001 through 2003 thereby increasing

capacity utilization rates to around 80 percent at its galvanizing plant.78 M.M. Steel has

undertaken an expansion program, which includes the addition of a continuous hot-dip

galvanizing line and an additional cold-rolling mill that will begin production in future

years.79

Fluctuating Export Supply

South African exports of flat-rolled carbon steel products are affected by changes in

domestic demand for these products. From 2001 through 2005, export volumes for flat-rolled

carbon steel periodically declined in response to higher levels of South African domestic

demand, and vice versa. Nevertheless, overall domestic shipments increased by 5.3 percent

(approximately 2.7 million mt) and export volumes increased by 13.3 percent (approximately

2.3 million mt) during 2001–05. Domestic consumption of flat-rolled carbon steel products
 80 Peter Dieterich (Secretary General of the South African Iron and Steel Institute), e-mail message to

Commission staff, September 12, 2006.

 81 Peter Dieterich (Secretary General of the South African Iron and Steel Institute), e-mail message to

Commission staff, September 12, 2006. Domestic shipment and export data for flat-rolled carbon steel

products reported by SAISI members. Data do not include exports by service centers or non-SAISI members.

 82 Annual domestic shipments of flat-rolled carbon steel products as reported by the South African Iron

and Steel Institute (SAISI); Iscor Limited, Annual Report (2002).

 83 Domestic shipment and export data for flat-rolled carbon steel products reported by SAISI members.

Data do not include exports by service centers or non-SAISI members. Data provided to USITC staff by

SAISI.

 84 Peter Dieterich (Secretary General of the South African Iron and Steel Institute), e-mail message to

Commission staff, September 12, 2006; Iscor Limited, Annual Report (2003), 28.

 85 Mittal Steel South Africa, Annual Report (2004), 29.

 86 Metal Bulletin, “Mittal Steel SA Considers Imports as Demand Booms.”

 87 Peter Dieterich (Secretary General of the South African Iron and Steel Institute), e-mail message to

Commission staff, September 12, 2006.

3-20

varied from year to year, reaching a low of 44 percent of production and a high of 59

percent.80 Correspondingly, annual exports of flat-rolled carbon steel products fluctuated

from 41 percent to 56 percent of production.81

Annual South African domestic shipments of flat-rolled carbon steel products increased by

20 percent from approximately 2.1 million mt in 2001 to a little over 2.5 million mt in 2002.

This increase corresponded to strong domestic demand for flat-rolled carbon steel products

for durable goods, new developments in the mining industry, and depressed export prices.82

Exports declined 11 percent to about 2 million mt during the same period.83 In contrast, in

2003 domestic shipments of flat-rolled carbon steel products declined 22 percent to 2 million

mt, attributable in part to lower domestic demand for durable goods and an appreciation of

the rand that negatively impacted the competitiveness of domestic downstream steel

consuming sectors.84 Correspondingly, from 2002 through 2003 exports increased 42 percent

to 2.6 million mt.

Domestic shipments again increased from 2003 through 2004 as a result of economic growth

coupled with higher demand in the construction, building, automotive, and appliance sectors

in South Africa. Mittal Steel SA correspondingly allocated lower volumes for international

export and focused on local and regional markets.85 Following lower domestic shipments and

higher export volumes in 2005, domestic demand was reportedly strong in 2006, particularly

for galvanized sheet.86

In contrast, South African flat-rolled stainless steel production is predominantly for export

markets. Columbus is predominantly export oriented, as the domestic market and regional

SSA markets for flat-rolled stainless steel products are relatively small compared to the

larger domestic and regional SSA markets for flat-rolled carbon steel products. As a result,

70 to 80 percent of production of stainless steel is exported and is thus more dependent on

foreign demand. Stainless steel production is reportedly adjusted as international market

conditions warrant.87
3-21

Flat-rolled Steel Bibliography

Acerinox Group. Annual Report. 2001. http://www.acerinox.com (accessed various dates).

———. Annual Report. 2002. http://www.acerinox.com (accessed various dates).

———. Annual Report. 2003. http://www.acerinox.com (accessed various dates).

———. Annual Report. 2004. http://www.acerinox.com (accessed various dates).

———. Annual Report. 2005. http://www.acerinox.com (accessed various dates).

Aluminium Africa, Ltd. “Country Profile.” http://www.aluminiumafrica.com (accessed various dates).

American Metal Market. LME nickel AM spot bid price. http://www.amm.com (accessed various dates).

CRU Group. CRU Monitor: Steel. Historical monthly steel pricing series, January 2001–December 2005.

Republic of South Africa, Department of Trade and Industry (DTI). Metals Sector Development Strategy. 

Draft, 2005. http://www.dti.gov.za/publications/MetalsSectorDevelopStrat.htm (accessed

August 31, 2006).

European Investment Bank. “Loans Activity: Kenya.” 

http://www.eib.europa.eu/projects/loans/regions/CountryList.asp?Region=5&Country=129

(accessed January 9, 2007).

Global Trade Information System, Inc. (GTIS). Global Trade Atlas. Annual data compiled from

reporting countries’ official statistics, including EU25 external trade.

http://www.gtis.com/gta/usitc/ (accessed various dates).

Government of Kenya, Ministry of Trade and Industry. The Iron and Steel Sub-Sector in Kenya. 2002.

http://www.tradeandindustry.go.ke/documents/di_sector_iron_steel.pdf (accessed

September 18, 2006).

International Finance Corporation. “Summary of Project Information: Mabati Rolling Mills Limited.”

http://www.ifc.org/ifcext/spiwebsite1.nsf/2bc34f011b50ff6e85256a550073ff1c/3bdc0f4e9eb41aa

08525688e007589ba?opendocument (accessed January 9, 2007).

International Iron and Steel Institute. Steel Statistical Yearbook 2006. 

http://www.worldsteel.org/pictures/publicationfiles/SSY%202006.pdf (accessed

December 18, 2006).

Iscor Limited. Annual Report. 2001. http://www.iscor.co.za (accessed various dates).

———. Annual Report. 2002. http://www.iscor.co.za (accessed various dates).

———. Annual Report. 2003. http://www.iscor.co.za (accessed various dates).
3-22

Metal Bulletin. “Mittal SA Adds Galv Line after Slab Caster Restart,” December 8, 2006. 

http://www.metalbulletin.com (accessed January 3, 2007).

———. “Mittal Steel SA Considers Imports as Demand Booms,” September 19, 2006. 

http://www.metalbulletin.com (accessed Sept. 20, 2006).

Mittal Steel South Africa. Annual Report. 2004. http://www.iscor.co.za (accessed various dates).

———. Annual Report. 2005. http://www.iscor.co.za (accessed various dates).

M.M. Integrated Steel Mills, Ltd. “Company.” http://www.mmstee.com (accessed various dates).

Purchasing Magazine. “Steel Price Transaction Report.” Historical U.S. pricing series for hot-rolled

stainless steel plate. http://purchasingdata.com (accessed various dates).

Swindells, Steve. “Evraz to Buy Interest in Highveld Steel.” American Metal Market, July 14, 2006.

http://www.amm.com (accessed January 3, 2007).

The Monitor (Uganda). “Roofings’ Investments Grow as Its Market Share Doubles,” April 5, 2005.

Xinhua News Agency. “Tanzania Bans Import of Uganda’s Iron Sheets,” August 1, 2006.

Yager, Thomas. “The Mineral Industry in Tanzania.” In U.S. Geological Survey Minerals

Yearbook–2001, 28.1–28.10. Reston, VA: U.S. Geological Survey, 2001.

http://minerals.usgs.gov/minerals/pubs/country/2001/tzmyb01.pdf (accessed January 5, 2007).

———. “The Mineral Industry in Tanzania.” In U.S. Geological Survey Minerals Yearbook–2002,

28.1–28.10. Reston, VA: U.S. Geological Survey, 2002.

http://minerals.usgs.gov/minerals/pubs/country/2002/tzmyb02.pdf (accessed January 5, 2007).

———. “The Mineral Industry in Tanzania.” In U.S. Geological Survey Minerals Yearbook–2003,

31.1–31.10. Reston, VA: U.S. Geological Survey, 2003.

http://minerals.usgs.gov/minerals/pubs/country/2003/tzmyb03.pdf (accessed January 5, 2007).

———. “The Mineral Industry in Tanzania.” In U.S. Geological Survey Minerals Yearbook–2004,

38.1–38.10. Reston, VA: U.S. Geological Survey, 2004.

http://minerals.usgs.gov/minerals/pubs/country/2004/tzmyb04.pdf (accessed January 5, 2007).
 88 HTS heading 2711 includes petroleum gases either in a liquefied or gaseous state. Sub-Saharan Africa

only exports significant quantities of petroleum gases in the form of liquefied natural gas (LNG) (HTS

subheading 2711.11) and to a lesser extent, liquefied petroleum gases (LPGs), such as liquefied propane

(HTS 2711.12) and liquefied butane (HTS 2711.13). The positive shift in SSA exports for HTS heading

2711, almost 130 percent by value, was driven principally by LNG. Nigeria is the only SSA producer and

exporter of LNG, and the leading SSA producer and exporter of LPGs. Although other SSA countries such as

Equatorial Guinea, Angola, and Congo-Brazzaville are engaged in the production of LPGs, such production

is mainly derived from existing infrastructure associated with the production of crude petroleum, condensate

(a light, valuable oil), or natural gas liquids present in associated natural gas (found with crude petroleum)

and natural gas condensate fields. Given the predominance and growth of LNG exports within sub-Saharan

Africa’s overall exports of petroleum gases, this section covers LNG trade only.

 89 BP, BP Statistical Review of World Energy, 2006.

 90 Angola had an estimated 2 trillion cubic feet (about 5.7 billion cubic meters) of proved natural gas

reserves in 2006. Equatorial Guinea had an estimated 1.3 trillion cubic feet of proved natural gas reserves in

2006. Oil & Gas Journal 104.47 (December 18, 2006) as reported by EIA, “World Proved Reserves of Oil

and Natural Gas, Most Recent Estimates.”

3-23

Liquified Natural Gas88

Summary of Findings

In recent years, natural gas has played an increasingly important role in helping meet the

world’s energy needs. In particular, liquefied natural gas (LNG) has filled the supply gap

between domestic production and consumption of natural gas in large developed economies

such as the United States and members of the EU. In SSA, LNG accounts for approximately

two-thirds of petroleum gases exports, followed by relatively smaller export volumes of

other liquefied petroleum gases (LPGs), such as liquefied propane and butane. Consequently,

this industry profile will focus almost exclusively on LNG. As global LNG trade continues

to grow, Nigeria is fast becoming an important supplier and is the only LNG producer and

exporter in SSA. In other SSA countries such as Equatorial Guinea and Angola, plans to

produce LNG for export are in varying phases of development, driven by the desire to

commercialize natural gas resources and to reduce the amount of flared (burned) natural gas

associated with crude petroleum production.

The increase in the value of SSA exports of LNG was due to rising natural gas prices driven

by strong global demand for LNG supplies, coupled with strong production and export

growth in Nigeria following the addition of LNG production and transport capacities.

Increasing natural gas prices during the period contributed to faster growth in trade values

relative to growth in trade volumes.

Industry Overview

Natural gas production (box 3-3) in SSA is heavily concentrated in Nigeria, which possesses

large associated natural gas reserves and liquefaction capabilities. In 2006, Nigeria had an

estimated 185 trillion cubic feet (about 5.2 trillion cubic meters) of proven natural gas

reserves. This makes the country the largest natural gas reserve holder in Africa and the

seventh-largest natural gas reserve holder in the world, accounting for 3 percent of total

world proven natural gas reserves.89 The natural gas industries in Angola and Equatorial

Guinea are also supported by significant, albeit smaller, associated natural gas reserves.90
3-24

Box 3-3 Product Description for Liquefied Natural Gas (LNG)

Natural gas is a colorless and odorless gaseous mixture of hydrocarbon compounds, primarily methane, and is a

cleaner burning fossil fuel than fuel oils and coal. Natural gas is extracted from the subsurface through wells and

transported by pipeline to gas processing facilities, where natural gas and other hydrocarbon compounds such as

butane, propane, and ethane, among others, are separated and cleaned. Much of the natural gas in sub-Saharan

Africa comes from associated natural gas fields (found with crude petroleum) and historically has been a by-product

of crude petroleum production. 

When cooled to -161 degrees C (-260 degrees F) at atmospheric pressure, natural gas is condensed to a liquid (LNG),

occupying one six-hundredth of its volume in a gaseous state. Unlike natural gas that is transported via pipeline, LNG

is transported and stored at atmospheric pressure in super-insulated cryogenic containers aboard specially designed

tankers that allow for long-distance transport to overseas markets. On the receiving end, LNG is transported to

regassification terminals where it is heated, regassified, and transported via pipeline through gas distribution networks

and ultimately to end-users. There are 52 LNG-receiving terminals worldwide, located primarily in Japan, Korea, and

the United States.

Natural gas is used primarily for electrical power generation, heating, and petrochemical production. Natural gas

components such as propane and butane may be used for heating and for cooking or industrial fuels.

LNG projects in SSA are funded through joint ventures between state-run companies and

affiliates of vertically integrated international oil companies (IOCs) (table 3-3). Nigeria is

the only SSA country that currently possesses the infrastructure to produce LNG, although

plans to construct LNG facilities in Equatorial Guinea and Angola, both of which produce

LPGs from associated natural gas reserves, are in varying phases of development.

Table 3-3 Ownership structure of LNG projects in sub-Saharan Africa

Country LNG project Company and participation

Nigeria NLNG (Bonny Island) Nigeria Liquefied Natural Gas, Ltd.: NNPC (49 percent)

Shell Gas (25.6 percent)

Total LNG Nigeria Ltd. (15.4 percent)

Eni International (10.4 percent)

Brass LNG (Brass Island)

(proposed)

NNPC (49 percent)

Eni International (17 percent)

Brass Holding Co Ltd (Total) (17 percent)

Philips (Brass) Ltd (ConocoPhilips) (17 percent)

Olokola LNG

(proposed)

NNPC (49.5 percent)

Chevron Nigeria Ltd (ChevronTexaco) (18.5 percent)

Shell Gas & Power Developments (Shell) (18.5 percent)

British Gas Group (13.5 percent)

Equatorial Guinea EG LNG (Bioko Island)

(under construction)

Equatorial Guinea LNG Holdings, Ltd.: Sonagas (25 percent)

Marathon Oil Corporation (60 percent)

Mitsui & Co (8.5 percent)

Marubeni Corporation (6.5 percent)

Angola Angola LNG (proposed) Sonangol (22.8 percent)

Cabinda Gulf Oil Co. (ChevronTexaco) (36.4 percent)

ExxonMobil (13.6 percent)

BP (13.6 percent)

Total (13.6 percent)

Source: Company literature.
 91 EIU, Country Commerce Report: Nigeria, 2.

 92 NLNG company Website.

 93 Ibid.

 94 The SPDC joint venture currently supplies feed gas from several fields, including Soku, Bonga, BNAG,

Awoba, and Cawthorne Channel fields. The EPNL joint venture supplies feed gas from Obite and Ibewa

fields. The NAOC joint venture supplies feed gas primarily from the Mbede and Obiafu-Obrikom fields. As

additional liquefaction capacities come on line, gas supplies to NLNG will be supplemented by additional

fields. NLNG company Website. Other companies that do not hold an interest in NLNG, including

ConocoPhillips, also supply natural gas to Bonny Island.

 95 Condensate is a natural gas liquid recovered from associated and nonassociated gas wells from lease

separators or field facilities. For more information on the production of methanol in Equatorial Guinea, see

section on acyclic alcohols in this chapter.

3-25

Growth in Nigeria’s natural gas sector is a response to the government’s strategy to diversify

its oil-based energy industry to an integrated oil and gas energy industry. This strategy is

underlined by the government’s intent to eliminate natural gas flaring by 2008 and raise

natural gas export revenues to 50 percent of crude petroleum export revenues by 2010. These

policies have added impetus to commercially exploit and monetize natural gas assets that

historically have been underutilized. Government objectives to promote private investment

by integrated oil companies (IOCs) and to provide a clearer natural gas development strategy

and fiscal framework are among other factors moving the natural gas industry in the country.

The Nigerian National Petroleum Corporation (NNPC) is the principal shareholder in

Nigeria’s natural gas and LNG projects, as well as the regulatory body acting on behalf of

the Nigerian government.91 Incorporated in 1989 to produce LNG for export, Nigeria

Liquefied Natural Gas Limited (NLNG), a subsidiary of NNPC, is the principal operating

company in Nigeria engaged in LNG production. NLNG’s liquefaction facilities on Bonny

Island have an overall annual production capacity of 18 million mt of LNG and 3.4 million

mt of LPGs and are expected to increase capacity to 22 million mt of LNG and 4 million mt

of LPGs by 2007.92

Feed gas to supply NLNG liquefaction facilities is obtained through gas supply agreements

between NLNG and three joint ventures that supply natural gas from several fields located

primarily in the Niger Delta, where a significant portion of Nigeria’s proved natural gas

reserves are located.93 The joint venture companies are affiliates of principal shareholders

of NLNG, and include Shell Petroleum Development Company of Nigeria (Shell affiliate),

Elf Petroleum Nigeria Limited (Total affiliate), and Nigeria Agip Oil Company (Eni-Agip

affiliate).94

Similar to Nigeria yet smaller in scale, Equatorial Guinea and Angola have relatively large

associated natural gas reserves, although neither country currently possesses the

infrastructure to produce LNG. Rather, the majority of natural gas production is processed

into LPGs or into natural gas condensate or methanol.95 Natural gas is also re-injected into

the subsurface either to help maintain reservoir pressure or to save it for later use. Excess

natural gas is also flared.

GEPetrol, established in 2001, is the national oil company of Equatorial Guinea and operates

as a commercial entity acting on behalf of the Ministry of Mines, Industry, and Energy, the

state regulatory authority. Sonagas was created in 2005 as the national gas company of

Equatorial Guinea, and represents the government’s participation in all gas-related projects.

Sonangol is Angola’s national oil company and is co-project leader with a local affiliate of

ChevronTexaco in the development of Angola is proposed LNG facility.
 96 Regional exports of Nigerian natural gas are expected to increase following the completion of the West

African Gas Pipeline, a 421-mile pipeline that will supply natural gas to power generators and industrial

consumers in Benin, Togo, and Ghana. First deliveries are tentatively scheduled for March 2007.

3-26

Sub-Saharan Africa Trade in the Global Context

Leading Exporters

World exports of LNG reached over $43 billion in 2005, a 93 percent increase compared to

export values in 2001. LNG trade accounted for approximately 36 percent of the value of

total natural gas trade in 2005. Principal exporters of LNG in terms of value and quantity

were Indonesia, Malaysia, and Qatar (figure 3-5). Overall, the top ten exporters of LNG

accounted for approximately 94 percent of the global LNG total in 2005. Nigeria was the

eleventh-largest LNG exporter in terms of value in 2005.

Nigerian exports of LNG accounted for 3.3 percent of the total value of world LNG exports.

Nigeria is the only producer and exporter of LNG among SSA countries. There are no

currently operable pipelines to transport Nigerian natural gas to regional markets, so

Nigerian exports of natural gas are entirely in the form of LNG.96 From 2001 through 2005,

Nigerian export volumes of LNG increased by more than 50 percent as additional capacity

to produce and export LNG became operational during the period. In terms of value,

SSA

3%

Indonesia

22%

Malaysia

15%

Qatar

14%

Algeria

10%

Trinidad & Tobago

8%

Other

28%

Global Exporters

Nigeria

100%

SSA Exporters

Figure 3-5 Leading global and sub-Saharan Africa exporters of LNG, 2005

$43,259 million $1,415 million

Source: GTIS, Global Trade Atlas, annual data compiled from reporting countries’ official statistics, 

including EU external trade.
 97 In 2003, Nigeria delivered LNG cargos to other Asian markets, including Japan, South Korea, and

Taiwan. BP Statistical Review of World Energy, 2005.

3-27

Nigerian export revenues increased by 175 percent to more than $1.4 billion, driven by

production and export increases coupled with rising natural gas prices during the period.

Leading Export Markets

In 2005, world imports of LNG were approximately 138 million mt (189 billion cubic

meters), an increase of 32 percent since 2001. Top importers of LNG are Japan, Korea, the

EU, and the United States (figure 3-6). Most LNG exports to Japan and Korea come from

Indonesia, as well as from Malaysia and Qatar. EU imports of LNG come mostly from

Algeria and Nigeria. U.S. imports of LNG come primarily from Trinidad and Tobago and

Algeria. The United States also imports LNG from Nigeria.

Because of the concentration of liquefaction facilities in Nigeria and their proximity to the

large European and U.S. markets relative to other major importers of LNG in Asia, SSA

exports are focused exclusively on these two markets.97 Nigeria has been increasingly

significant as a supplier of LNG to the European market. As a share of all EU imports of

LNG, imports from Nigeria increased from 11 percent to 18 percent in 2005. Virtually all

SSA exports of LNG to Europe and the Mediterranean region are destined for regassification

terminals located in Spain, Portugal, France, Italy, and Turkey. In terms of both value and

quantity, Nigerian exports of LNG to these markets increased significantly during 2001–05

(table 3-4). SSA exports of LNG are free of duty in the EU market.

Japan

42%

South Korea

20%

EU

17%

United States

12%

Other

9%

Global Export Markets

EU

95%

United States

5%

SSA Export Markets

Figure 3-6 Leading markets for global and sub-Saharan Africa exports of LNG, 2005

Source: GTIS, Global Trade Atlas, annual data compiled from reporting countries’ official statistics, 

including EU external trade.

$43,259 million $1,417 million
 98 Between 2000 and 2003, Nigeria delivered more than 20 cargos under short-term contracts to the

United States. U.S. Department of Energy, Liquefied Natural Gas: Understanding the Basic Facts, 4; and

EIA, The Global Liquefied Natural Gas Market: Status and Outlook, 14.

3-28

Table 3-4 Sub-Saharan Africa exports of LNG, by selected exporters and key markets, 2001–05

Exporters Key markets

Exports

2001 2002 2003 2004 2005

Percent

change

2001–05

Nigeria

Total EUa 1,000 dollars 337,246 376,203 775,765 993,511 1,337,875 297

Million mt 4.05 4.63 6.75 7.85 7.87 94

 Spain 1,000 dollars 278,100 248,064 649,907 672,448 927,486 234

Million mt 1 1.18 3.08 3.51 3.65 265

 Portugal

1,000 dollars (

b

) (b) 34,459 171,503 263,081 n/a

Million mt 0.19 0.31 0.62 0.96 1.15 505

 France 1,000 dollars 59,145 128,139 91,399 149,561 147,307 149

Million mt 0.37 0.58 0.49 0.61 3.07 730

USA 1,000 dollars 176,129 21,467 228,228 69,371 76,581 -57

Million mt 0.79 0.17 1.04 0.24 0.17 -78

Turkey 1,000 dollars (

b

) 22,863 (b) (b) (b) n/a

Million mt 0.88 0.93 0.82 0.75 0.75 -15

Total 1,000 dollars 514,169 421,234 1,021,961 1,159,416 1,414,456 175

Million mt 5.72 5.72 8.61 9.19 8.79 54

SubSaharan

Africa

Total

1,000 dollars 538,988 530,234 1,047,233 1,179,758 1,417,074 163

Million mt

(est.) 5.79 5.79 8.62 9.20 8.79 52

Source: BP Statistical Review of World Energy, 2002–2006; and GTIS, Global Trade Atlas, annual data compiled from reporting countries’ official

statistics, including EU external trade.

Note: Export values reported at the 6-digit level for HTS subheading 2711.11. Nigerian export quantities were derived from LNG export data as

published by BP Statistical Review of World Energy 2002–2006, converted to million metric tons. Export quantities as reported by BP Statistical

Review of World Energy are on a contractual basis and may not correspond to physical gas flows in all cases.

Although Nigeria is the only producer of LNG in Sub-Saharan Africa, total SSA exports of LNG show slightly higher values than do total Nigerian

exports of LNG, likely reflecting relatively small intra-SSA shipments or reporting error. 

a Total EU LNG import quantities reflect imports of Belgium, France, Italy, Portugal, and Spain.

b Did not report imports in terms of value.

From 2001 through 2005, Nigerian LNG exports to the United States fluctuated but declined

in terms of both quantity and value, as most deliveries to the United States were under shortterm contracts.98 Following recent additions in production capacity, part of which is allocated

to supplying the U.S. market, Nigerian LNG exports to the United States are expected to

increase significantly. SSA exports of LNG are free of duty in the U.S. market.

Nigerian competitors for LNG vary by export market. Principal non-SSA suppliers of LNG

to European, Mediterranean and, North American markets possess large natural gas reserves

and liquefaction facilities. The following tabulation shows principal LNG suppliers to these

markets in 2005.

Market SSA competitors

European Union Algeria, Nigeria, Qatar

United States U.S. domestic producers, Trinidad & Tobago, Algeria, Egypt
 99 IEA, Natural Gas Market Review 2006, 16.

 100 U.S. Department of Energy, “Corporate Council on Africa Oil & Gas Forum Keynote Address,”

remarks for Energy Secretary Samuel Bodman.

 101 UK Heren National Balancing Point index and U.S. Henry Hub. BP Statistical Review of World Energy

2006.

 102 Prices as published by EIA were converted from U.S. dollars per thousand cubic feet to U.S. dollars

per million Btu by multiplying by 0.969932.

 103 BP, BP Statistical Review of World Energy, 2006.

 104 IEA, Natural Gas Market Review 2006, 33.

 105 China consumed 94 percent of its production in 2005. India produced 83 percent of its consumption in

2005. Pakistan produced as much as it consumed in 2005. BP Statistical Review of World Energy, 2006.

 106 BP, BP Statistical Review of World Energy, 2006.

3-29

Factors Affecting Trade Patterns

Increasing natural gas prices from 2001 through 2005 were a primary driver of increased

export revenues, as tight global LNG supplies and increasing global demand created a

seller’s market.99 Export growth in Nigeria was also supported by increased production of

LNG resulting from increased liquefaction and transport capacities. Nigeria’s endowment

of natural gas reserves, as well as location in the Gulf of Guinea giving it proximity and

access to the large LNG markets in Europe and the United States, contribute to its

comparative advantage in supplying LNG to these markets.

Plans to construct LNG facilities in Equatorial Guinea and Angola are in varying phases of

development and will help reduce the amount of natural gas currently flared in both

countries. Equatorial Guinea has its first liquefaction terminal under construction, with the

facility scheduled to become operational by late 2007.100 Plans to develop an LNG facility

in Angola are currently being studied, with a target date to begin exporting LNG set for

2011.

Demand Growth and Price Increases

Global demand for natural gas increased significantly from 2001 through 2005, which

contributed to a significant increase in prices over the period. Natural gas prices generally

rose in line with increasing crude petroleum prices through 2005. Two benchmark prices in

the European and U.S. markets more than doubled from 2001 through 2005—to $6.69 per

million Btu and $8.79 per million Btu, respectively.101 Similarly, U.S. LNG import prices

increased 96 percent to an annual average of $7.93 per million Btu in 2005, up from an

annual average of $4.04 per million Btu in 2001.102 In the United States, a reduction in crude

petroleum output in the Gulf of Mexico after hurricanes Katrina and Rita, coupled with

lower natural gas inventories that were drawn down the preceding winter, contributed to

higher natural gas prices in late 2005.

At the same time that prices increased, global consumption of natural gas increased by about

12 percent from 2001 through 2005 to about 2,750 billion cubic meters.103 Consumption

increased across all regions. A large portion of this demand growth came from countries that

are not members of the Organization for Economic Cooperation and Development.104 For

example, from 2001 through 2005 consumption increased significantly in China

(75 percent), Pakistan (51 percent), and India (35 percent).105 However, these countries

accounted for only about 4 percent of global consumption of natural gas in 2005, up from

3 percent in 2001.106 The world’s largest consuming countries’ share of global consumption

of natural gas remained relatively stable from 2001 through 2005.
 107 An LNG “train” is the designation given to each independent gas liquefaction unit.

 108 Ahmed, Abdul-Kadir K, “Nigeria LNG: Keys to Investments and Project Development.”

 109 Between 2000 and 2003, Nigeria delivered more than 20 cargos under short-term contracts to the

United States. U.S. Department of Energy, Liquefied Natural Gas: Understanding the Basic Facts, 4; and

EIA, The Global Liquefied Natural Gas Market: Status and Outlook, 14. Liquefied natural gas produced in

excess of planned quantities under sales and purchase agreements with long-term buyers is sold as spot

cargo. NLNG company Website.

 110 NLNG has sales and purchase agreements with five European buyers, each with a contract of a 22.5-

year duration: Gaz de France (France), Enel (Italy), Botas (Turkey), Gas Natural SDG (Spain), and Transgas

(Portugal). Abdul-Kadir K Ahmed, “Nigeria LNG: Keys to Investments and Project Development;” and

NLNG company Website.

 111 EIA, Nigeria Country Analysis Brief, 6; and NLNG company Website.

 112 Ahmed, Abdul-Kadir K, “Nigeria LNG: Keys to Investments and Project Development.”

 113 NLNG company Website; EIA, Nigeria Country Analysis Brief, 6; Alexander’s Gas & Oil

Connections, “Nigeria Targets $4bn Annual From Gas Exports.”

 114 Six of the seven LNG carriers to transport LNG from Trains 1 and 2 are owned by NLNG through its

wholly-owned subsidiary, Bonny Gas Transport Limited (BGT). The seventh LNG carrier is chartered on a

long-term basis from Shell Bermuda Overseas Limited. Three additional LNG carriers were acquired by

BGT, funded partly with third-party financing, following the expansion of Train 3. Eight additional LNG

carriers were built for the expansion of Trains 4 and 5. NLNG company Website.

 115 NLNG company Website.

 116 Ahmed, Abdul-Kadir K, “Nigeria LNG: Keys to Investments and Project Development.”

3-30

Increased Investment

Nigeria

From 2001 through 2005, the incremental addition of LNG liquefaction capacity (“trains”)

and LNG carriers contributed to a significant increase in LNG exports.107 Nigeria’s natural

gas industry was started in 1995, when principal shareholders signed an investment

agreement to build Nigeria’s first natural gas liquefaction plant. Construction of the

$3.8 billion NLNG facility, located at Bonny Island, began in 1996. The plant became

operational in 1999, and by 2002 production capacity had increased to 11 million mt.108

Initially some production was exported to the United States under short-term contracts.109

However, the three original liquefaction trains are currently devoted to supplying France,

Italy, and Turkey (combined 47 percent of production and export volumes) and Spain

(53 percent).110

Exports will continue to increase as Nigeria continues to expand its LNG production and

shipping capacity. Annual production capacity is expected to have reached 18 million mt by

the end of 2006.111 The majority of LNG production from new capacity added in 2006 will

be exported to the United States (60 percent), with the remainder being exported to Spain

(35 percent) and France, Italy, and Turkey (5 percent).112 Additional production and storage

capacity planned for 2007 should increase annual production capacity to 22 million mt and

boost annual export revenues to around $4 billion.113

Since 1999, transport capacity for Nigerian LNG exports has increased in line with

increasing production volumes. Special LNG transport ships directly owned by NLNG

increased from four in 1999 to twelve in mid-2005, while NLNG also increased the number

of chartered carriers during the period.114 Five LNG carriers have been chartered by thirdparty ship owners to transport Nigerian LNG from the sixth liquefaction train and are

scheduled for delivery between 2006 and 2008.115 The addition of owned and chartered LNG

carriers increased transport capacity from approximately 600,000 cubic meters in 1999 to

2.2 million cubic meters in 2005.116 The increase in additional LNG carriers and transport
 117 Alexander’s Gas & Oil Connections, “Nigeria Targets $4bn Annually from Gas Exports.”

 118 Ahmed, Abdul-Kadir K, “Nigeria LNG: Keys to Investments and Project Development.”

 119 Chevron, Nigeria Fact Sheet. The West African Gas Pipeline Company Ltd, the pipeline owner and

operator, is owned by an international consortium led by Chevron affiliate Chevron West African Gas

Pipeline Ltd. (38 percent shareholder), NNPC (25 percent), Shell Overseas Holding Ltd. (17 percent),

Takoradi Power Company Ltd (Ghana) (16 percent), Société Togoliase de Gaz (2 percent), and Société

Bengaz SA (2 percent). ChevronTexaco, “Chevron begins installation of the West Africa Gas Pipeline.”

 120 Alexander’s Gas & Oil Connections, “Offshore pipelines between Ghana and Nigeria completed.”

 121 EIA, Nigeria Country Analysis Brief, 7.

 122 Brass LNG Limited company website; ConocoPhillips, Fact Book, 30.

 123 ChevronTexaco, “ChevronTexaco and Others to Study Potential LNG facility in Nigeria”; EIA,

Country Analysis Brief: Nigeria, 6. 

 124 Marathon Oil Corporation, “Marathon and GEPetrol Announce Final Investment Decision on

Equatorial Guinea LNG Project.”

 125 Principal shareholders of the projects are Marathon Oil Company (60 percent interest), followed by

Sonangas (25 percent interest), Mitsui & Co., Ltd. (8.5 percent interest), and a subsidiary of Marubeni

Corporation (6.5 percent interest). Marathon Oil Corporation, “Marathon and Partners Award Front End

Engineering and Design Contract.”

 126 Marathon Oil Corporation, “Marathon and GEPetrol Announce Final Investment Decision.”

 127 Ibid.

3-31

capacity has boosted the number of LNG cargoes shipped per year. From 2004 through

2005, the number of LNG cargoes shipped increased from 170 to 600.117 By 2008, NLNG

expects to increase the number of owned and chartered LNG carriers to twenty-five, with an

expected combined transport capacity of almost 3.2 million cubic meters by 2008.118

Regional exports of Nigerian natural gas are also expected to increase following the

completion of the $590 million, 421-mile West African Gas Pipeline (WAGP) to supply

power generators and industrial consumers in Benin, Togo, and Ghana.119 In August 2006

the offshore segment of the WAGP was completed, with first deliveries tentatively scheduled

for March 2007.120 The WAGP will have an initial capacity of 200 million cubic feet per day

(Mmcf/d) of natural gas and an expected full capacity of 450 Mmcf/d within fifteen years.121

Plans to develop additional LNG production facilities are currently being studied. A second

LNG facility on Brass Island, located in Nigeria’s central Niger Delta, would have an annual

capacity of 10 million mt, with an operational date set for early 2011.122 The feasibility of

a third facility is currently being examined. This plant, to be located in the Olokola Free

Trade Zone in Nigeria, would require additional investment of $7 billion, have an initial

capacity of 11 million mt per year, and a maximum capacity of 33 million mt per year.123

Equatorial Guinea and Angola

From 2001 through 2005, natural gas production in Equatorial Guinea increased rapidly in

response to new investments in projects to either process natural gas into condensate,

methanol, or LPGs or re-inject natural gas into existing reservoirs such as the Alba field for

use as feed gas for the planned LNG plant. Construction of Equatorial Guinea’s first LNG

facility is currently underway, with production and exports expected to begin in late 2007.124

The facility required an investment of $1.4 billion by project shareholders and will have an

initial capacity of 3.4 million mt per year.125 It is expected to be one of the lowest-cost LNG

operations in the Atlantic Basin.126 Feed gas will be supplied from the Alba field under a

long-term supply agreement.127 The output of 3.4 million mt per year will be sold to BG Gas

Marketing Ltd. under a seventeen-year purchase and sale agreement beginning in late 2007;
 128 Participants in the Alba field include Marathon, Noble Energy, and GEPetrol. “Marathon and GEPetrol

Announce Final Investment Decision.”

 129 U.S. Department of Energy, “Corporate Council on Africa Oil & Gas Forum Keynote Address.”

 130 EIA, Country Analysis Brief: Nigeria, 6.

 131 Ibid.

 132 Nigeria Oil & Gas Online website.

 133 EIA, Country Analysis Brief: Nigeria, 5.

 134 EIU, Country Commerce Report: Nigeria, 20.

 135 Ibid.

 136 EIA, Country Analysis Brief: Nigeria, 5.

 137 Akoma Chinweoke, “Power–Key Driver of Domestic Growth of Gas in Nigeria–DPR Director.”

3-32

it is intended for export to the United States.128 A second liquefaction train with a capacity

of 4.4 million tons per year is currently being studied.

Plans to construct a 5 million mt per year LNG facility to be located in Soyo, northern

Angola, are in developmental stages. The proposed LNG facility is tentatively scheduled to

begin exporting LNG in 2011.129

Policies to Promote the Industry

Nigeria

Growth in the Nigerian natural gas sector is, in part, a result of government efforts to

transition from an oil-based industry to an integrated oil and gas energy industry by

exploiting and monetizing natural gas assets that have been underutilized. Historically, much

of Nigeria’s associated natural gas has been flared and thus lost because many of the crude

petroleum fields lacked the infrastructure to separate the associated natural gas from crude

petroleum during drilling.130 Forty-three percent of Nigeria’s total annual natural gas

production is flared. This is the highest rate of any country in the world, accounting for an

estimated 20 percent of the world total of flared natural gas.131

The reduction of natural gas flaring has been on the government’s policy agenda since the

mid-1990s. In 1995, the government increased penalties for every cubic foot of natural gas

that crude petroleum producers flared.132 The Nigerian government’s determination to end

flaring by 2008 and increase natural gas export revenues to 50 percent of oil revenues by

2010 has helped to spur new gas commercialization projects in the country.133 Government

initiatives aimed at developing the natural gas sector include duty-free and VAT-free imports

of machinery and equipment, tax-deductible interests on loans for natural gas projects, and

allowances for investment capital.134 Other incentives include tax holidays for up to 5 years,

as well as tax-free dividends for a period of 5 years.135

The Nigerian government also has emphasized the importance of private investment in the

development of the country’s natural gas sector. The NNPC has estimated that $15 billion

in private sector investment is necessary to meet the country’s natural gas development goals

by 2010.136 The Department of Petroleum Resources, a regulatory agency that oversees the

activities of companies engaged in the energy sector, has stressed the continued importance

of private sector-based investment and the presence of commercial entities to the

development of Nigeria’s natural gas industry.137

For example, Nigeria’s natural gas and LNG sector is based on shareholder as well as thirdparty financing. The initial construction of the first and second liquefaction trains, which cost
 138 NLNG company website; Abdul-Kadir K Ahmed “Nigeria LNG: Keys to Investments and Project

Development.”

 139 NLNG company Website.

 140 Five international banks and six Nigerian banks participated in funding for the project, and include

BNP Paribas, Citigroup, Credit Lyonnais, MCC, West LB, Citibank Nigeria, First Bank of Nigeria, FSB

International Bank, Guaranty Trust Bank, Union Bank of Nigeria, and United Bank for Africa. The

international facilities comprised four international commercial bank loans which were supported by Export

Credit Agency (ECA) loan guarantees or insurances of $620 million. These loans were accompanied by an

additional international bank loan of $180 million. ECAs include the Export-Import Bank of the United

States, the Export Credits Guarantee Department of the United Kingdom (ECGD), Servizi Assicurativi del

Commercio Estero (SACE) of Italy, and Gerling NCM. Alexander’s Oil & Gas Corporation, “Nigeria targets

$4bn annual from gas exports,” and NLNG company Website.

 141 Ahmed, Abdul-Kadir K, “Nigeria LNG: Keys to Investments and Project Development.”

 142 World Bank, Global Gas Flaring Reduction Partnership, “Top 20 Flaring Countries”; and IEA, Energy

Policy Review of Angola (Draft), 14 and 100.

 143 IEA, Energy Policy Review of Angola (Draft), 14.

3-33

approximately $3.6 billion, was financed by NLNG shareholders.138 The third liquefaction

train, with a cost of $1.8 billion (including new LNG carriers), was financed by shareholders

and from revenue and surpluses generated from the first two trains.139 NLNG shareholders

financed 50 percent of the total cost to build the fourth and fifth liquefaction trains ($2.1

billion excluding LNG carrier acquisition costs). Third parties, including international and

national bank syndicates supported by Export Credit Agency guarantees and insurances,

financed the remainder.140 The sixth liquefaction train is 100 percent financed by NLNG

shareholders.141 Funding for additional LNG carriers has been based on third-party financing

and internally-generated cash revenues and shareholder funds.

Angola and Equatorial Guinea

Both Angola and Equatorial Guinea have underlined the need to reduce natural gas flaring.

In Angola, the fifth-largest flaring country in 2004, the government declared a zero-flaring

policy for all new fields and the elimination of routine flaring from existing fields by 2010.142

Plans to reduce flaring have generally focused on natural gas re-injection into existing

reservoirs and on the proposed LNG facility for LNG export.143 Similarly, the government

of Equatorial Guinea, working in conjunction with commercial entities, has initiated a

number of natural gas utilization projects to reduce the amount of flared natural gas,

including the development of an LNG production facility for LNG export. These activities

did not affect SSA exports during 2001–05 but likely will have an impact following

competition of LNG production facilities.
3-34

Liquified Natural Gases Bibliography

Ahmed, Abdul-Kadir K. “Nigeria LNG: Keys to Investments and Project Development.” Presented at a

workshop at the International Energy Agency, Paris, France, May 19-20, 2005. 

http://www.iea.org/Textbase/work/2005/LNGGasMarkets/session_7/1_Abdul-Kadir_Ahmed.pdf

(accessed various dates).

Alexander’s Gas & Oil Connections. “Nigeria Targets $4bn Annual From Gas Exports,” Vol. 10, no. 23,

 December 8, 2005. http://www.gasandoil.com/goc/company/cna54972.htm (accessed

December 14, 2006).

Alexander’s Gas & Oil Connections. “Offshore Pipelines Between Ghana and Nigeria Completed,” Vol.

11, no. 18, September 27, 2006. http://www.gasandoil.com/GOC/news/nta63971.htm (accessed

November 22, 2006).

BP. Statistical Review of World Energy. 2002. http://www.bp.com.

———. Statistical Review of World Energy. 2003. http://www.bp.com.

———. Statistical Review of World Energy. 2004. http://www.bp.com.

———. Statistical Review of World Energy. 2005. http://www.bp.com.

Brass LNG, Limited. “About Brass LNG.” http://www.brasslng.com (accessed various dates).

ChevronTexaco. “ChevronTexaco Announces Award of Front-End Engineering and Design Contracts for

Angola LNG Plant,” April 21, 2005. http://www.chevron.com/news/press/2005/2005-04-21.asp

(accessed December 15, 2006).

———. “ChevronTexaco and Others to Study Potential LNG facility in Nigeria,” April 12, 2005. 

http://www.chevron.com/news/press/2005/2005-04-12.asp (accessed December 15, 2006).

———. “ChevronTexaco Announces First Condensate From Angola’s Sanha Field,” March 1, 2005. 

http://www.chevron.com/news/press/2005/2005-03-01.asp (accessed December 28, 2006).

———. “Chevron Begins Installation of the West Africa Gas Pipeline,” September 7, 2005. 

http://www.chevron.com/news/press/2005/2005-09-07.asp (accessed September 19, 2006).

———. “Nigeria Fact Sheet,” April 2006. http://www.chevron.com/operations/docs/nigeria.pdf

(accessed various dates).

ConocoPhillips. Fact Book, June 2006. http://www.conocophillips.com/NR/rdonlyres/199287F3-9CDC4C6C-8D61-EE1591281F5D/0/FB_entire.pdf (accessed December 15, 2006).

Economides, M.J., S. Mokhatab, and D. Wood. “Natural Gas and LNG Trade–A Global Perspective.”

Hydrocarbon Processing 85, no. 7 (July 2006): 39-46.
3-35

Economist Intelligence Unit. Country Commerce Report: Nigeria. March 2006.

http://www.eiu.com/report_dl.asp?issue_id=710238456&mode=pdf (accessed September 7,

2006).

Global Trade Information System, Inc. (GTIS). Global Trade Atlas. Annual data compiled from reporting

countries’ official statistics, including EU25 external trade. http://www.gtis.com/gta/usitc

(accessed various dates).

International Energy Agency (IEA). Natural Gas Market Review 2006. Paris: IEA/OECD, 2006.

———. Energy Policy Review of Angola (Draft). Paris: IEA, November 7, 2005.

Marathon Oil Corporation. “Marathon and GEPetrol Announce Final Investment Decision on Equatorial

 Guinea LNG Project,” June 22, 2004. 

http://www.marathon.com/News_Center/Press_Releases/2004_News_Releases/?releaseid=58364

2 (accessed December 15, 2006).

———. “Marathon and Partners Award Front End Engineering and Design Contract for Train 2 LNG

 Project in Equatorial Guinea,” August 23, 2006. 

http://www.marathon.com/News_Center/Press_Releases/2006_News_Releases/?releaseid=89846

0 (accessed December 15, 2006).

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Nigeria Oil & Gas Online. “National Gas Policy.” http://www.nigerianoil-gas.com (accessed

November 17, 2006).

“Power–Key Driver of Domestic Growth of Gas in Nigeria–DPR Director.” AllAfrica.com

(September 11, 2006). http://www.allafrica.com/stories/printable/200609110513.html (accessed

September 20, 2006).

U.S. Department of Energy. “Corporate Council on Africa Oil & Gas Forum Keynote Address.” 

Remarks for Energy Secretary Samuel Bodman, December 1, 2006.

http://www.energy.gov/news/4498.htm (accessed January 5, 2007).

U.S. Department of Energy, Energy Information Administration. “Country Analysis Briefs: Nigeria,”

March 2006. http://www.eia.doe.gov/emeu/cabs/Nigeria/Background.html (accessed various

dates).

———. “Glossary.” http://www.eia.doe.gov/glossary/index.html (accessed various dates).

———. International Energy Outlook 2006. http://www.eia.doe.gov/oiaf/ieo/pdf/0484(2006).pdf

(accessed October 20, 2006).

———. The Global Liquefied Natural Gas Market: Status and Outlook, December 2003.

http://www.eia.doe.gov/oiaf/analysispaper/global/index.html (accessed August 30, 2006).
3-36

U.S. Department of Energy, Office of Fossil Energy. Liquefied Natural Gas: Understanding the Basic

 Facts. August, 2005.

http://www.fossil.energy.gov/programs/oilgas/publications/lng/LNG_primerupd.pdf (accessed

December 6, 2006).

World Bank. Global Gas Flaring Reduction, A Public-Private Partnership. “Top 20 Flaring Countries.” 

http://worldbank.org/ggfr (accessed various dates).
 143 Textile and apparel exports to the United States under AGOA are limited to a regional cap, which

limits AGOA countries to not more than 6.4 percent of all apparel articles imported into the United States,

and LDBC’s to no more than 3.5 percent. The regional cap and the LDBC sub-cap have not been reached.

 144 The SSA countries discussed here were selected based on one of two criteria: (1) countries that posted

the largest value of apparel exports and showed an overall increase in exports from 2001 through 2005

(Madagascar, Lesotho, Kenya, and Swaziland); or, (2) countries that increased apparel exports by at least

50 percent during the period and by at least $1 million after expiration of the ATC in 2005 (Botswana and

Ethopia).

 145 South Africa and Mauritius accounted for 36 percent of apparel exports in 2005, an overall decline

from 2001. South Africa and Mauritius have attempted to position themselves to regain market shares lost

after the expiration of the ATC. Both countries have taken measures to produce higher-value products

(including man-made fiber fabrics in South Africa and high-end finished apparel in Mauritius) rather than

compete with China on basic commodity type apparel items such as T-shirts, sweatshirts, and basic knitwear.

South African exports of certain man-made fiber textile materials to the United States have increased from

2005 to the first half of 2006. Several apparel producers in Mauritius have stated that they are diversifying

their product lines to exploit their competitive advantage in product quality.

3-37

Apparel

Summary of Findings

Exports of apparel from SSA increased 13 percent by value from 2001 through 2005 and

accounted for 80 percent of total SSA exports of both textiles and apparel in 2005

(table 3-5). SSA countries largely benefited from the duty-free, quota-free access to the U.S.

market granted under AGOA during 2001–05, while other countries were constrained by

quotas under the Agreement on Textiles and Clothing (ATC).143 This overall increase in

exports from SSA during the 2000–05 period occurred despite a decline of $393 million

from 2004 and 2005 as a result of the full phase out of global quotas for WTO (World Trade

Organization) members on January 1, 2005, in accordance with the ATC. 

Because apparel exports account for a large portion of exports from SSA’s textile and

apparel sector, as well as from the SSA countries that exported the largest shares of textiles

and apparel, this section focuses on apparel trade only. While many SSA countries export

apparel, six countries—Kenya, Lesotho, Madagascar, Swaziland, Ethiopia, and Botswana

—will be discussed here.144 These countries were chosen because they demonstrated

increased apparel exports at average annual rates from 4 to 125 percent, and they sustained

increased export levels from 2004 through 2005. These six countries accounted for

47 percent of SSA apparel exports and along with South Africa and Mauritius accounted for

a total of 83 percent of SSA apparel exports. Although South Africa and Mauritius are

among SSA’s largest textile and apparel producers, they were not covered here because their

exports did not increase during the five-year period under review.145

Trade agreements and preference programs, particularly AGOA’s third-country fabric

provision, the ATC, and EU Cotonou Agreement, served as strong catalysts for increased

apparel exports from SSA. To a lesser extent, exports increased because of regional

economic integration in southern Africa; individual country programs and state-sponsored

policies, such as the creation of export processing zones (EPZs); infrastructure development

projects; and, especially in Kenya, Lesotho, Madagascar, and Swaziland, other government

investment and incentives that served to attract domestic and foreign direct investment

(FDI), notably of Asian origin. More recently, Botswana and Ethiopia also have increased
3-38

Table 3-5 Sub-Saharan Africa apparel exports, by selected exporters and key markets, 2001–05

Exports

Exporter Key markets 2001 2002 2003 2004 2005

Percent

change

2001–05

1,000 dollars

Madagascar

USA 178,022 89,308 196,289 323,456 276,660 55

EU 239,879 130,447 145,947 196,697 222,589 -7

Canada 2,309 888 2,613 5,847 7,451 223

Total 429,080 228,874 348,175 532,534 514,493 20

Lesotho

USA 214,809 321,259 392,472 455,759 390,712 82

Canada 6,449 3,298 6,454 10,836 11,600 80

EU 3,399 1,874 1,154 1,045 793 -77

Total 224,865 326,905 401,017 468,121 404,097 80

Kenya

USA 64,567 125,493 187,729 277,175 270,542 319

EU 1,666 997 1,439 3,197 3,052 83

Canada 20 328 1,944 2,648 2,759 13,695

Total 68,005 129,965 194,515 287,099 278,727 310

Swaziland

USA 47,960 89,065 140,666 178,644 160,856 235

Canada 14 79 137 776 579 4,036

Mexico 0.6 0 47 137 159 26,400

Total 58,928 105,380 147,442 180,703 161,725 174

Botswana

USA 2,762 6,046 7,160 20,233 30,043 988

EU 17,577 7,497 6,263 12,657 5,959 -66

Canada 304 308 188 135 152 -50

Total 21,296 14,722 13,840 33,160 36,457 71

Ethiopia

USA 400 1,308 1,763 3,335 3,605 801

EU 131 31 98 713 1,018 677

Total 655 1,376 1,984 4,175 4,739 624

Sub-Saharan

Africa

USA 949,708 1,097,441 1,510,558 1,757,139 1,463,605 54

EU 964,143 812,987 889,441 948,559 855,441 -11

South Africa 22,808 28,576 25,640 29,549 39,874 75

Canada 21,259 14,397 22,231 29,182 27,950 31

Mexico 1,701 1,970 1,412 3,552 6,0670 3,467

Total 2,149,236 2,108,691 2,561,618 2,825,747 2,432,290 13

Source: GTIS, Global Trade Atlas, annual data compiled from reporting countries’ official statistics, including EU external trade.

exports of textiles and apparel due, in part, to strong government incentives and

comparatively low wages.
 146 Unless otherwise indicated, information contained in this section is sourced from U.S. Department of

State, “Textile and apparel production capabilities in AGOA-eligible countries,” August 2006. 

 147 The CMT segment entails a process whereby all apparel inputs, including all fabric and materials, are

shipped to manufacturers in a kit; the fabric is then cut into a pattern, sewn together, and further assembled

into the finished apparel product.

 148 Wage data compiled from USITC staff interview (Kenya and Ethiopia), Institute for Policy Studies

(Swaziland), U.S. Department of State, U.S. Embassy, Antananarivo, Madagascar, cable 161609Z, August

2006, and 080931Z (Madagascar), ComMark Trust (Lesotho), and ComMark Trust,“Botswana Textile and

Apparel Sub Sector Study,” (Botswana). Wages are estimates and generally do not include additional

benefits or nonmonetary compensation. As such, wages are not fully comparable across countries.

 149 Data on number of firms, employment, production, and fabric sourcing contained in this section is

sourced from U.S. Department of State, “Textile and Apparel Production Capabilities in AGOA-Eligible

Countries,” August 2006, unless otherwise indicated. 

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Industry Overview146

Apparel exports from SSA, particularly from the countries discussed in this study, generally

target the mid- and low-range basic apparel markets in the United States and EU. SSA

exports of apparel largely consist of cut-make-trim (CMT) products.147 The CMT segment

in the apparel production process requires higher labor input and a lower capital component

relative to other stages of the textile-apparel supply chain such as yarn or fabric production

(box 3-4). Purchasers of finished apparel articles from SSA are largely retailers supplying

the U.S. and EU markets.

Box 3-4 Product Description1 for Apparel 

The apparel industry covers a broad spectrum of products, including woven, knit, or nonwoven garments such as

shirts, trousers, gloves, headwear, and neckwear. The vast majority of apparel exports from SSA, particularly to the

United States, are consumer-ready products such as basic trousers, shorts, T-shirts, sweatshirts, and sweaters, largely

made of cotton or man-made fibers.

______________

1

 For a more comprehensive discussion of the production process and industry supply chain, see U.S. International Trade

Commission, Textiles and Apparel: Assessment of the Competitiveness of Certain Foreign Suppliers to the U.S. Market.

The SSA industry is characterized by a relatively high number of apparel firms concentrated

in EPZs or industrial zones. Firms employ a relatively large number of low-skilled, mainly

female workers (estimated at a combined total of 250,000 in the countries discussed here)

earning $30-$120 per month.148 Foreign investment in the industry is mostly of Asian origin

but also includes some African (mainly South African and Mauritian) and European

investment. Swaziland and Lesotho were particularly successful in attracting Asian industry

investment, while Botswana attracted South African investment and Madagascar attracted

Mauritian investment.

Madagascar

The Malagasy industry is concentrated in the apparel sector, with 121 apparel factories

(28 exporting to the United States) and two textile factories.149 Apparel factories are

generally consolidated in EPZs and employ roughly 90,000 workers, each earning $45 per

month. Apparel firms source fabric primarily from China, while some firms have recently
 150 ComMark Trust, “The Current State of Lesotho’s Textiles and Apparel Industry.”

 151 In December 2006, the U.S. Congress passed the Africa Investment Incentive Act. The Act includes

incentives for African apparel firms to utilize African fabrics and specifically states that the Lesotho-based

denim mill produces sufficient denim to supply the region with 30 million square meter equivalents of

denim. 

 152 Industry officials, interview by Commission staff, Athi River EPZ, Kenya, December 5, 2006, and

EPZ Performance Under the African Growth and Opportunity Act (AGOA), 2000-2006, EPZA Report, 2006.

 153 Ibid.

 154 Industry officials, interview by Commission staff, Athi River EPZ, Kenya, December 5, 2006.

 155 Knitting and dyeing operations were projected to commence at a new mill during late 2006. 

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begun importing from Mauritius and Lesotho. Madagascar’s two textile factories, COTONA

and SOMACOU, source cotton domestically and employ a total of 1,500 workers.

Lesotho

Lesotho currently has one large textile mill and forty-two apparel firms producing roughly

26 million pairs of jeans and 90 million knit garments annually.150 The apparel industry

employs roughly 40,000 workers, a decline of 13,000 workers, or 25 percent, since 2004.

Apparel workers in Lesotho earn $110-120 per month. Lesotho apparel firms source a vast

majority of fabric from Asia, whereas the textile mill produces denim fabric using African

cotton.151

Kenya

In 2005, the Kenyan industry consisted of twenty-five apparel factories and twelve textile

mills located mostly in EPZs near Mombasa and Nairobi, down from thirty apparel factories

in 2004.152 Data from the Athi River EPZ indicate that industry employment increased

consistently until 2003, declined slightly in 2004 (owing to the pending expiration of the

ATC) and has since stagnated, with current employment at roughly 34,000 workers earning

approximately $110 per month.153 Kenyan textile mills generally produce for the domestic

market, although at least one firm produces for export to high-end stores in Britain and

elsewhere in the EU.154

Swaziland

In 2006, the textile and apparel industry in Swaziland consisted of one spinning textile mill

and twenty apparel factories.155 The apparel industry currently employs roughly 15,000

workers, down 50 percent from 2004, while the textile mill employs 100 workers, earning

approximately $85 per month. A majority of apparel factories are owned by Taiwanese firms

and source a vast majority of fabric from Taiwan and China, while the textile spinning mill

sources its cotton from Zambia and Mozambique to produce yarn for export to South Africa.

Botswana

In 2006, the Botswana textile and apparel industry consisted of one textile factory and an

estimated seven apparel factories, which employ a total of approximately 6,400 employees.

Industry workers earn roughly $108 per month. Apparel firms source fabric largely from

China, Taiwan, and India and, to a lesser extent, South Africa and Mauritius, and produce

for inputs to produce apparel for export to the United States. The textile factory imports
 156 U.S. Department of State, “Textile and Apparel Production Capabilities in AGOA-Eligible Countries,”

August 2006.

 157 Ibid.

 158 GTIS, Global Trade Atlas.

 159 Ibid.

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cotton yarn from Zambia and Zimbabwe to produce toweling for export to South Africa and

Mauritius.156

Ethiopia

Ethiopia currently has fifteen textile mills, including eight vertically integrated mills that

produce largely for the domestic market, and forty-three apparel factories that supply the

domestic and, to a lesser extent, the export market, with workers earning around $30 per

month.157 Ethiopian apparel exports are shipped from a few Ethiopian firms producing basic

sportswear for a few consistent U.S. and EU buyers. Ethiopia is the only country included

in the study that exports more textiles ($9.2 million in 2005) than apparel ($4.7 million in

2005). In 2005, 97 percent of Ethiopia’s $9.2 million in textile exports was destined for the

EU, and consisted largely of bed and kitchen linens.

Sub-Saharan Africa Trade in the Global Context

Total global apparel exports increased by 31 percent, from $159.5 billion in 2001 to

$209.3 billion in 2005. Meanwhile, SSA apparel exports increased by 13 percent, from

$2.2 billion in 2001 to $2.8 billion in 2004 before declining to $2.4 billion in 2005.158

Leading Exporters

The three largest global exporters of apparel are China, Turkey, and Hong Kong, together

accounting for nearly one-half of global apparel exports in 2005 (figure 3-7). China, the

largest exporter, also had the largest increase in export value from $46 billion in 2001 to

$81 billion in 2005, or 76 percent. Of China’s $35 billion increase in apparel exports,

$18 billion (more than 50 percent) occurred from 2004 through 2005, after global quotas

were removed on January 1, 2005, in accordance with the ACT.159

Of SSA exporting countries, Kenya registered the largest increase in apparel exports during

the period, at $211 million, followed by Lesotho ($180 million), Swaziland, ($103 million),

and Madagascar ($86 million). Botswana and Ethiopia, though having relatively smaller

shares of apparel exports from SSA during the period, shipped $37 million and $5 million,

respectively, in 2005, and posted increases of $15 million and $4 million during the period

(figure 3-7). Additionally, only Botswana and Ethiopia, increased their exports of apparel

from 2004 through 2005. Exports from other SSA countries described here and SSA as a

whole declined. With the exception of Ethiopia, which exports more textiles than apparel,

exports from all of the selected countries are heavily concentrated in the apparel sector, and

consist largely of non-knit suits, blazers, trousers or skirts, knit sweaters, pullovers, and

sweatshirts.
 160 More recently, firms in Madagascar have increasingly targeted the EU as an important export

destination. Textile and apparel exports from Madagascar to the EU now represent roughly two-thirds of

industry exports. U.S. Department of State, U.S. Embassy, Antananarivo, Madagascar, cable 161609Z,

August 2006. 

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Leading Export Markets

The leading global markets for apparel are the United States, EU, Japan, and Hong Kong

(figure 3-8). These four economies accounted for 84 percent of global apparel imports in

2005. In 2002, the first year after AGOA’s implementation, the United States surpassed the

EU as the largest market for SSA apparel exports (table 3-5). SSA exports to the United

States grew by 85 percent, from $950 million in 2001 to a high of $1.8 billion in 2004,

before a slight decrease to $1.5 billion in 2005. SSA exports to the EU fluctuated downward

by $109 million during the period, from $964 million in 2001 to $855 million in 2005. Of

the six countries discussed, Lesotho, Kenya, and Swaziland exported mainly to the United

States during the entire period. Botswana’s and Madagascars’s leading export market shifted

from the EU to the United States from 2002 through 2003.160 Although Ethiopia shipped

more apparel to the United States than to the EU, the majority of its textiles and apparel

exports were destined for the EU, reportedly owing largely to shipments of bed and kitchen

China

39%

Turkey

6%

Hong Kong

5%

India

4%

SSA

1%

Other

46%

Global Exporters

Mauritius

Madagascar 30%

21%

Lesotho

17%

Kenya

11%

Other

8%

Swaziland

7%

South Africa

6%

SSA Exporters

Figure 3-7 Leading global and sub-Saharan Africa exporters of apparel, 2005

$209,341million $2,433 million

Source: GTIS, Global Trade Atlas, annual data compiled from reporting countries’ official statistics, 

including EU external trade.
 161 Industry official, interview by Commission staff, Addis Ababa, Ethiopia, December 14, 2006.

 162 The U.S. apparel market was estimated at $83.9 billion in 2005. Data estimated based on: U.S. Census

Bureau, Current Industrial Report: Apparel, and U.S. import and export data from Global Trade Atlas. China

remains the largest apparel exporter to the United States despite quantitative restraints.

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linens for Swedish-based retailer IKEA.161 Tariff treatment for SSA exports is discussed later

in this profile. 

The size of the apparel markets in the United States and EU increased during 2001–05, as

did the market share of imported apparel relative to domestic production. The primary global

competitor in both the U.S. and EU apparel markets is China, whose share has increased

rapidly and currently accounts for 24 percent of the U.S. import market (20 percent of the

total U.S. market) and 33 percent of the EU import market.162 The following tabulation

identifies the principle competitors for SSA exports in the U.S. and EU markets.

Market SSA competitors

United States China, Mexico, Hong Kong, and India

EU China, Turkey, and Bangladesh

United States

34%

EU

32%

Japan

10%

Hong Kong

8%

Other

16%

Global Export Markets

United States

60%

EU

35%

Other

5%

SSA Export Markets

Figure 3-8 Leading markets for global and sub-Saharan Africa exports of apparel, 2005

$209,341million $2,433 million

Source: GTIS, Global Trade Atlas, annual data compiled from reporting countries’ official statistics,

including EU external trade.
 163 See U.S. International Trade Commission, Textiles and Apparel: Assessment of the Competitiveness of

Certain Foreign Suppliers to the U.S. Market.

 164 For a more comprehensive discussion of the MFA and ATC, see USITC, Textiles and Apparel:

Assessment of the Competitiveness of Certain Foreign Suppliers to the U.S. Market, 1-8.

 165 USITC, Textiles and Apparel: Assessment of the Competitiveness of Certain Foreign Suppliers to the

U.S. Market, 2-4.

 166 USITC, Textiles and Apparel: Assessment of the Competitiveness of Certain Foreign Suppliers to the

U.S. Market, Chap. 2.

 167 The first Lomé Convention, between African, Carribean, and Pacific (ACP) countries and nine

European countries, granted nonreciprocal trade preferences to ACP exports and allowed duty-free, quotafree access of textile and apparel products to these European markets without a local content provision. Lall,

“FDI, AGOA and Manufactured Exports From a Landlocked, Least-Developed African Economy: Lesotho.” 

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Factors Affecting Trade Patterns

Trade agreements and programs such as the Multi-Fiber Arrangement (MFA) and the

Cotonou Agreement were important factors that led to the development of textile and apparel

industries in SSA. AGOA was, however, a major catalyst for increased SSA apparel exports

to the United States from 2001 through 2005. The Southern African Customs Union (SACU)

played an important role in enabling Lesotho, Swaziland, and Botswana to take advantage

of tariff preferences granted under the aforementioned trade programs. To a lesser extent,

government programs and policies in the selected countries combined with tariff preferences

to encourage industry investment during the period. Other supply-side factors such as

abundant labor and a historical presence of a textile and apparel industry were likely to have

contributed to increased industry investment in these countries.

Tariff Preferences and Trade Agreements

The Multi-Fiber Arrangement and the Agreement on Textiles and Clothing163

The MFA, which preceded the Agreement on Textile and Clothing (ATC), was the

predominant mechanism in regulating international trade in textiles and apparel from 1974

through 1994 and contributed to the development of the apparel industry in SSA.164 The

MFA enabled textile and apparel importers such as the United States and EU, for example,

to establish quantitative limits on imports of textile and apparel articles in order to prevent

market disruption. MFA restrictions differed from country to country and generally

constrained exporters in Asian countries more than countries in other regions.165 Many Asian

firms looked abroad to establish apparel production facilities in countries less constrained

by quotas, such as those in SSA.166 In 1995, members of the General Agreement on Tariffs

and Trade (GATT) established the ATC, which required countries to phase out the MFA and

eliminate quotas in four stages over a ten-year transition period ending January 1, 2005. The

largest transition, which required countries to ensure that the final 49 percent of textile and

apparel trade was in conformance with GATT and, as such, not subject to regularized quotas,

did not take place until January 1, 2005.

Lomé Convention and Cotonou Agreement

After it was first signed in 1975, the Lomé Convention supported further development of

SSA apparel industries by encouraging FDI in the SSA apparel industry by allowing the use

of third-country fabric.167 However, subsequent Lomé Conventions (negotiated every five

years) required the use of local fabric. Furthermore, the Cotonou Agreement that replaced

the Lomé Convention in June 2000, generally requires that fabric inputs be sourced from
 168 Generally, two manufacturing steps or processes must take place in the beneficiary country or meet the

cumulation requirements to confer origin. For example, most apparel is assembled in the beneficiary

countries from fabric made and cut in the beneficiary or EU countries. A recent study prepared for the

European Commission finds that EU rules of origin “have had the effect of suppressing apparel trade (or

even preventing it from taking place at all...” between the countries of the SADC and the EU. European

Commission, Sustainability Impact Assessment of the EU-ACP Economic Partnership Agreements, 23,

68–69. 

 169 Lesser-developed countries are countries with an annual per-capita GDP of $1,500 or less in 1998 as

designated by the World Bank. In December 2006, the Africa Investment Incentive Act was signed into law.

The Act extends the third-country fabric provision until 2015 and includes additional incentives to increase

investment in textiles and apparel in AGOA-eligible countries.

 170 The highly constrained categories included cotton and man-made fiber knit tops, pants and shorts,

nightwear, and underwear. USITC, Textiles and Apparel: Assessment of the Competitiveness of Certain

Foreign Suppliers to the U.S. Market, 3–13.

 171 Exports from the selected countries to the United States are concentrated under HS headings 6110,

6203, and 6204, with ad valorem MFN duty rates ranging up to 32 percent. 

 172 Safeguards on imports of textile and apparel from China are permitted in accordance with paragraph

242 of China’s Accession agreement to the WTO, which states that members may consult with China in

order to avoid or ease textile and apparel market disruption. The agreement allows WTO member states to

introduce specific safeguard measures on imports of Chinese textiles and apparel if the subject imports were

disruptive to the market.

 173 Products in category 348 include women’s and girls’ trousers, breeches and shorts of cotton or blue

denim, not knit (HTS subheading 6204.62.40), whereas category 347 includes men’s and boys’ trousers,

breeches, and shorts of cotton, blue denim, or corduroy, not knit (HTS subheading 6203.42.40). 

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African, Caribbean, and Pacific (ACP) countries—subject to a double transformation

rule—for exports to qualify for duty-free status.168

The African Growth and Opportunity Act

By allowing the use of third-country fabric as an input in apparel for export to the United

States, the AGOA was a major factor contributing to increased SSA apparel exports to the

United States from 2001 through 2005. Signed into law in May 2000, AGOA granted dutyfree, quota-free treatment to U.S. apparel imports and selected textiles imports from eligible

SSA countries until 2015. It also granted duty-free treatment to apparel exports from lesserdeveloped beneficiary countries (LDBCs) using third-country fabrics.169 The third-country

fabric provision enables LDBCs to utilize fabric inputs sourced from third-party countries

(i.e., non-U.S., non-SSA) and receive duty-free access to the U.S. market. In 2002, SSA

apparel exports of products highly constrained by quotas (largely on Asian countries)

accounted for 73 percent of SSA’s apparel exports to the United States.170 In 2005, of the

$365.2 million in total U.S. apparel imports under AGOA, 89 percent, or $325.5 million, was

of apparel made with third-country fabrics.171

Quotas on Chinese Textile and Apparel Imports172

During May through August 2005, the United States took ten safeguard actions in response

to rising imports from China. In November 2005, the United States and China signed a

Memorandum of Understanding (MOU), which superceded previous safeguards and

established quotas on U.S. imports of various textile and apparel items from China until

2008. Products in categories 347 and 348 are two of the three largest categories of apparel

exports from SSA to the United States and are included in the MOU.173

In July 2005, the EU established import quotas on textile and apparel items in ten product

categories from China, including cotton fabrics, T-shirts, pullovers, trousers, blouses, bed
 174 Official Journal of the European Union, July 9, 2005.

 175 United Nations Industrial Development Office, Kenya Benchmarking Study, 2004.

 176 WTO. East African Community Trade Policy Review: Kenya.

 177 Industry officials, interview by Commission staff, Athi River EPZ, Kenya, December 5, 2006, and

EPZ Performance Under the African Growth and Opportunity Act (AGOA), 2000-2006. EPZA Report, 2006.

 178 Government official, interview by Commission staff, Addis Ababa, Ethiopia, December 13, 2006. 

 179 U.S. Department of State, “Textile and Apparel Production Capabilities in AGOA-Eligible Countries.”

 180 EIU, Country Report: Lesotho, 16.

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linens, dresses, brassieres, table and kitchen linens, and flax yarn, until 2008.174 SSA industry

exports to the EU are concentrated in some of the aforementioned items.

Policies to Promote the Industry and Other Country-specific Factors

All six of the countries discussed here secured apparel investment, in part, through the

creation of EPZ or industrial zones. Madagascar, Swaziland, Kenya, and Lesotho encouraged

apparel investment in EPZs, while Botswana and Ethiopia developed industrial zones. EPZ

textile and apparel investment incentives vary by country, but notably include duty

reductions on fabric and inputs, capital investments, five- or ten-year tax holidays, and

varying degrees of technical assistance in complying with administrative and bureaucratic

requirements.175 For example, in Kenya, most apparel firms are located in EPZs.176 In Kenya,

AGOA-related exports accounted for 75 percent of total EPZ exports from 2000 through

2006 and accounted for an average of over 90 percent of EPZ employment (currently

39,000) from 2000 through 2005.177

Industrial zones in Ethiopia and Botswana are similar to EPZs, but generally do not require

that products be produced exclusively for export. In Ethiopia, textile and apparel firms are

eligible for special incentives regardless of where factories are physically located. Since

2003, the government of Ethiopia has developed over 6,000 hectares as industrial zones. The

zones are fitted with physical infrastructure such as paved roads, water, and electricity and

are located near major transportation routes.178

Madagascar

Madagascar’s geographic proximity to Mauritius, the region’s second-largest textile and

apparel producer, contributed positively to the growth of the Malagasy industry. While the

majority of apparel industry investment is from Asian firms, Mauritian firms also invested

in Madagascar during 2001–05. Compared to Mauritius, Madagascar possesses an abundant

labor supply and AGOA third-country fabric provision eligibility. One industry source

indicated that at least one Mauritian firm chose to relocate apparel production to Madagascar

because it was a neighboring French-speaking country with lower industry wages and

AGOA third-country fabric provision eligibility. The restrictions placed on U.S. and EU

imports of textiles and apparel from China will be a factor in determining the future viability

of Madagascar’s industry noted a U.S. government source.179

Lesotho

The government of Lesotho implemented several programs aimed at increasing investment

in the apparel industry during 2001–05, primarily through the Lesotho National

Development Corporation (LNDC), the main government entity that promotes industrial

development in Lesotho.180 The LNDC facilitates apparel FDI through the provision of

factory shells in industrial zones and provides technical assistance to enable firms to take
 181 ComMark Trust,“The Current State of Lesotho’s Textiles and Apparel Industry.”

 182 Ibid.

 183 For additional information on the Kenyan EPZ scheme, see 3–56. 

 184 Industry official, interview by Commission staff, Athi River EPZ, Kenya, December 5, 2006. 

 185 WTO, Southern African Customs Union Trade Policy Review: Botswana.

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advantage of a five-year tax holiday and the SACU duty Credit Certificate Scheme (DCCS).

The DCCS is managed by South Africa and provides reimbursement of a portion of the

associated import duties for certain products, including textiles and apparel. An industry

source credits the DCCS with enabling Lesotho firms to remain viable after the expiration

of the ATC in January 2005.181

Apparel firms are located primarily near the South African border in the Maseru industrial

zone. Exports from land-locked Lesotho are facilitated by easy access to modern shipping

facilities and simplified customs procedures as a member of SACU. Industry sources suggest

that Lesotho has fully adjusted to the post-ATC environment in 2006, as evidenced by the

re-opening of all factories that closed after the ATC expiration in 2005.182

Kenya

A historical textile and apparel industry dating to the 1960s, a strong EPZ scheme and other

favorable government incentives, and a well-educated workforce combined to create a

competitive environment for the apparel industry in Kenya.183 Government incentives in the

sector include a ten-year tax holiday for new industry investment, tax-free inputs, and

priority access to factory space, as well as national treatment for foreign investors. The

Kenyan textile and apparel industries are led, in part, by Kenyan entrepreneurs with strong

technical skills and industry knowledge developed initially during the 1960s and 1970s when

the industry received strong government support. Some investors reinvested in the industry

after AGOA, with the United States as the target market. Kenyan apparel industry leaders

are optimistic that the newly-expanded AGOA legislation will foster increased industry

investment and exports to the United States.184

Swaziland

The government of Swaziland offers incentives to apparel investors similar to those offered

by other SSA apparel exporters. These include a ten-year tax holiday, national treatment for

foreign investment, and easy access to one of four industrial areas. The largest industrial

area, Matsapha, is located near the South African border with reportedly easy access via road

or rail to the port of Durban. During 2001–04, the Swazi government was particularly adept

at securing Asian apparel investment by providing factory shells in its industrial zones and

working through the Swazi Investment Promotion Authority, which serves as an all-inclusive

resource for industry investors.

Botswana

The government of Botswana targeted the textile and apparel industry as a high-priority

sector and supports manufacturing, including the apparel industry, by maintaining sound

long-term fiscal management, practicing good governance, ensuring low labor costs,

applying low tax rates, providing a sufficient transportation infrastructure, and maintaining

a stable exchange rate.185 The Botswana Export Development and Investment Authority

provides industrial rebates for machines and materials used to manufacture industry exports
 186 Ibid.

 187 Industry analyst, telephone interview by Commission staff, November 9, 2006. 

 188 State Minister, Ethiopia Ministry of Trade and Industry, interview by Commission staff, Addis Ababa,

Ethiopia December 13, 2006. 

 189 In 2003, Ethiopia’s industry exports totaled $9.3 million.

 190 Government and industry officials, interview by Commission staff, Addis Ababa, Ethiopia,

December 14, 2006. 

 191 Ibid. 

 192 State Minister, Ethiopia Ministry of Trade and Industry, interview by Commission staff, Addis Ababa,

Ethiopia December 13, 2006. 

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and has focused on the textile and apparel industry in particular.186 One industry analyst

noted that at least one firm had relocated from Madagascar to Botswana to take advantage

of Botswana’s attractive government incentives, while another firm relocated from

Zimbabwe to Botswana to escape the country’s steadily increasing political and economic

tensions.187

Ethiopia

In 2003, the Ethiopian government implemented a series of measures aimed at increasing

exports of textiles and apparel to $500 million by 2019.188 In 2005, Ethiopian exports of

textiles and apparel totaled $13.9 million, an increase of 33 percent since the measures were

introduced in 2003.189 Starting in 2004, the government of Ethiopia sold nearly all of its 36

apparel firms and over one-half of its 12 textile mills to private investors.190 New FDI in the

industry includes Turkish and Chinese investment in textile mills and Italian investment in

an apparel factory.191 Industry incentives include: preferential financing through the Bank

of Ethiopia; a five-year tax holiday for industry investors and an additional two-year tax

holiday for foreign investors; a duty-drawback scheme for inputs and capital investments;

and preferential access to land.192 In addition, the government made substantial investments

in the development of industrial zones throughout the country and greatly improved

Ethiopia’s physical infrastructure. In contrast to other regional producers, the Ethiopian

industry has benefited in the past few years from road improvement projects, which eased

transport to the port of Djibouti; low-cost, reliable electricity; and the lowest wage rate

among the selected countries.

Regional Integration

Membership in SACU was an important factor that contributed to the competitiveness of the

apparel industries in Botswana, Swaziland, and Lesotho. SACU members, which also

include South Africa and Namibia, must adhere to several criteria important to attracting

FDI, including harmonization of customs, exchange rates, taxation, and industrial policies.

Exchange rate stability in general facilitates international trade. Therefore, SACU

membership and the attendant policies linking domestic currencies in Swaziland, Lesotho,

and Botswana to the more stable South African rand benefit apparel exports from these

countries. The Swazi lilangeni and the Lesotho loti are pegged at parity to the South African

rand, while the Botswana pula is linked to a basket of currencies with a strong emphasis on

the rand. The government of Botswana devalued the pula in April 2005, and one industry

source suggests that this devaluation has encouraged industry investment from firms

operating elsewhere in the region. In contrast, the Swazi Central Bank cited the high price
 193 Central Bank of Swaziland, “Recent Economic Development.”

 194 Wage data compiled from interview by Commission staff (Kenya and Ethiopia), Institute for Policy

Studies, (Swaziland), U.S. Department of State, U.S. Embassy, Antananarivo, Madagascar. Cable 161609Z.

August 2006 and 080931Z (Madagascar), ComMark Trust (Lesotho), and ComMark Trust,“Botswana

Textile and Apparel Sub Sector Study,” 32 (Botswana). Wages are estimates and generally do not include

additional benefits or non-monetary compensation. As such, wages are not fully comparable across countries.

 195 South African wage data from ComMark Trust,“Botswana Textile and Apparel Sub Sector Study,” 32.

3-49

of the rand in 2005 as a causal factor in the lack of new FDI in Swaziland, particularly in the

textile and apparel sector.193

Labor

The segment of the apparel production chain that takes place in SSA, the CMT (cut, make,

and trim) process, is labor intensive. Accordingly, the abundant supply of inexpensive labor

in SSA contributed to development of the apparel industry in the region. Monthly industry

wages in the selected countries currently range from $30 in Ethiopia to $110-$120 in

Lesotho.194 By comparison, the range for monthly wages in South Africa is $160-$320, while

monthly wages in China range from $45 to $125, though estimates vary widely.195
3-50

Apparel Bibliography

“Asian Garment Producers Expand in Africa.” Clean Clothes Campaign, May 21, 2006.

http://www.cleanclothes.org/news/newsletter21-06.htm (accessed October 22, 2006). 

Central Bank of Swaziland. “Recent Economic Developments.” April 2005. 

http://www.centralbank.org.sz/monthly_stats/RECENT-ECONOMIC-DEVELOPMENTS-APRI

L-2005.pdf (accessed January 11, 2007).

ComMark Trust. Briefing Memo. “The Current State of Lesotho’s Textiles and Apparel Industry.”

September 2006.

Economist Intelligence Unit. “Country Report: Lesotho.” October 4, 2006.

http://www.eiu.com/index.asp?layout=displayIssueArticle&article_id=1041218889&text=busine

ss+africa (accessed various dates)

European Commission. “External Trade September 2006.”

http://trade.ec.europa.eu/doclib/docs/2006/september/tradoc_130099.pdf (accessed

November 13, 2006).

European Commission. “External Trade, Trade Issues, Textile and Footwear Sector.”

http://ec.europa.eu/trade/issues/sectoral/industry/textile/trade_text_en.htm (accessed

November 13, 2006).

European Commission. “Official Journal of the European Union, July 9, 2005.”

http://trade-info.cec.eu.int/doclib/docs/2005/july/tradoc_124051.pdf (accessed November 11,

2006).

Institute for Policy Studies. “Wal Mart’s Pay Gap.”April 2005. 

http://www.ips-dc.org/projects/global_econ/Wal-mart_pay_gap.pdf (accessed

November 13, 2006).

Kenya Export Processing Zone Authority. “Kenya’s Textile and Apparel Industry: 2005.”

www.epzakenya.com (accessed various dates). 

Lall, Sanjaya. “FDI, AGOA and Manufactured Exports From a Landlocked, Least-Developed African

Economy: Lesotho.” October 2003. 

Salm, Andy, et al.“Botswana Textile and Apparel Sub Sector Study.” ComMark Trust. October 2004.

United Nations Industrial Development Office. “Kenyan Benchmarking Study, 2004.” Nairobi, Kenya.

http://www.unido.org/file-storage/download/?file_id=27491 (accessed October 22, 2006).

U.S. Department of Commerce. Economics and Statistics Administration. U.S. Census Bureau.

“Current Industrial Reports, Apparel: 2005 Summary.”
3-51

U.S. Department of Commerce. International Trade Administration. Office of Textiles and

Apparel. “U.S. Imports, Production, Markets, Import to Production Ratios and Domestic Market

Shares for Textile and Apparel Product Categories.” http://www.otexa.ita.doc.gov/ipbook.pdf

(accessed November 5, 2006). 

U.S. Department of Labor. Bureau of Labor Statistics. “Career Guide to Industries: Textile, Textile

Product, and Apparel Manufacturing.” http://www.bls.gov/oco/cg/cgs015.htm#emply (accessed

various dates).

U.S. Department of State. U.S. Embassy. Nairobi, Kenya. “AGOA: Request for Information on Textile

and Apparel Production Capabilities and Third-Country Fabric Provisions 3582),” August 2006.

———. U.S. Embassy. Antananarivo, Madagascar. “Textiles and Apparel Sector: Updated Statistics and

Projection of Future Competitiveness–Madagascar (996),’ September 2006. 

———. U.S. Embassy. Antananarivo, Madagascar. “Madagascar’s AGOA Apparel Sector is Shrinking

(907),” August 2006.

———. U.S. Embassy. Port Lous, Mauritius. “Mauritian Textile Industry Renaissance (337),”

June 2006. 

 ———. U.S. Embassy. Mbabane, Swaziland. “USITC Study on Sub-Saharan Africa Factors Affecting

Trade Patterns of Selected Industries (477),” September 2006.

U.S. Department of State. “Textile and Apparel Production Capabilities in AGOA-Eligible Countries.”

August, 2006. 

USITC. Textiles and Apparel: Assessment of the Competitiveness of Certain Foreign Suppliers to the 

U.S. Market, Inv. No. 332-448. Washington, DC, 2004. 

WTO. “East African Community Trade Policy Review: Kenya.” October 2006.

http://www.wto.org/english/tratop_e/tpr_e/tp_rep_e.htm (accessed October 22, 2006). 

 ———. “International Trade Statistics, 2004, Trade By Sector.”

http://www.wto.org/english/res_e/statis_e/its2005_e/its05_bysector_e.htm (accessed

November 13, 2006). 

 ———. “Southern African Customs Union Trade Policy Review: Botswana.” 

April 2003. http://www.wto.org/english/tratop_e/tpr_e/tp_rep_e.htm, A-1, 57 (accessed

November 5, 2006).
 199 Alcan and the government of Cameroon produce unwrought aluminum in a joint venture smelter at

Alucam. Kassakovich, “From Canada to Cameroon, Alcan Keeping Options Open: Alucam Capacity May

Tripile Under New Deal.” Both parties have signed a letter of intent for the potential upgrade and expansion

of the smelter and the construction of a new hydroelectric power station to supply the facility. Annual

capacity of the smelter is currently 90,000 mt. The upgrade will increase capacity to 260,000 mt annually by

2010. Ghana’s aluminum smelter closed in April 2003. In 2006, it was reported that Alcoa and the

government of Ghana had reached an agreement to restart Ghana’s aluminum smelter in Tema to produce

limited quantities of unwrought aluminum.

 200 The industry is comprised of firms engaged in the extraction of raw bauxite, the refining of raw bauxite

into alumina, production of primary aluminum from alumina, and the manufacture of semi-fabricated and

finished aluminum products.

3-52

Unwrought Aluminum

Summary of Findings

South Africa and Mozambique are the primary producers of unwrought aluminum among

SSA countries, with two smelters operating in South Africa and a third smelter operating in

Mozambique.199 Together, South Africa and Mozambique accounted for 9 percent of global

production in 2005, the overwhelming majority of which was exported to major aluminumconsuming markets in the EU and Japan. Exports from South Africa and Mozambique

collectively increased at an average annual rate of 20 percent, from $930 million in 2001 to

$1.9 billion in 2005 (table 3-6).

The primary drivers of increased exports of unwrought aluminum from South Africa and

Mozambique have been strong global demand and prices, expansion of existing smelting

capacity, and construction of new smelting capacity. Smelters in SSA countries are currently

operating at full capacity in response to the strong global demand. Current plans call for

additional production capacity to be added after 2010, depending on continued existence of

sufficient electricity generation capacity at cost-competitive levels.

In general, unwrought aluminum production is shifting from traditional locations in North

America and western Europe to regions that possess competitive supplies of electrical power,

favorable logistics in terms of port locations that improve access to raw materials and

markets for finished products, and adequate supplies of labor and low construction costs.

South Africa and Mozambique possess the necessary combination of competitive power

supplies and port access to accommodate competitive aluminum smelting operations. Given

the dearth of usable raw materials (bauxite and alumina) in South Africa and Mozambique,

these countries have engaged in production sharing arrangements whereby they import raw

materials from outside the SSA region, add value by converting the materials into unwrought

aluminum, and largely export the unwrought aluminum for further processing.

Industry Overview

The global aluminum industry is dominated by five large companies: Alcoa and Kaiser

(United States), Alcan (Canada), Alusuisse (Switzerland), and BHP Billiton (Australia).200

BHP Billiton, the world’s fifth-largest aluminum producer, dominates the production of

unwrought aluminum in South Africa and Mozambique. The majority of aluminum alloys

produced by smelters in South Africa and Mozambique serve high-volume, commodity-type

electrical, construction, and automotive markets. These smelters are technically capable of
 201 Dr. Tony Paterson, Aluminium Federation of South Africa, telephone interview by Commission staff,

October 31, 2006.

3-53

Box 3-5 Product Description for Unwrought Aluminum

Aluminum originates in oxide form as alumina, which is refined from bauxite ore. Bauxite ore is generally mined in tropical and

subtropical regions, including Africa, the West Indies, South America, and Australia. To form primary, or unwrought aluminum,

alumina is electrolytically reduced to a metal form in primary smelting plants. Aluminum is often blended with other metals

to form aluminum alloys possessing properties more desirable to specific end uses. Aluminum smelting is energy intensive;

therefore, smelters tend to be located in areas that have access to abundant supplies of energy. In remote locations, electricity

may be generated specifically for the aluminum smelter.

Unwrought aluminum is an intermediate product that is usually produced in the form of ingots or slabs. The only use for

unwrought aluminum is to manufacture (via rolling mills) wrought aluminum shapes (plates, sheets, strips, foil, etc.) that are

eventually used to form finished downstream aluminum products. Typical end-use market applications for wrought aluminum

include: (1) transportation equipment (e.g., parts for motor vehicles and aircraft); (2) packaging (e.g., beverage cans);

(3) construction (e.g., aluminum siding); and (4) electrical applications (e.g., electricity distribution cables).

Table 3-6 Sub-Saharan Africa exports of unwrought aluminum, by selected exporters and key markets, 2001–05

Exporters Key markets

Exports

2001 2002 2003 2004 2005

Percent

change

2001–05

South Africa

Japan 1,000 dollars 152,910 241,089 291,779 358,049 298,509 95

Metric tons 98,603 171,325 197,757 204,770 157,526 60

United

States

1,000 dollars 27,394 19,782 13,381 68,898 142,939 422

Metric tons 19,268 14,984 9,346 39,814 74,425 286

South

Korea

1,000 dollars 211,289 171,843 115,220 100,010 115,374 -45

Metric tons 133,513 123,488 77,902 56,581 59,539 -55

All other 1,000 dollars 231,506 238,973 229,645 394,054 279,621 21

Metric tons 180,541 168,685 151,690 225,052 143,843 -20

Total 1,000 dollars 623,099 671,686 650,025 921,011 836,443 34

Metric tons 431,925 478,482 436,695 526,217 435,333 1

Mozambique

EU 1,000 dollars 306,880 404,719 527,004 861,632 1,022,109 233

Metric tons 209,981 292,616 357,903 501,095 528,775 152

South

Africa

1,000 dollars 0 1,762 0 0 0 n/a

Metric tons 0 1,200 0 0 0 n/a

Total 1,000 dollars 306,880 406,481 527,004 861,632 1,022,109 233

Metric tons 209,981 293,816 357,903 501,095 528,775 152

Sub-Saharan

Africa Total 1,000 dollars 1,228,427 1,274,255 1,360,590 1,917,699 2,012,879 64

Metric tons 824,506 902,660 911,351 1,101,885 1,043,806 27

Source: GTIS, Global Trade Atlas, annual data compiled from reporting countries’ official statistics, including EU external trade.

producing highly specialized alloys for aerospace applications, but since demand for such

applications is more limited, BHP Billiton reserves such production for its other smelters

(box 3-5).201
 202 Plunkert, Mineral Commodity Summaries, 23.

 203 The Department: Trade and Industry South Africa (DTI), South Africa Metals Sector Development

Strategy 2006 (Draft), 32.

 204 Ibid., 31.

 205 The Mozal smelter is Mozambique’s largest foreign investment project to date (2006 CIA World

Factbook, http://www.theodora.com/wfbcurrent/ mozambique/ mozambique_economy.html).

 206 BHP Billiton Website, “Mozal.”

 207 Plunkert, Mineral Commodity Summaries, 2006, 23.

 208 Ibid.

 209 Ibid.

3-54

South Africa is the largest producer of unwrought aluminum in Africa, producing

830,000 metric tons (mt), representing 56 percent of the continent’s production in 2005, and

is ranked as the world’s eighth-largest aluminum producer.202 However, South Africa exports

only slightly more than one-half of its production. BHP Billiton holds majority ownership

of South Africa’s only two aluminum smelters, Hillside Aluminum and Bayside Aluminum,

both located in Richards Bay on the country’s east coast.203 Bayside primarily serves the

domestic South African market while Hillside’s production is predominantly exported. South

Africa has no economically exploitable deposits of bauxite and no alumina production

facilities. All alumina feedstock used in primary aluminum production is imported,

principally from Australia.204

Mozambique has only recently become a major global producer of aluminum since

construction of the Mozal smelter near Maputo in 1999.205 BHP Billiton owns 47.1 percent

of the plant, but holds the marketing rights to 75 percent of the smelter’s total output.206

Mozambique produced an estimated 555,000 mt in 2005, making it the second- largest

producer in Africa, with almost 37 percent of the African continent’s total production.207

Mozambique ranked as the world’s tenth-largest aluminum producing country in 2005.

However, Mozambique is SSA’s largest aluminum exports with virtually all of its aluminum

production exported. Like South Africa, Mozambique is dependent on imports for supplies

of raw materials.

Sub-Saharan Africa Trade in the Global Context

Global production of unwrought aluminum totaled 31.2 million mt in 2005.208 China, with

7.2 million mt of production, and Russia, with 3.7 million mt of production, were the largest

global producers in 2005, followed by Canada and the United States, producing 2.8 million

mt and 2.5 million mt, respectively.209 The top four producers represented nearly 52 percent

of the global total.

Leading Exporters

From 2001 through 2005, global export volume of unwrought aluminum increased by

32 percent to 16.1 million mt. By comparison, SSA export volumes increased by 27 percent

to 1,043,806 mt during the same period. Among the leading producers, Russia was also the

world’s leading exporter of unwrought aluminum in 2005, accounting for 26 percent of the

global total (figure 3-9). Australia and China each accounted for 12 percent while Canada

accounted for 10 percent of global exports. Among SSA countries, Mozambique and South

Africa ranked fifth and sixth among all global exporters of unwrought aluminum, by volume.

Mozambique and South Africa combined to account for 93 percent of SSA exports of

unwrought aluminum in 2005 (figure 3-9).
 210 American Metal Market, “Billiton’s Mozal II smelter produces ingot early.”

3-55

Leading Export Markets

The EU was the largest market for global exports of unwrought aluminum in 2005, followed

by Japan and the United States (figure 3-10). These three markets were also the leading

destinations for SSA exports. All of Mozambique’s 2005 exports of unwrought aluminum

were destined for the EU, largely due to Mozambique’s exemption from EU aluminum

import duties under the EU-ACP Cotonou Agreement.210 Japan was the principal export

destination for South African exports in 2005, accounting for 36 percent of South African

exports. The United States was the second-leading destination for exports from South Africa,

accounting for 17 percent of total exports from South Africa. Imports of unwrought

aluminum enter both Japan and the United States free of duty. The following tabulation

identifies the principal competitors in SSA’s leading export markets.

Market SSA competitors 

United States U.S. domestic production, Russia, and Canada

EU EU domestic production, Russia, and China

Japan Russia, China, and New Zealand

Russia

26%

Australia

12%

China

12%

Canada

10%

SSA

11%

Other

29%

Global Exporters

Mozambique

52%

South Africa

42%

Other

7%

SSA Exporters

Figure 3-9 Leading global and sub-Saharan Africa exporters of unwrought aluminum, 2005

$18.8 million 2.0 million

Source: GTIS, Global Trade Atlas, annual data compiled from reporting countries’ official statistics, 

including EU external trade.
 211 World Bureau of Metal Statistics, World Metal Statistics, June 2006, 9 and 148.

3-56

Factors Affecting Trade Patterns

The growth of SSA exports of unwrought aluminum was largely driven by investments in

production capacity and growth in global demand. The investment in SSA aluminum

operations is part of a larger process wherein the production of unwrought aluminum is

undergoing a geographical shift from traditional locations in North America and western

Europe to regions such as the Middle East, Russia, Australia, and Africa. Reasons behind the

shift include the need for competitive supplies of power and favorable logistics—both in

terms of access to raw materials and access to key end-use markets—as well adequate

supplies of labor and low construction costs. South Africa and Mozambique, as described

in detail below, possess sufficient supplies of electricity and the port facilities necessary to

support expansion of the aluminum smelting industry.

Demand Growth and Price Increases

In general, growth in unwrought aluminum exports from SSA has been affected by increased

global demand and prices for aluminum in industrial applications, such as transportation and

building construction. Global consumption of refined aluminum has grown by 17.7 percent,

from 25.4 million mt in 2002 to 29.9 million mt in 2005. At the same time, the average price

of aluminum traded on the London Metal Exchange increased by 112.1 percent from

$1,349 per mt in 2002 to $2,861 per mt in May 2006.211

EU

23%

Japan

20%

United States

20%

South Korea

10% China

4%

Other

23%

Global Export Markets

EU

50%

Japan

15%

United States

7%

South Korea

5%

Other

23%

SSA Export Markets

Figure 3-10 Leading markets for global and sub-Saharan Africa exports of unwrought 

aluminum, 2005

$18.8 million $2.0 million

Source: GTIS, Global Trade Atlas, annual data compiled from reporting countries’ official statistics, 

including EU external trade.
 212 Alcoa Corporation, Annual Report, 2005, 1.

 213 While per capita levels of consumption in India and China are relatively low (approximately 1.1 and

4.4 pounds, respectively), it is projected that demand in these nations will increase with increasing

industrialization and as sectors such as electronics and motor vehicles become increasingly important. DTI,

South Africa Metals Sector Development Strategy 2006 (Draft), 30.

 214 Of aluminum sold to the domestic industry, it is estimated that about 60–70 percent is exported after

only a limited value-added component. Principal aluminum users in South Africa are the automotive and

packaging industries, followed by light engineering, electrical cable, and heavy transport. In the past 10

years, the automotive industry’s demand for aluminum, mainly in the form of castings, has increased more

than threefold to an average of more than 240 pounds per car. DTI, South Africa Metals Sector Development

Strategy 2006 (Draft), 32 and 34; and Plunkert, Mineral Commodity Yearbook, Aluminum, 2006, 5–18. 

 215 Expected capacity of the new smelter is 660,000 mt per year. Alcan expects to assume 30 percent

ownership of the joint venture project, with the remainder to be owned by the South African government and

its Industrial Development Corporation. Alcan is expected to spend $800 million on the project.

 216 Piasecka, “Alcan Close to Power Deal for S. Africa Smelter Project.”

 217 Piasecka, “Alcan Signs 25-year Power Contract With Eskom for Goega Smelter.”

 218 Swindells, “Alcan must reapply for tax credit for Coega aluminum smelter plan.”

3-57

Global demand is expected to continue to grow in the future. Future increases in

consumption of aluminum will be driven primarily by China, India, Russia, and Brazil.212

Asia is expected to account for 60 percent of future demand growth and, by 2020, is

expected to consume as much aluminum as the entire world presently consumes.213

Increased Investment

Nearly 30 years ago, BHP Billiton, with access to large bauxite deposits in its native

Australia, invested in aluminum smelting capacity in South Africa to gain access to its

low-cost electricity. Since then, BHP Billiton has substantially augmented its SSA smelting

capacity with increased investment in South Africa and Mozambique. Capacity expansions

have had a significant effect on SSA exports, as roughly one-half of South Africa’s

production and nearly all of Mozambique’s production is destined for export.

BHP Billiton entered the South African industry in 1971. At that time, South African

production totaled 22,000 mt. By 2001, BHP Billiton had increased its total South African

production to 662,000 mt. An expansion of the Hillside plant’s primary aluminum capacity,

completed in 2003, increased annual production capacity at that facility alone to 670,000 mt,

equivalent to more than two-thirds of 2005 exports. As a result, South Africa’s total

production capacity increased to 851,000 mt in 2005.214

South Africa’s position as a major global producer and exporter of aluminum will be further

solidified if an anticipated investment by Alcan Aluminum, the world’s second-largest

aluminum producer, is completed. Alcan and the South African Industrial Development

Corporation are considering the construction of a new smelter at Coega, in the Eastern Cape.

Production of aluminum from the planned smelter would almost entirely be exported to

major global markets in Japan and Europe. Alcan is seeking to assume 30 percent ownership

of the joint venture project. If construction of the new smelter occurs, it is expected that

aluminum ingots will be produced starting in 2008.215 The decision to construct the smelter

partly will depend on the ability of Alcan to secure a low-cost power source for the

project.216 Alcan is currently in negotiations with state-owned electricity supplier Eskom

Holdings Ltd. of South Africa to secure electricity for the project.217 Alcan has already

secured a 2.2 billion rand ($370 million) tax credit from the South African government for

this planned smelter.218
 219 Plunkert, Mineral Commodity Summaries, 2006, 23.

 220 Pawlek, “The Primary Aluminum Industry at the Turn of the Year 2005–2006.”

 221 Ports and Ships,“Port Maputo.”

3-58

Production of primary unwrought aluminum in Mozambique more than doubled from

270,000 mt in 2001 to an estimated 555,000 mt in 2005.219 In 2003, BHP Billiton launched

an $860 million capital expansion program to increase annual capacity at its Mozal

operations by 253,000 mt, resulting in a rated production capacity of 540,000 mt annually.

The decision to expand operations was driven by a favorable outlook for aluminum prices

globally and the favorable economic environment under which the smelter was operating in

Mozambique, including access to raw materials through its parent company and access to

necessary port facilities in Maputo. In 2005, BHP Billiton announced plans to further expand

its Mozal smelter to an annual capacity of 750,000 mt. The company is expected to proceed

with the most recent expansion project once it secures additional energy supplies. The

additional capacity should become operational within two to three years.220

Infrastructure Improvement

Port facilities that can handle large volumes of bulk imports of alumina as well as large

volumes of unwrought aluminum ingots for export were an important factor in selecting

locations for investment in aluminum smelting operations in South Africa and Mozambique.

Although SSA does possess some bauxite deposits, those located in South Africa and

Mozambique are of low quality and are not commercially viable. As a result, aluminum

smelters located in SSA must import the primary input into the smelting process, alumina,

from other sources. Furthermore, the large majority of unwrought aluminum produced in

SSA is exported rather than consumed locally.

Richards Bay is South Africa’s leading bulk port and also its most modern. The port was

built in 1976 for the export of coal and during the 1990s expanded into the handling of other

bulk cargoes. The port has facilities dedicated to the importing of alumina and the exporting

of unwrought aluminum.

The port in Mozambique through which alumina and unwrought aluminum transit is in

Maputo, strategically close to the BHP Billiton smelter. The port of Maputo is the largest in

Mozambique and is situated close to South Africa and to large developing markets in Asia.

In 2003, the Maputo Port Development Company launched a development plan for the

facility in order to create a modern international trading port. Key improvements include

restoring the approach channels to sufficient depth, initiating continuous 24/7 port

operations, tightening security, rebuilding internal roads to carry heavy road traffic and

railway capacity, and installing new handling equipment at the port.221 One of the two main

components of the port includes the Matola Bulk Terminals with four deepwater berths for

handling bulk minerals, petroleum, aluminum, and grain.
 222 Dr. Tony Paterson, Aluminium Federation of South Africa, telephone interview by Commission staff,

October 19, 2006.

 223 U.S. Department of Energy, “An Energy Summary of South Africa.”

 224 Dr. Tony Paterson, Aluminium Federation of South Africa, telephone interview by Commission staff,

October 19, 2006. Under these agreements, Eskom and the government of South Africa have traded excess

electricity capacity to attract significant foreign investments, most notably in aluminum. In the case of

aluminum, 30-year contracts linked to the price of aluminum metal were agreed upon for the initial

investments. Base rates were established at a certain point in time and varied monthly with the London Metal

Exchange price for aluminum and the exchange rate between the U.S. dollar and the South African rand.

Recently, the government of South Africa has prohibited Eskom from entering into new contracts linked to

aluminum prices while, at the same time, South Africa’s electricity surplus has dwindled. U.S. Embassy,

Johannesburg, official e-mail message to Commission staff, December 11, 2006.

 225 Encyclopedia of the Nations, “Mozambique: Energy and Power.”

 226 CIA, “Mozambique.”

3-59

Natural Resources

Aluminum smelting is an energy-intensive industry, with the cost of electricity accounting

for nearly 30 percent of production costs. Therefore, investment in new plants and capacity

expansion at existing facilities depends on a continued supply of low-cost electricity. South

Africa possesses extensive coal supplies that are utilized for low-cost electricity generation.

Mozambique produces an excess supply of hydroelectric power, which is linked to the

Southern Africa power grid, complementing South Africa’s coal-generated electrical

capacity.

South Africa’s principal competitive advantage in terms of unwrought aluminum production

is its plentiful supply of low-cost electrical energy, more than 90 percent of which is

generated from coal. When South Africa’s current aluminum smelters were built during the

1990s, electricity in South Africa, in terms of cost per kilowatt hour (kwh), was the lowest

or second-lowest in the world.222 Electrical generation capacity in South Africa was overbuilt

during the 1980s when actual economic growth was much lower than projected, resulting in

surplus electrical generating capacity in the country and lower prices for large industrial

consumers.223 Economic growth in South Africa has since absorbed much of the overcapacity

in electricity production. Prices have risen, and thus reduced some of the price advantage

enjoyed by large industrial consumers. Nonetheless, aluminum smelters are given a price

advantage by the state-owned South African electrical utility, Eskom, due to the large

volumes consumed and the consistency of demand since the smelters operate 24 hours a

day.224

Mozambique is a significant exporter of electricity based on output from the Cahora Bassa

Dam and other hydroelectric facilities, which account for almost 96 percent of

Mozambique’s electric power production.225 Mozambique produced 15.0 billion kwh of

electricity while consuming 10.5 billion kwh in 2003.226 The Cahora Bassa hydroelectric

project is among the largest suppliers to the Southern Africa Power Pool. In late 2005,

Eskom of South Africa was purchasing approximately 60 percent of the production from the

Cahora Bassa project.

Although both South Africa and Mozambique are lacking in key raw materials used in the

production of unwrought aluminum, their geographic location on the Indian Ocean and their

excellent port facilities permit these smelters to benefit from low-cost alumina exported from

BHP Billiton-owned alumina refineries in western Australia and Brazil. The rise in global

raw material prices for bauxite and alumina since 2003 has favored the use by BHP

Billiton’s aluminum facilities in SSA of alumina sourced from their company-owned,
 227 Dr. Tony Paterson, Aluminium Federation of South Africa, telephone interview by Commission staff,

October 31, 2006.

 228 Plunkert, Minerals Yearbook, Bauxite and Alumina, 2004, tables 11 and 12.

 229 Eskom, “Mozambique Reclaims Cahora Bassa.”

3-60

offshore refineries. The only nation in SSA with known indigenous bauxite reserves is

Guinea. Although Guinea was the third-leading producer of bauxite in the world in 2004

after Australia and Brazil and also a leading global producer of alumina, both South Africa

and Mozambique import alumina principally from BHP Billiton’s plants in Australia and

Brazil. Large-scale commercial production of petroleum coke and petroleum pitch also does

not exist in SSA countries, so BHP Billiton sources its coke and pitch from the Gulf region

of the United States.

Both South Africa and Mozambique possess reserves of bauxite, but the quality of these

reserves is not high enough (less than 50 percent alumina content) to be commercially

viable.227 Almost all the alumina used by the aluminum smelters in South Africa and

Mozambique is supplied by Australia and Brazil, which supply almost one-half of the

world’s commercial bauxite and meet nearly 35 percent of the global aluminum market’s

need for alumina.228 All imported alumina enters South Africa duty free and passes through

the ports of Richards Bay and Maputo.

Regional Integration

Due to its location in far southwestern Mozambique, the Mozal aluminum smelter does not

have a direct connection to the Cahora Bassa Dam project, but is instead supplied from the

Southern Africa Power Pool by Eskom.229 At the time of the smelter’s construction, its most

reliable source of electricity in the region was located in South Africa. Eskom, however, did

not have transmission or supply jurisdiction in Mozambique. In response, the Mozambique

Transmission Company SARL (Motraco) was formed in 1998 to supply reliable electricity

to the Mozal aluminum smelter. Motraco is a private joint-venture company formed by

Eskom, Electricidade de Mozambique, and Swaziland Electricity Board. It owns

transmission lines connecting the electrical grids in South Africa, Mozambique, and

Swaziland.
3-61

Unwrought Aluminum Bibliography

Alcoa Corporation. Annual Report, 2005.

http://www.alcoa.com/global/en/investment/pdfs/2005_Alcoa_Annual_Report.pdf (accessed

October 11, 2006).

Aluminium Africa, Ltd. http://www.aluminiumafrica.com (accessed various dates).

American Iron and Steel Institute. http://www.steel.org (accessed various dates).

American Metal Market. http://www.amm.com (accessed various dates).

BHP Billiton Website. “Mozal.” http://aluminium.bhpbilliton. com/repository/

 operations/mozal.asp (accessed September 1, 2006).

Central Intelligence Agency. CIA World Factbook, 2006.

http://geography.about.com/library/cia/blcmozambique.htm (accessed October 18, 2006) and

http://geography.about.com/library/cia/blcsouthafrica.htm (accessed October 18, 2006).

Encyclopedia of the Nations. “Mozambique: Energy and Power.” 2006. Thomas Gale.

Kassokovich, Natalia, “From Canada to Cameroon, Alcan Keeping Options Open: Alucam Capacity May

Triple Under New Deal.” American Metal Market, October 27, 2005.

http://www.findarticles.com/p/articles/mi_m3MKT/is_42.4_113/ai_n16000230 (accessed

March 27, 2007).

Masawi, Francis. “Motraco: A Model for Regional Infrastructure Development,” 2002.

ESI Africa. http://www.esi-africa.com/last/ESI_4_2002/ESI42002_030_1.htm (accessed

October 30, 2006).

Mauritius Commercial Bank. “Key Facts and Figures.”

http://www.mcb.mu/home/index_mcbnew.html (accessed October 21, 2006).

Pawlek, Rudolf P. “The Primary Aluminum Industry at the Turn of the Year 2005-2006.”

Light Metal Age, February 2006.

Piasecka, Isabella. “Alcan Signs 25-year Power Contract With Eskom for Coega

Smelter.” American Metal Market. November 28, 2006. http://amm.com/2006-11-28__19-19-

38.html (accessed February 8, 2007).

———. “Alcan Close to Power Deal for South Africa Smelter Project.” American Metal Market,

September 7, 2006.

Plunkert, Patricia. Mineral Commodity Summaries, 2006. U.S. Geological Survey.

“Port Maputo.” Ports and Ships, 2003. http://ports.co.za/maputo.php (accessed

November 14, 2006).
3-62

Republic of South Africa. Department of Trade and Industry. Metals Sector Development

Strategy. Draft, 2005. http://www.dti.gov.za/publications/MetalsSectorDevelopStrat.htm

(accessed August 31, 2006).

Swindells, Steve. “Alcan Must Reapply for Tax Credit for Coega Aluminum Smelter

Plan.” American Metal Market, January 25, 2005. http://amm.com/2005-01-25__13-47-45.html

(accessed September 29, 2006).

“The Port of Richards Bay.” Ports and Ships, 2006. http://ports.co.za/richards-bay. php

(accessed October 18, 2006).

World Bureau of Metal Statistics. World Metal Statistics, June 2006.

World Customs Organization. Harmonized System Nomenclature.

http://www.wcoomd.org/ie/En/Topics_Issues/topics_issues.html (accessed October 26, 2006).
 250 Because actual SSA export statistics are not generally available, the country-specific data used in this

analysis are market countries’ reported imports from SSA, the value of which includes ocean freight. Marine

transportation rates have risen steadily due to increasing energy costs, and a U.S. industry official reported

that outbound marine freight rates for SSA veneer exports increased at an average annual rate of 10.7 percent

from 2001 through 2005. Ocean freight accounts for approximately one-half of the cost of veneer delivered

to the southeastern United States. Industry official, e-mail message to Commission staff, October 23, 2006.

 251 In general, softwood tree species typically predominate in natural forests at higher latitudes of the

world, whereas hardwood tree species predominate in natural forests at lower latitudes.

 252 So-called “valuable” hardwood species are those whose technical properties (e.g., strength, natural

durability, machining properties) and appearance (e.g., grain, figure, texture, color) make them suited for

high-value end uses. FAO. Promotion of Valuable Hardwood Plantations in the Tropics, 4.

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Wood Veneer

Summary of Findings

SSA accounts for a significant portion of the global veneer supply. From 2001 through 2005,

the value of SSA wood veneer exports increased steadily at an average annual rate of

12.6 percent (table 3-7), which was noticeably faster than the annual rate of increase in the

value of global exports (8.7 percent). As a result, SSA exports as a share of global wood

veneer exports rose from 8.1 percent to 10.3 percent. By far, the EU remains the largest

market for SSA veneer exports. Industry sources report that the internal SSA market is

strong and believe that actual export values are somewhat higher than reflected by official

exports statistics. In contrast to export values, SSA production declined during the period,

and export quantities did not show a pattern of steady increase (table 3-7).

The increase in value of SSA exports of veneer was generally due to higher prices and, in

certain countries, a shift toward producing higher-value sliced veneer. Rising ocean freight

rates were also a factor.250 In addition, a number of other factors (e.g., increasing demand for

certified wood products, disruption of mahogany supplies, increasing demand from emerging

markets, and increased use of lesser-known species) also influenced the market for African

veneer. Without exception, SSA countries producing veneer are pursuing policies, such as

log export bans, designed to encourage the further processing of forest resources to capture

more value from those resources. Foreign government policies affecting international trade

in veneer are not believed to have had a major impact on the SSA veneer trade. Large

consuming countries typically have zero or low tariffs on wood veneer.

Industry Overview

Geography and climate influence the type of veneer manufactured and exported by SSA

producers.251 In 2005, hardwood veneer accounted for over 95 percent of the value of SSA

veneer exports because most of the indigenous tree species are hardwood (box 3-6). Some

SSA countries are well endowed with species considered to be particularly suitable for

high-value end uses.252 As these valuable indigenous species generally do not grow in other

parts of the world, SSA countries enjoy a sustainable competitive advantage with respect to

the wood products made from them. SSA veneer production and exports are highly

concentrated in countries along the west coast of central Africa or within the Congo Basin

that are well endowed with forest resources (e.g., Gabon, Côte d’Ivoire, Ghana, Cameroon,

and Equatorial Guinea). However, the sources are changing, as readily accessible coastal

areas become depleted.
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Table 3-7 Sub-Saharan Africa exports of wood veneer, by selected exporters and key markets, 2001–05

Exporters Key markets

Exportsa

2001 2002 2003 2004 2005

Percent

change

2001–05

Gabon

EU

Million dollars

28.7 43.7 61.0 79.0 79.7 178

Morocco 0 4.2 6.1 6.1 8.5 n/a

United

States 5.0 4.9 4.8 6.1 4.6 -8

All other 4.7 4.3 7.2 6.8 4.7 0

Total 38.4 57.1 79.1 98.0 97.5 154

1,000 m3 255.6 263.5 281.8 309.5 256.7 0

Côte

d’Ivoire

EU

Million dollars

55.0 47.5 53.2 58.3 67.1 22

United

States 2.4 3.5 3.5 4.4 6.5 171

Romania 0.0 1.3 1.7 3.5 4.0 n/a

All other 8.1 7.8 9.2 8.4 2.4 -70

Total 65.5 60.2 67.6 74.7 79.9 22

1,000 m3 189.0 113.4 117.3 121.0 155.6 -18

Ghana

EU

Million dollars

39.0 38.2 44.0 41.6 42.9 10

United

States 15.7 17.7 14.2 16.5 17.3 10

Canada 2.3 3.1 3.3 4.6 3.6 57

All other 5.6 6.2 9.8 13.3 8.4 50

Total 62.7 65.2 71.4 76.1 72.2 15

1,000 m3 234.3 179.0 342.5 457.5 184.7 -21

Cameroon

EU

Million dollars

20.9 25.0 34.1 38.6 49.2 135

United

States 1.2 1.3 0.9 0.8 1.1 -8

China 0.05 0.9 0.6 0.4 0.9 1,700

All other 3.2 2.8 4.3 3.5 2.1 -34

Total 25.4 30.0 39.9 43.2 53.3 110

1,000 m3 62.0 169.2 277.9 60.0 66.0 6

Equatorial

Guinea

EU

Million dollars

8.1 9.3 10.7 19.2 20.5 153

China 0 0.6 0.3 0.5 0.8 n/a

United

States 0.02 0 0.5 0.2 0.2 900

All other 0.1 0.05 0 0 0 -100

Total 8.3 10.0 11.5 19.9 21.5 159

1,000 m3 23.7 N/A 25.5 36.3 38.4 62

SubSaharan

Africa

EU

Million dollars

165.5 172.4 224.6 259.4 284.6 72

United

States 25.8 31.3 29.1 29.4 33.3 29

Morocco 0 4.3 6.4 6.2 8.6 n/a

All other 29.9 34.2 42.3 44.8 29.3 -2

Total 221.1 242.2 302.4 339.9 355.8 61

1,000 m3 905.3 789.3 1,281.1 1,032.1 910.5 1

Source: GTIS, Global Trade Atlas, annual data compiled from reporting countries’ official statistics, including EU external trade.

1

 Wood veneer is traded in different units of measure, and importing countries report quantities of veneer imports in one or more units of measure

(e.g., square meters, cubic meters, metric tons, kilograms), which gives rise to various reporting errors. Incorrect data were eliminated or if possible,

corrected. Errors were evident in the following: Indonesian imports from Gabon and South Africa reported in cubic meters; Brazilian imports from

Cameroon reported in cubic meters; Spanish imports from Côte d’Ivoire, Cameroon, Liberia, South Africa (2002), and Equatorial Guinea (2002); and

Greek imports from Cameroon.
 253 Due to difference in both reporting countries and unit of measure conversion factors FAO production

data are not directly comparable with GTA trade data shown in table 3-1. FAOStat, September 19, 2006.

 254 Ibid.

 255 African Timber Organization (ATO), Promoting the Further Processing of Tropical Timber in Africa,

8.

 256 ATO, Promoting the Further Processing of Tropical Timber in Africa, 8, and Oliver and Fripp, TTF,

“Producer Country Draft – Congo Brazzaville.”

 257 Comparison of quantity data for veneer production and export is complicated by the different units of

measure used to report veneer exports. However, it is apparent that a very large portion of veneer production

in SSA countries is exported.

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Box 3-6 Product Description for Wood Veneer

Wood veneer is a thin sheet of wood that is the principal raw material of plywood, and as a result, its demand is driven

primarily by the demand for plywood. Veneer may be manufactured from either hardwood (broad-leafed) or softwood

(coniferous) logs, but the typical end uses for softwood and hardwood plywood are quite different. Unlike softwood

plywood, which is used for structural end uses, such as residential or commercial construction, hardwood plywood

is generally used for relatively high value nonstructural purposes such as furniture, flooring, cabinets, and paneling.

Its appearance is often a defining feature.

The production process starts with veneer or peeler logs and proceeds using one of two basic methods— rotary or

sliced. The rotary method is typically used to produce low-cost softwood veneer and some low-end hardwood veneer.

To make rotary veneer, a log is spun in a lathe as a long (parallel) knife is held against it. Continuous veneer is peeled

in a fashion analogous to unrolling paper towels. Sliced veneer, which is used as face veneer in high-value

applications, is inherently more valuable than rotary veneer because it is more costly to manufacture and because

of the relative scarcity of the high quality trees necessary to make appearance grade veneer. For sliced veneer, logs

are sawn into half logs or quarter logs to create a flat surface, across which a knife is drawn. With respect to veneer

produced in SSA, the value of sliced veneer may be 3.5 to 4.0 times that of rotary veneer.1

 Once the veneer is peeled

or sliced, it is kiln-dried and graded.

_________________________________

1

 Ghana Forestry Commission, TIDD, Reports on Export of Wood Products: December 2001 to 2005.

Sub-Saharan Africa Trade in the Global Context

Despite these natural advantages, total SSA veneer production reportedly declined from

924,000 cubic meters in 2001 to 893,000 cubic meters in 2005.253 SSA veneer production

also dropped relative to global production, decreasing from 11.0 percent (by quantity) in

2001 to 9.3 percent of global production in 2005.254 Table 3-8 shows the number of veneer

mills and reported production in some of the large veneer-producing countries. In most cases,

the number and size of the veneer mills is small relative to the size of the forest resources.

The SSA wood products processing industry is characterized by obsolete, often illmaintained equipment.255 As financing is generally unavailable locally for small- to mediumsized secondary timber-processing enterprises, EU expatriate firms account for much of the

total production in SSA countries.256 Those producers in SSA countries with very little

further processing capability are highly dependent on veneer export markets.257
 258 FAOStat, September 19, 2006.

 259 Ibid.

 260 Despite their location and large forest resources, veneer production and exports by the Democratic

Republic of Congo, the Republic of Congo, and the Central African Republic have been inhibited by a

variety of factors.

 261 Analysis of export quantity trends is complicated by the fact that veneer exports are reported in several

units of measure (e.g., kilograms or mt, square meters, cubic meters).

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Table 3-8 Number of veneer mills and veneer production volume in selected SSA countries

Country Millsa Productionb

Cubic meters

Gabon 8 120,300

Côte d’Ivoire 19 274,000

Ghana 8 300,000

Cameroon 1 47,300

Republic of the Congo n/a 32,000

Democratic Republic of the Congo 6 1,000

Sources: ATO, Promoting the Further Processing of Tropical Timber in Africa, 43, Anzele, Côte d'Ivoire Solid Wood

Products Annual 2004, Gain report no. IV4013, 12; and FAOSTAT, September 19, 2006.

a

The estimated number of mills is for 2002, except Côte d'Ivoire, which is 2003. b

2005 FAOStat veneer production figures. Data for Equatorial Guinea are not available.

Leading Exporters

In 2005, the United States, Canada, and China were the top three global exporters of wood

veneer and collectively accounted for 47 percent of the value of the reported $2.4 billion in

veneer exports (figure 3-11). These three countries also are among the leading producers of

veneer.258 The United States and Canada both have substantial forest resources. China does

not, but fueled by imported logs, its veneer industry nevertheless expanded at an average

annual rate of 24 percent during 2001–5 to become the largest global producer of wood

veneer.259 Three SSA countries—Gabon, Côte d’Ivoire, and Ghana—are among the top ten

exporters. Collectively, SSA countries accounted for nearly 15 percent of global exports of

wood veneer in 2005 (figure 3-11).

From 2001 through 2005, five countries—Gabon, Côte d’Ivoire, Ghana, Cameroon, and

Equatorial Guinea—accounted for more than 90 percent of the value of SSA veneer

exports.260 The value of SSA exports exhibited strong growth during the period, rising by

61 percent to $356 million (as compared to the 34 percent growth in global exports).

However, the quantity data do not show a similar pattern of increase as the value data.261 The

quantity of SSA of exports increased from 905,000 cubic meters in 2001 to 1.3 million cubic

meters in 2003 and then fell to 910,000 cubic meters in 2005 (table 3-7).
 262 The ratio of hardwood veneer imports to total imports remained about the same during the 2001–05

period. Global trade in softwood veneer is limited because softwood plywood is used for lower-value end

uses and its markets are confined to countries where wood frame construction predominates (e.g., the United

States and Canada). Global Trade Atlas.

 263 Wiedenbeck, et al. Defining Hardwood Veneer Log Quality Attributes, 5.

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Leading Export Markets

In 2005, 85 percent of the $2.4 billion in global veneer imports were of hardwood veneer.262

As appearance is the primary defining feature of hardwood veneer, the species of wood used

is an important consideration. Relatively few species are commercially important, and

demand for appealing species drives global trade in hardwood veneer. Europe, North

America, and Asia consume significant quantities of wood veneer (figure 3-12). Veneer

quality specifications reportedly vary among regional markets, with Europe and Japan

demanding tight growth rings and/or consistent texture while North America and Asia accept

more marks and more figure.263

The EU remains by far the largest market for SSA veneer exports, accounting for 80 percent

of such exports in 2005 (figure 3-12). SSA countries have had strong ties with European

countries, and European wood products firms have developed close business relationships

United States

21%

Canada

18%

SSA

15%

China

8%

Malaysia

5%

Other

34%

Global Exporters

Gabon

27% Côte d'lvoire

22%

Ghana

20%

Cameroon

15%

Equatorial Guinea

6%

South Africa

6%

Other

3%

SSA Exporters

Figure 3-11 Leading global and sub-Saharan Africa exporters of wood veneer, 2005

$2,409 million $357 million

Source: GTIS, Global Trade Atlas, annual data compiled from reporting countries’ official statistics, including

EU external trade.
 264 Industry official, telephone interview with Commission staff, October 12, 2006.

 265 Industry officials, telephone interviews with Commission staff, October 10 and 12, 2006.

 266 Industry official, telephone interview with Commission staff, October 10, 2006.

 267 Hervé Bourguignon (Secretariat General, Interafrican Forest Industries Association (IFIA)) e-mail

message to Commission staff, October 30, 2006. 

3-68

with African veneer producers.264 Although ranked second behind the EU, the United States

is a relatively small market for SSA veneer. Industry sources report that American consumers

are coming to appreciate African species, but traditionally they have preferred indigenous

or South American species.265 Increased Asian demand for veneer is being driven principally

by Asia’s expanding furniture industry.266 Currently, SSA exports of wood to China are

mainly in the form of logs to feed Chinese veneer production, but veneer exports are trending

upward.267 Most of the leading consuming markets have low or zero tariffs on imports of

wood veneer. The following tabulation identifies the principal competitors in the leading

markets for SSA veneer exports.

EU

33%

United States

24%

Canada

8%

China

5%

Other

31%

Global Export Markets

EU

80%

United States

9%

Other

11%

SSA Export Markets

Figure 3-12 Leading markets for global and sub-Saharan Africa exports of wood veneer, 2005

$2,409 million $356 million 

Source: GTIS, Global Trade Atlas, annual data compiled from reporting countries’ official statistics, including

EU external trade.
 268 Hervé Bourguignon (Secretariat General, IFIA), e-mail message to Commission staff,

October 30, 2006. 

 269 As Nigerian purchasers generally pay cash, prices are discounted, but they are not strict with respect to

veneer quality. Industry official, telephone interview with Commission staff, September 28, 2006, and ITTO,

Tropical Timber Report, September 1–15, 2005, 5.

 270 Indigenous species of African woods may have many common names depending on country of origin.

In this report, the Harmonized Schedule pilot name, if available, will be used as a common reference to

particular species. If no pilot name exists, the lead name as shown in Tropical Timbers of the World will be

used. The first reference to a species will be followed by its scientific name.

 271 Oliver, Fripp, and Roby, “Wood Products Trade – Africa & Europe.”

 272 Pedersen, “Market Report Draft – Spain,” and International Wood Products Association, written

submission.

3-69

Market Principal SSA competitors 

EU United States, Romania, Croatia, Switzerland, Domestic producers

United States Canada, Brazil, EU, China, Domestic producers

China United States, Malaysia, Taiwan, EU

Reported SSA exports do not include intra-SSA exports other than those reported by South

Africa. However, industry sources report that the internal market for veneer in SSA is strong

and believe that actual intra-SSA exports are somewhat higher than reported because

informal intra-SSA exports go unrecorded.268 For example, Ghana’s wood products

producers are exploring new markets in the Economic Community of West Africa States.

Also, Nigeria, which has overland access to Ghana through Benin and Togo, is reportedly

a large consumer of wood products from Ghana.269

Factors Affecting Trade Patterns270

Various factors influenced SSA veneer exports from 2001 through 2005. SSA exports

generally benefitted from solid demand from both traditional European customers and new

customers in Asia and North America. Veneer demand was also influenced by purchasers’

developing preference for certified wood products from sustainable sources. SSA’s

indigenous species are well suited for veneer and, at least in Ghana, export values benefitted

from a shift in product mix toward higher-value sliced veneer. Export quantities, however,

were somewhat limited by various factors, such as raw material constraints and civil unrest.

In general, SSA veneer-producing countries pursue policies designed to encourage local

processing of forest resources and have worked with industry to encourage development of

sustainable sources of forest resources.

Recent trends in exchange rates have somewhat undermined the competitive position of

African veneer in international markets because SSA exports are priced in euros while South

American exports are priced in U.S. dollars.271 Specifically, the recent strengthening of the

euro has made Brazilian veneer increasingly competitive in Europe relative to African

woods. This change has made SSA core-stock veneer less competitive in the United States.272
 273 In 2002, reacting to reports that mahogany (Swietenia macrophylla) was being illegally and/or

unsustainably logged in Brazil, the Convention of International Trade in Endangered Species of Wild Fauna

and Flora (CITES) listed mahogany in appendix II instead of the previous listing in CITES appendix III. Of

the three appendices to CITES, appendix I affords the most protection and appendix III the least.

Commercial trade for appendix II species requires a CITES permit. The change interrupted the heretofore

large flow of Brazilian exports of mahogany veneer to the United States. Brazilian mahogany veneer

reportedly remains unavailable. Industry official, e-mail message to Commission staff, September 27, 2006;

CITES, “CITES Trade Controls to Take Effect for Mahogany”; Caldwell, “Bigleaf Mahogany Market Still

Shrinking”; and International Wood Products Association, written statement.

 274 Industry official, e-mail message to Commission staff, September 27, 2006; and Ghana Forestry

Commission, TIDD, Reports on Export of Wood Products: December 2001 to 2005.

 275 Industry official, e-mail message to Commission staff, September 27, 2006; and industry official,

telephone interview with Commission staff, October 10, 2006.

 276 Oliver, Fripp, and Roby, “Wood Products Trade – Africa & Europe.”

 277 Tariff rates, which are less for logs to China and India than for veneer, tend to encourage exports of

logs rather than veneer. Tariff rate information found at

http://www.ita.doc.gov/td/tic/tariff/country_tariff_info.htm.

 278 Industry official, telephone interview with Commission staff, October 10, 2006.

 279 Industry official, telephone interview with Commission staff, September 27, 2006.

 280 TTF, “EU & International Market Drivers.”

 281 Industry official, telephone interview with Commission staff, October 10, 2006.

3-70

Demand Growth and Price Increases

Within the wood products industry, different woods are informally categorized as red woods

or white woods based on their general color. Market prices for either are influenced by

global supply and demand. In 2002, a disruption in the supply of an important South

American red wood, mahogany (Swietenia spp.), benefitted certain SSA suppliers as it led

to panic buying in the United States of African red woods such as Acajou d’Afrique (Khaya

spp.), Sapelli, (Entandrophragma cylindricum), and Sipo (Entandrophragma utile) by some

traditional users of mahogany.273 This development, in combination with the existing demand

from European countries, caused a scarcity of Acajou d’Afrique and upward pressure on the

price of sliced veneer.274 Although some producers of mahogany (e.g., Peru, Bolivia, and

Central American countries) resumed mahogany shipments by 2004 and restored some

balance to veneer markets, Acajou d’Afrique has now been established as a substitute for

mahogany in the U.S. market.275

From 2001 through 2005, SSA benefitted from a general increase in Asian wood products

demand, which resulted in a rise in trade for such items between Africa and Asia, particularly

okoumé (Aucoumea klaineana) from Gabon, the Democratic Republic of the Congo, and

Equatorial Guinea.276 Although China buys more logs than veneer, SSA exports of veneer

to China are also increasing.277 Industry sources attribute the increased Asian demand to that

region’s expanding furniture industry.278 Other new markets for SSA veneer include the

Russian Federation and East European countries.279

In general, global markets for wood products in recent years have increasingly demanded

wood products that are certified to be from legal and sustainable sources. Although the

extent of illegal logging in SSA countries is uncertain, the preference of veneer buyers has

nevertheless shifted toward veneer from certified sources.280 In general, veneer from certified

sources is more expensive than veneer from uncertified sources. An industry source has

speculated that the push by purchasers to buy certified veneer may have already had a price

impact.281

Although reliable price data are not generally available for all SSA countries, the available

data suggest that veneer prices increased at an average annual rate of approximately
 282 Ghana Forestry Commission, TIDD, Reports on Export of Wood Products: December 2001 to 2005.

 283 Forest cover in Africa is approximately 650 million hectares or 17 percent of the continent’s total area.

Generally, forest land in African countries is state-owned with access being granted to forest industries

through concessions. Oliver, Fripp, and Roby, “Wood Products Trade – Africa & Europe.”

 284 ITTO, Status of Tropical Forest Management 2005, 69.

 285 Hervé Bourguignon (Secretariat General, IFIA), e-mail message to Commission staff,

October 30, 2006. 

 286 Oliver and Fripp, “Producer Country Draft – Gabon,” and ITTO, Status of Tropical Forest

Management 2005, 80.

 287 Oliver and Fripp, “Producer Country Draft – Cameroon”; Oliver and Fripp, “Producer Country Draft –

Congo Brazzaville”; and Oliver and Fripp, TTF, “Producer Country Draft – Ghana.”

 288 Because lesser-known species have not been commercially exploited, larger logs are generally

available, and the veneer is typically higher quality and grade. These species are generally not found in

abundance, so they are more expensive to harvest than more common species. As they are higher value and

more expensive, increased use of lesser known species may have helped push up the value of SSA veneer

exports. ATO, Promoting the Further Processing of Tropical Timber in Africa, 7; and industry official,

telephone interview with Commission staff, October 10, 2006.

 289 Ghana’s exports of high value veneer (i.e., sliced veneer, curls veneer, and layons) increased from

31 percent (by quantity) of total exports in 2001 to 39 percent in 2005. Because high value veneer is almost 4

times as valuable as rotary veneer, it accounted for 63 percent (by value) of total exports in 2001 and

71 percent in 2005. Ghana Forestry Commission, TIDD, Reports on Export of Wood Products: December

2001 to 2005.

 290 ATO, Promoting the Further Processing of Tropical Timber in Africa, 7; and industry official,

telephone interview with Commission staff, October 10, 2006.

3-71

4 percent during the period of 2001–5.282 Along with other global suppliers, SSA exporters

benefited from these price increases.

Natural Resources

Veneer production and exports are highly concentrated in countries along the west coast of

central Africa or within the Congo Basin.283 However, the availability of forest resources and

the principal sources in Africa are shifting due to over-exploitation of readily accessible

coastal forests. The declining resource bases in some West African countries have only been

partly offset by new sources in more remote inland areas (e.g., Republic of the Congo,

Central African Republic) where difficult logistics and poor infrastructure are a clear

obstacle to the expansion of veneer exports.284 According to an industry source, of the five

largest SSA veneer exporting countries, Gabon, Cameroon, and Equatorial Guinea still have

abundant resources, while Ghana and Côte d’Ivoire do not.285

SSA veneer-producing countries have been working to develop supplies of certified wood

products, which tend to command higher prices in world markets. Efforts are advancing

along two paths. First, government efforts are underway to develop a certification system

tailored specifically to African countries (i.e., the Pan African Forest Certification).286

Second, private wood products firms in Cameroon, the Republic of the Congo, and Ghana

are currently working to meet the requirements of an international certification scheme (i.e.,

Forest Stewardship Council certification).287

According to industry sources, SSA veneer producers are using more lesser-known species,

although there is not a consistent strategy for their development.288 They have also increased

production of high-value face and back stock relative to lower-value core stock.289 Both

trends have tended to increase the overall value of veneer exports.290
 291 ITTO, Status of Tropical Forest Management 2005, 91–92; and Oliver and Fripp, “Producer Country

Draft – Gabon.”

 292 Imposition of a 20 percent log export tax in 1996 reportedly made veneer production increase by 2003.

Hervé Bourguignon (Secretariat General, IFIA), e-mail message to Commission staff, October 30, 2006; and

ITTO, Status of Tropical Forest Management 2005, 92, 95.

 293 Cessation of SNBG price setting was scheduled to take place, January 1, 2006 and be replaced by a log

export quota system. The change was postponed due to producers concerns that a price war would ensue.

ITTO, Tropical Timber Market Report, February 16–28, 2006, 2, November 16–30, 2005, 2, and May 16–31,

2006; and ITTO, Status of Tropical Forest Management 2005, 93.

 294 Also known as gaboon, okoumé is a utilitarian species that is softer than other red woods and does not

finish as well. It is often used for core stock. Exports of okoumé logs to China have declined due to the log

export tax and increasing scarcity. Industry official, telephone interview with Commission staff,

September 28, 2006; and Oliver and Fripp, “Producer Country Draft – Gabon.”

 295 Industry official, e-mail message to Commission staff, September 27, 2006.

 296 Oliver and Fripp, “Producer Country Draft – Gabon”; and Pedersen, “Market Report Draft – France.”

 297 The mill, belonging to a Dutch firm (Van Hout), was moved from Holland to Gabon. The firm already

had a rotary mill in Gabon. Industry official, telephone interview with Commission staff,

September 28, 2006.

 298 Oliver and Fripp, “Producer Country Draft – Gabon.”

 299 ITTO, Status of Tropical Forest Management 2005, 85.

 300 Ibid., 86.

 301 Hervé Bourguignon (Secretariat General, IFIA), e-mail message to Commission staff,

October 30, 2006; and Oliver, Fripp, and Roby, “Wood Products Trade – Africa & Europe.”

3-72

Gabon

Estimates of Gabon’s total forest area range from 21.3 million to 25.8 million hectares, all

of which is owned by the state.291 Gabon is traditionally a strong exporter; approximately 90

percent of its production is exported. Gabon has recently taken measures to restrain exports

of logs in order to encourage downstream production of veneer and other processed

products.292 The Société Nationale des Bois du Gabon, a privately managed enterprise

sanctioned by the government, has a monopoly on log exports of the two main species,

okoumé (Aucoumea klaineana) and ozigo (Dacryodes spp.).293 Production is heavily focused

on okoumé, which is used mainly for veneer and plywood.294 Although of lesser quality than

Acajou d’Afrique, the lower-priced okoumé veneer affords a competitive advantage to

Gabon in international markets, particularly in China.295

Most veneer exports to Europe are destined for the French plywood sector; veneer and

plywood exports have reportedly replaced okoumé log exports to France.296 One factor in

Gabon’s increasing veneer exports was the start-up in 2003 of a new sliced veneer mill, that

produces veneer almost solely for export.297 However, industry sources believe maintaining

production levels depends on utilizing a wider range of species rather than confining

harvesting to “few species.”298

Côte d’Ivoire

Estimates of Côte d’Ivoire’s total forest area range from 7.1 million to 11.7 million

hectares.299 Forest land is owned either by the state or by local communities.300 Côte d'Ivoire

has a well-developed processing industry and was formerly the largest supplier of

further-processed African hardwood products.301 Despite a ban on log exports of valuable

species, an increasing scarcity of logs is attributed to civil war (which has contributed to

deforestation throughout the country), bush fires, and the production of charcoal and
 302 ITTO, Status of Tropical Forest Management 2005, 88; and Anzele, Côte D’Ivoire Solid Wood

Products Annual 2004, 3–4.

 303 Anzele, Côte D’Ivoire Solid Wood Products Annual 2004, 4.

 304 ITTO, Status of Tropical Forest Management 2005, 98.

 305 Oliver and Fripp, “Producer Country Draft – Ghana,” and Hervé Bourguignon (Secretariat General,

(IFIA), e-mail message to Commission staff, October 30, 2006. 

 306 One lesser species, Fuma (Ceiba pentandra) is used for rotary veneer for core stock, much of which is

exported to the United States. Industry officials, telephone interviews with Commission staff, September 28,

2006 and October 10, 2006; Ghana Forestry Commission, TIDD, Reports on Export of Wood Products:

December 2001 to 2005; industry official, telephone interview with Commission staff, September 28, 2006;

and Oliver and Fripp, “Producer Country Draft – Ghana.”

 307 Ghana Forestry Commission, TIDD, Reports on Export of Wood Products: December 2001 to 2005.

 308 ITTO, Tropical Timber Report, August 16–31, 2005, 9.

 309 Oliver and Fripp, TTF, “Producer Country Draft – Cameroon”; and ITTO, Status of Tropical Forest

Management 2005, 58–59.

 310 Exports of lesser-known species are permitted for market development purposes. ITTO, Status of

Tropical Forest Management 2005, 62, and Oliver and Fripp, “Producer Country Draft – Cameroon.”

 311 Oliver and Fripp, “Producer Country Draft – Cameroon”; and industry official, telephone interview

with Commission staff, September 28, 2006.

 312 ITTO, Tropical Timber Report, January 16–30, 2005, 2.

 313 Oliver and Fripp, “Producer Country Draft – Cameroon”; Oliver and Fripp, TTF, “Producer Country

Draft – Cameroon”; and ATO, Promoting the Further Processing of Tropical Timber in Africa, 8.

 314 Oliver and Fripp, “Producer Country Draft – Cameroon.”

3-73

fuelwood.302 As a result, the veneer industry in Côte d'Ivoire has reportedly resorted to log

imports from other SSA countries to supplement its diminishing local log supply.303

Ghana

Estimates of Ghana’s total forest area range from 2.7 million to 6.3 million hectares.304 A log

export ban, good transportation infrastructure, and a stable political environment are factors

that have contributed to the development of more downstream wood products processing

(particularly veneer) than in other African countries.305 However, the country’s log supply

is dwindling, the quality of the remaining growing stock has decreased, and there is now

excess capacity in production facilities.306 Nevertheless, from 2001 through 2005, the value

of Ghana’s veneer exports increased due to a favorable change in the mix of sliced and rotary

veneer.307 In an effort to offset the declining resource, a sliced veneer company in Takoradi

is reportedly developing a new product, buttress sliced veneer, to be sliced from stumps.308

Cameroon

Estimates of the forest land in Cameroon range from 13.3 million to 23.8 million hectares,

most of which belongs to the state.309 Cameroon’s policy to encourage further processed

wood products is reflected in its ban on log exports of commercially valuable species.310

Major export species are obeche (Triplochiton scleroxylon), sapelli, missanda

(Erythrophleum spp.), and okoumé.311 In 2005, Italy absorbed 78 percent of Cameroon’s

veneer exports.312

The forest resources are heavily exploited in the southern part of the country, and harvests,

which are close to long-term sustainable limits, are reported to be significantly lower than

installed processing capacity can accommodate.313 However, in recent years, forest

management has been encouraged through an improved legal and regulatory framework, and

an international NGO has been appointed as an official independent observer.314
 315 ITTO, Status of Tropical Forest Management 2005, 58–104.

 316 ATO, Promoting the Further Processing of Tropical Timber in Africa, 8; and Oliver and Fripp,

“Producer Country Draft – Cameroon.”

 317 Oliver and Fripp, TTF, “Producer Country Draft – Gabon”; Oliver and Fripp, “Producer Country Draft

– Congo Brazzaville.”

 318 ATO, Promoting the Further Processing of Tropical Timber in Africa, 8.

 319 Anzele, Côte d’Ivoire Solid Wood Products Annual 2004, 10.

3-74

Policies to Promote the Industry

Several SSA-veneer producing countries have new or relatively new forest regulations that

likely have contributed to their ability to produce and export veneer.315 In general, SSA

veneer-producing countries have pursued policies designed to encourage further local

processing of forest resources. Such policies include tax schemes, export bans, preferential

duty treatment, privatization of state-owned timber firms, and changes in the way logging

concessions are awarded.

Downstream value-added wood processing is encouraged through log export restrictions in

the form of partial or total log export bans (Nigeria, Ghana, Côte d’Ivoire, and Cameroon)

or local log processing quotas (Central African Republic, Gabon, and the Republic of

Congo).316 Gabon is privatizing the state-controlled monopoly for okoumé trade, and the

Republic of the Congo has privatized five state-controlled timber firms since 1998.317

Measures such as industrial incentives and the granting of concessions subject to the

establishment of processing capacity have been applied to attract foreign investment in

veneer processing.318 For example, veneer manufacturers in Côte d’Ivoire benefit from tax

holidays and exemption from duties on imports of machinery and other essential inputs.319
3-75

Wood Veneer Bibliography

African Timber Organization. Promoting Further Processing of Tropical Timber in Africa, Libreville, 

Gabon, 2004. http://www.itto.or.jp/live/Live_Server/839/PD%2015-98%20Rev.%202(E).pdf

(accessed October 27, 2006).

Anzele, Antoine. Côte d’Ivoire Solid Wood Products Annual 2004. Gain report no. IV4013. USDA 

Foreign Agricultural Service, Washington, D.C. September 2004.

Caldwell, Brian. “Bigleaf Mahogany Market Still Shrinking.” Woodshop News XXI, no. 2, January 2007.

Chudnoff, Martin. Tropical Timbers of the World. Agricultural Handbook No. 607. Madison, WI: USDA

Forest Service Forest Products Laboratory, September 1984.

Convention on International Trade in Endangered Species. “CITES Trade Controls to Take Effect for

Mahogany.” Geneva: November 11, 2003.

http://www.cites.org/eng/news/press/2003/031111_mahogany.shtml (accessed

October 27, 2006).

FAO. Promotion of Valuable Hardwood Plantations in the Tropics. A Global Overview. Unpublished

report based on the work of F. K. Odoom. Forest Plantation Thematic Papers, Working Paper 4.

Forest Resource Development Service, Forest Resources Division, 2001.

Ghana Forestry Commission. Timber Industry Development Division. Report on Export of Wood

 Products: December 2005. Accra: Ghana Forestry Commission, 2006.

 ———. December 2004. Accra: Ghana Forestry Commission, 2005.

 ———. December 2003. Accra: Ghana Forestry Commission, 2004.

 ———. December 2002. Accra: Ghana Forestry Commission, 2003.

 ——— December 2001. Accra: Ghana Forestry Commission, 2002.

International Tropical Timber Organization. Status of Tropical Forest Management 2005. ITTO

Technical Series no. 24. Yokohama: ITTO, 2006. 

http://www.itto.or.jp/live/pageddisplayhandler?pageId=270 (accessed October 27, 2006).

International Tropical Timber Organization. Tropical Timber Market Report 10, no. 13

(August 16–31, 2005): 9.

———. 10, no. 14 (September 1–15, 2005): 5–6.

———. 10, no. 19 (November 16–30, 2005): 2.

———. 11, no. 2 (January 16–31, 2006): 2–4.

———. 11, no. 4 (February 16–28, 2006): 2–3.

———. 11, no. 8 (April 16–30, 2006): 2–3.
3-76

 ———. 11, no. 10 (May 16–31, 2006): 2–4.

Oliver, Rupert and Emily Fripp. Timber Trade Federation. “Producer Country Draft—Cameroon.” 

http://www.ttf.co.uk/forests/responsible/producer_country_fact_sheets.pdf (accessed

October 27, 2006).

 ———. “Producer Country Draft—Congo Brazzaville.” 

http://www.ttf.co.uk/forests/responsible/congo_final_draft.pdf (accessed October 27, 2006).

 ———. “Producer Country Draft—Gabon.” 

http://www.ttf.co.uk/forests/responsible/gabon_final_draft.pdf (accessed October 27, 2006).

 ———. “Producer Country Draft—Ghana.” 

http://www.ttf.co.uk/forests/responsible/ghana_final_draft.pdf (accessed October 27, 2006).

Oliver, Rupert, Emily Fripp and Andy Roby. Timber Trade Federation. “Wood Products Trade – Africa

& Europe.”

http://www.ttf.co.uk/forests/responsible/overview_trade_final_with_metafile_inserts.pdf

(accessed October 27, 2006).

Pedersen, Ole. Timber Trade Federation. “Market Report Draft—France.”

http://www.ttf.co.uk/forests/responsible/france_final_draft.pdf (accessed October 27, 2006).

 ———. “Market Report Draft—Spain.” http://www.ttf.co.uk/forests/responsible/spain_final_draft.pdf

(accessed October 27, 2006).

Timber Trade Federation. “EU & International Market Drivers.”

http://www.ttf.co.uk/forests/responsible/overview.paper.final.pdf (accessed October 27, 2006).

Wiedenbeck, Jan, Michael Wiemann, Delton Alderman, John Baumgras, and William Luppold. Defining

Log Quality Attributes. General Technical Report NE-313. Newton Square, PA: U.S. Forest

Service, January 2004.

http://www.fs.fed.us/ne/newtown_square/publications/technical_reports/pdfs/2004/ne_gtr313.pdf

(accessed October 27, 2006).
 1

 Commercial services consist of transportation, travel and tourism, and other services, which include

communications, construction, insurance, financial, computer and information, royalties and license fees, and

other business services.

 2

 Travel services will hereafter be referred to as tourism. Based on data compiled from WTO “Statistical

databases.”

 3

 Transportation services account for the remaining 22 percent of total commercial service exports.

4-1

CHAPTER 4

Services Sector Profiles

Exports of commercial services from sub-Saharan Africa (SSA) totaled more than

$23 billion in 2004 and represented about 15 percent of the total value of SSA exports

from 2001 through 2004.1

 Travel or tourism services accounted for about 50 percent

of the total, up from 41 percent in 2000.2

 Increased political stability reduced or eliminated

conflict in a number of SSA countries and contributed to the growth in tourism exports for

both business and leisure travel. Government policies that facilitated the expansion of

accommodations and helped to market their countries’ tourism potential also succeeded in

attracting more tourists. Financial services trade data are included in the “other” commercial

services category (along with communications, construction, insurance, and computer and

information services), which totaled nearly $6.5 billion and represented about 28 percent of

all commercial service exports between 2000 and 2004.3

 Although financial service exports

represent a small fraction of this total, exports of financial services are growing rapidly.

Increased exports of financial services are linked to increased merchandise exports that

increase demand for trade financing services. Exports of financial services also benefitted

from government reforms that attracted investment and facilitated expansion of the

infrastructure necessary for the financial services industry to grow. The following tabulation

summarizes dynamic factors that contributed to increased exports and underlying factors that

contributed to industry development in the services sector.

Factors Financial services Tourism

Dynamic Factors (factors that changed during 2001–05 and contributed to increased exports)

Demand growth and/or price increases X X

Increased investment X X

Policies to promote the industry X X 

Infrastructure improvement X X

Underlying Factors (factors remained relatively stable during 2001–05)

Natural resources X

Labor supply X X

Regional integration X
 4

 The actual increase in exports of financial services from SSA may differ due to data deficiencies.

Countries reporting to the IMF, which is the source of most data found in this discussion, differ from 1999

through 2004.

 5

 Financial intermediation encompasses firms, such as banks, acting as intermediaries who borrow from

consumers/savers and lend to firms that need investment. Gorton and Winton, “Financial Intermediation,” 1.

4-2

Financial Services

Summary of Findings

The financial services industry has an important place in the region’s growth prospects,

although SSA is not among the major world exporters of financial services (box 4-1). Within

the region, the financial services industries have grown steadily in recent years, and reported

exports have increased by up to 230 percent, from $61 million in 1999 to $201 million in

2003 (table 4-1).4

 Increases in financial service exports appear to stem from trade financing

activities and stock market activity. Trade financing, comprising aspects of intermediation

services and financial guarantees and commitments, provides a means to facilitate

merchandise trade and manage the trade-related risks borne by importers and exporters.5

Trade financing is an integral component of trade, especially when trade relationships are

new, when small- and medium-sized firms are involved and when trade-related risks are

perceived to be high. Trade financing is usually provided by commercial banks and

government entities such as export-import banks, export credit insurance agencies, and state

trading enterprises. Common forms of trade financing include pre-shipping financing, postBox 4-1 Product Description for Financial Services

International trade in financial services encompasses banking and other financial services traded between residents

and non-residents. As defined by the WTO, financial services include deposit taking and lending; intermediation;

financial leasing; payment and money transmission services; guarantees and commitments; money market, foreign

exchange, and derivative trading; securities activities; money brokering; asset management; and other related

services such as financial data processing and credit reference. IMF export data, which are used in this report,

include service fees for lines of credit, financial leasing, and foreign exchange transactions, as well as commissions

and fees for securities transactions, commodity futures trading and asset management. IMF export data does not

include intermediary or auxiliary services associated with insurance or pension funds.1

Exports of financial services may be provided through a number of different methods, including foreign consumers

traveling to the provider’s home market, as well as cross border transactions utilizing electronic communications or

the postal service. Local consumers’ purchases from foreign-owned affiliates located in the consumer’s home market

are the predominant mode of trade. However, these transactions are not captured in export statistics. Transactions

between local consumers and foreign-owned institutions located in the local market are not captured in the export

data of either the institution’s home country or that of the local country.

____________________

1

 IMF, Balance of Payment Statistics Yearbook of Statistics: 2005; WTO, Annex on Financial Services.
 6

 United Nations Economic and Social Commission for Asia and the Pacific, Trade Facilitation

Handbook, 59–64.

 7

 Batten and Bryant, “Trade Finance and Economic Development in Sub-Saharan Africa,” 4–5.

4-3

Table 4-1 Sub-Saharan Africa financial services exports, 1999–2004a

Country 1999 2000 2001 2002 2003 2004

Million dollars

Benin 5.90 2.60 2.60 3.20 0.60 (b

)

Botswana 1.10 4.10 2.80 1.40 1.90 (b

)

Cape Verde 0.52 0.01 0.04 0.04 0.14 (b

)

Côte d'Ivoire 23.40 28.20 46.80 38.70 47.50 (b

)

Eritrea 0.50 0.60 (b

) (b) (b) (b)

Ethiopia 9.60 3.60 4.10 4.10 5.00 2.90

Guinea 0.30 0.10 0.30 0.20 (a

) (b)

Guinea-Bissau (b

) (b) (b) 0.02 0.73 (b)

Madagascar 1.00 1.00 1.00 (b

) 2.00 (b)

Mali 0.70 0.80 1.50 2.40 2.00 (b

)

Mauritius (b

) 21.40 68.00 17.60 12.70 17.90

Mozambique (b

) (b) (b) 8.40 4.00 1.50

Namibia 6.50 2.50 1.20 1.30 (a

) (b)

Niger 0.10 0.40 0.40 0.60 0.20 (b

)

Sao Tome and Principe 0.25 0.28 0.24 0.25 (a

) (b)

Senegal 4.80 5.30 6.60 4.40 5.60 (b

)

Sierra Leone (b

) (b) (b) 0.40 0.10 0.50

Sudan (b

) (b) (b) 0.40 0.80 0.90

Swaziland (b

) (b) (b) (b) 97.70 290.80

Tanzania 4.00 4.00 3.90 4.30 4.20 2.40

Togo 2.30 3.60 0.70 3.60 0.40 (b

)

Uganda (b

) (b) (b) 0.90 15.10 45.80

SSA total 60.97 78.49 140.18 92.21 200.67 362.70

Source: International Monetary Fund, International Financial Statistics Yearbook.

 a

 IMF export data include service fees for lines of credit, financial leasing, and foreign exchange transactions,

as well as commissions and fees for securities transactions, commodity futures trading and asset management. IMF

export data does not include intermediary or auxiliary services associated with insurance or pension funds. IMF,

Balance of Payment Statistics Yearbook of Statistics: 2005; WTO, Annex on Financial Services.

 b

 Not available

shipping financing, buyer’s credit, and supplier’s credit. Pre- and post-shipping finance,

comprising short-term loans and lines of credit, provides exporters with capital to cover

wages, overhead, and input costs necessary to fill export orders and to continue operations

until payment is received. Buyer’s and supplier’s credit are loans made by financial

institutions and exporters in the exporting market, respectively, to importers in order to

finance the importer’s purchase.6

 In the sub-Saharan context, indigenous and foreigninvested sub-Saharan banks would export these services by providing them to merchandise

traders in neighboring African and overseas countries. Financial institutions that engage in

trade financing are most numerous in South Africa, Côte d’Ivoire, and Kenya. Swaziland and

Uganda also have active trade financiers.7

 Exports of trade financing services tend to grow

as merchandise trade grows, evidence of which is found throughout this report.
 8

 United Nations Development Programme, African Stock Markets Handbook, 7.

 9

 See, for example, International Financial Services London (IFSL), “Benefits of Liberalising Financial

Services and Promoting Access to Finance,” and “Impact of Liberalising Financial Services”; Dobson,

“Further Financial Services Liberalization in the Doha Round”; and Claessens, Demirguc-Kunt and

Huizinga, “How Does Foreign Entry Affect the Domestic Banking Market?”

 10 French, “New Directions for African Financial Services,” 27.

 11 Sacerdoti, “Access to Bank Credit in Sub-Saharan Africa: Key Issues and Reform Strategies,” 4.

 12 Ibid., 7.

 13 Ibid., 29.

 14 Hansohm, Hodge, and Ndulo, “State of Trade in Services and Service Trade Reform in Southern

Africa,” 36–7.

4-4

It is believed that the countries of focus in this chapter—Côte d’Ivoire, Mauritius, Swaziland,

Uganda—also export securities services. All are home to developing stock markets, the

largest of which is the West African Regional Bourse in Côte d’Ivoire.8

 Foreign purchases

of stocks in these growing markets require payments of fees and commissions to indigenous

stockbrokers, recorded as exports of financial services by these countries.

The financial services industry exerts an economy-wide influence. The efficient allocation

of scarce capital, through services such as intermediation, equity investment, and trade

financing, supports and contributes to the competitiveness and export potential of all

domestic economic sectors. Higher levels of competitiveness in the agricultural,

manufacturing, and energy sectors promote economic development, which in turn promotes

further development of the financial services industry.9

 Thus, economies with limited natural

resources, such as Mauritius, have used the financial services sector as a means to promote

and strengthen their position in the global marketplace.

Industry Overview

In general, SSA financial services industries are quite small relative to the global financial

services market. Unlike the global market, where individual firms tend to have little market

power, formal financial services in SSA markets are highly concentrated. A few large firms,

generally affiliates of European banks that specialize in financing commodity exports,

dominate the commercial banking sector.10 These trade financing activities facilitate both

imports and exports of manufactured goods and encompass the credit-end financing services

mentioned above.

The SSA financial services market environment also differs from that of other world

markets. SSA financial services markets, with the exception of South Africa and Mauritius,

are generally characterized by low levels of affordable bank credit extended to the private

sector in comparison to other developing countries’ markets.11 Reasons for low credit levels

include regulatory barriers for non-bank financial intermediation, weak judicial and

enforcement systems, and high levels of risk due to information asymmetry between lenders

and borrowers.12 High levels of risk and weak regulatory systems drive high interest rate

spreads that characterize many SSA financial services markets. For example, in 2002, the

difference between reference lending and deposit rates in Zambia was 36 percent.13

Financial services is both a capital- and technology-intensive industry, and small domestic

markets can limit access both to capital, and the ability to take advantage of economies of

scale present in the industry.14 As a result, regional agreements initiating financial integration

are increasingly common among SSA countries. For example, Cameroon, the Central

African Republic, Chad, the Republic of the Congo, Equatorial Guinea, and Gabon share a
 15 Jansen and Vennes, “Liberalizing Financial Services Trade in Africa: Going Regional and Multilateral,”

2.

 16 Hansohm, Hodge, and Ndulo, “State of Trade in Services and Service Trade Reform in Southern

Africa,” 45.

 17 Economist Intelligence Unit, Country Profile – Côte d’Ivoire.

 18 Cihak and Podpiera, “Bank Behavior in Developing Countries: Evidence from East Africa,” 10.

 19 Genesis Analytics, “Access to Financial Services in Swaziland,” 8.

 20 The period 1999–2003 was chosen due to considerations of data availability and consistency. USITC

staff calculations used IMF Balance of Payments data. Totals were calculated based on statistics from

reporting countries only. The IMF provides the most detailed breakdown of services export data, although

the list of reporting countries is limited. 

 21 U.S. ITC staff estimates. Totals are based on statistics from reporting countries only. The IMF provides

the most detailed breakdown of services export data; however, the list of reporting countries is limited.

 22 Datamonitor, Global Commercial Banks, October 2003; Datamonitor, Global Commercial Banks,

May 2005; Datamonitor, Global Investment Banking and Brokerage, May 2005. 

4-5

common currency as members of the Economic and Monetary Community of Central Africa,

one of some 30 regional trade agreements in Africa.15 Additionally, for many SSA countries,

it is not feasible to expect to export a large volume of financial services outside elements of

trade facilitation.16 Instead a number of countries, such as South Africa and Mauritius, have

focused on becoming a financial center for the region. Côte d’Ivoire is another example of

this—Abidjan hosts the regional stock exchange, as well as being a member of the central

bank for the West African Economic and Monetary Union (WAEMU).17

The structure of individual financial services industries varies widely among SSA countries

due to factors such as size, levels of economic development, and the degree of reform

undertaken in the financial services sector. For example, Uganda’s financial services industry

consists of three segments – large domestic banks, subsidiaries and branches of international

banks, and small (both domestic and foreign) banks.18 In contrast, Swaziland’s financial

service industry is dominated by subsidiaries of three South African banks and the

government-run Swazibank.19

Sub-Saharan Africa Trade in the Global Context

Financial services, as defined above (box 4-1), are provided by commercial banks, savings

institutions, credit unions, investment banks, securities and commodities brokerage firms and

exchanges, and other financial institutions. It is difficult to determine how the SSA financial

markets compare with the global financial services market because reliable statistics on SSA

services trade are not generally available. However, in 2003, reported SSA exports of

financial services totaled nearly $201 million, or 0.21 percent of the $97 billion world total.20

Leading Exporters

In 2003, the United Kingdom, the United States, Luxembourg, and Switzerland were the top

exporters of financial services (figure 4-1). These four countries combined to account for

over 65 percent of the reported $97 billion in financial services exports.21 European firms

dominate the global commercial banking sector, accounting for 48.2 percent of market share

in 2002, while U.S. firms control over one-half the market in the global investment banking

and brokerage sector.22
 23 IMF, Balance of Payment Statistics Yearbook; US Department of Commerce, Bureau of Economic

Analysis, Survey of Current Business; World Bank. 

 24 IMF, Balance of Payment Statistics Yearbook.

4-6

Twenty-two SSA countries reported financial services export data to the International

Monetary Fund (IMF) for at least two years between 1999 and 2004. South Africa, the

largest economy in SSA, also has the most advanced financial services industry. However,

South Africa does not report financial services data to the IMF, and banking and securities

data are aggregated with data from the country’s large insurance industry when reported to

the World Bank. As a result, it is difficult to identify banking and securities trends and

exports; insurance exports are highly volatile from year to year, due to methods of

calculation, thus overshadowing shifts in exports of other financial services. Although South

Africa’s financial services industry is one of the top SSA exporters—it exported $32 million

of financial services to the United States alone in 2003—it is omitted from this discussion

due to the lack of data.23

Of those SSA countries that reported financial services exports, four SSA countries reported

exporting more than $10 million in financial services during 2003. Three of these—Côte

d’Ivoire, Uganda, and Mauritius—reported significant export growth.24 The fourth,

Swaziland, did not report financial services data to the IMF in 1999–2002. However, in

2003, it accounted for almost one-half of SSA financial services exports.

United Kingdom

23%

United States

20%

Luxembourg

15%

Switzerland

9% Other

34%

Global Exporters

Swaziland

49%

Côte d'lvoire

24%

Uganda

8%

Mauritius

6%

Other

14%

SSA Exporters

Figure 4-1 Leading globala and sub-Saharan Africab exporters of financial services, 2003

$97,050 million $201 million

Source: IMF, Balance of Payments Yearbook of Statistics, 2005

 a World totals are calculated as the summation of all countries who reported Balance of Payments data 

to the IMF.

 b Sub-Saharan Africa totals are composed of the 23 countries which report Balance of Payment data 

to the IMF. South Africa is omitted, although it is the largest financial services marekt in Sub-Saharan 

Africa, because it did not report financial services data.
 25 Economic Commission for Africa, “Assessing Regional Integration in Africa.”

 26 U.S. ITC staff estimates. Totals are calculated based on statistics from reporting countries only.

Additionally, financial services export statistics are more reliable than import statistics. Financial service

import statistics are often significantly under reported because importing countries lack information on

transaction margins (e.g., the difference between buying and selling prices of financial instruments, or the

difference between borrowing and lending rates). The difference between total global exports ($97 billion)

and imports ($45.6 billion) of financial services reflect these difficulties. OECD, “Round Table on

(continued...)

4-7

Leading Export Markets

In 2003, Luxembourg, the United Kingdom, the United States, Belgium, and Germany were

the leading importers of financial services (figure 4-2). Total imports of these five countries

accounted for over one-half of reported financial services imports. As in the case of the

leading exporting countries, the largest markets for financial services exports tend to be in

more-developed economies. These markets have both the wealth and infrastructure necessary

to handle large financial transactions and services.

Specific data on leading importing markets for SSA financial services are not available.

However, developed countries, such as the United States or EU, are major trading partners

for SSA countries. This suggests that they are also importers of SSA trade financing

exports.25 They also may import securities-related services, as SSA’s capital markets tend

to have a higher return on investment than markets in developed countries, thus providing

incentive for investment. Due to the nature of trade financing services, it is also likely that

SSA markets import trade financing from neighboring SSA markets. Among global

importers, SSA countries accounted for less than 1 percent of the $45.6 billion in world

financial services imports in 2003.26 Côte d’Ivoire, Swaziland, and Kenya were the leading

 United States 

9%

 United Kingdom 

13%

 Luxembourg 

18%

 Other 

60%

Global Export Markets

Figure 4-2 Leading markets for globala exports of financial services, 2003

$45,612 million

Source: IMF, Balance of Payments Yearbook of Statistics, 2005

 a World totals are calculated as the summation of all countries who reported Balance of Payments

data to the IMF.
 26 (...continued)

Sustainable Development, Providing Services to Foreign Nationals,” 34.

 27 OECD, “Intertwined: FDI in Manufacturing and Trade in Services,” 25; OECD, “Services Trade

Liberalisation: Identifying Opportunities and Gains Part One: Examples of Developing Country Services

Export,” 5.

 28 Economics Intelligence Unit, “Country Report Malawi - Main Report: January 1, 2000.”

 29 Sacerdoti, “Access to Bank Credit in Sub-Saharan Africa: Key Issues and Reform Strategies,” 7–8.

4-8

reporting SSA importers of financial services in the global market, accounting for almost

75 percent of the region’s total.

Factors Affecting Trade Patterns

There is limited data on SSA economies, and few studies focus on SSA trade in financial

services. Thus it is difficult to identify with certainty those factors that influenced export

volumes in SSA financial services from 1999 through 2003. However, existing research on

the general structure of exports in the financial services industry renders it possible to

identify those characteristics that likely contributed to trends in financial services exports

from SSA. 

Demand Growth

The export potential of the financial services industry grows as the financial sector becomes

more robust, and demand for trade financing services may increase as a result of trade

growth in merchandise and agricultural goods. A strong financial services industry can

encourage manufacturers or producers to locate in a country, due to the availability of

financial infrastructure and services, and thereby enhance a country’s merchandise export

capacity.27

Exporting SSA firms may require letters of credit stating that overseas importers can pay for

merchandise. Similarly, foreign importing firms may need documentation showing that the

SSA exporter has the financing necessary to produce the desired goods in sufficient volumes.

Commercial banks with international departments routinely provide trade financing services

in addition to other banking services or provide credit and financing in concert with

institutions specifically geared to providing trade and development financing. For example,

in Malawi, an affiliate branch of Mauritian-based Loita Bank is co-managing both a facility

for exporters and an equity fund for the private sector in Southern African Development

Community countries.28 Thus, development of the finance sector promotes greater economic

growth and enables greater export volumes, providing the potential for additional exports of

financial services.

Policies to Promote the Industry

The contribution of financial services to economic growth in SSA has been widely

recognized, and consequently governments are now making efforts to reform the industry

and its support systems. Support system reforms include creating a controllable, reliable

system of financial information on borrowers; strengthening claims recovery and collateral

realization processes; establishing more appropriate bank resolution processes, which protect

creditors; establishing new markets and product development; and increasing competition

among banks through market access.29 SSA governments are initiating programs and
 30 Ibid., 9.

 31 OECD, Working Party of the Trade Committee, “Inter-Modal Linkages in Services Trade,” 11.

 32 The African locations include Botswana, Democratic Republic of Congo, Ghana, Kenya, Lesotho,

Madagascar, Malawi, Mauritius, Mozambique, Namibia, Nigeria, South Africa, Swaziland, Tanzania,

Uganda, Zambia, and Zimbabwe. Stanbic Website.

 33 Donaldson, Sader, and Wagle, “Foreign Direct Investment in Infrastructure, The Challenge of Southern

and Eastern Africa,” 2.

 34 OICU-IOSCO, “Report on Cross-Border Activities of Market Intermediaries in Emerging Markets,” 9.

 35 OECD, “7th OECD International Trade Statistics Expert Meeting ITS and OECD-EuroStat Meeting of

Experts in Trade-In-Services Statistics (TIS).”

4-9

regulations designed to develop these support systems, such as the establishment of credit

bureaus in Uganda and the adoption of a regional accounting system in the WAEMU.30

Regional Integration

The interregional expansion of financial services throughout SSA also contributes to growth

in financial services exports. In the financial services industry, research has shown a linkage

between commercial presence and cross-border delivery of services.31 In fact, in many

markets, commercial presence is a precondition for trade. If a firm has entered a foreign

market via a subsidiary or branch, this facilitates remote service delivery between the home

and foreign markets. For example, South Africa’s Standard Bank Investment Corporation

(Stanbic) has a presence in 17 African countries, as well as in Europe, the Americas, and

Asia.32 Although local transactions incurred by these subsidiaries are not included in South

African export statistics, export volumes will increase if the South African branches of

Stanbic perform data processing or credit reference services for their foreign subsidiaries.

Thus, expansion into the neighboring SSA region is another factor contributing to increased

exports of financial services.

Infrastructure Improvement

Similarly, improvements in infrastructure can contribute to growth in financial services

exports. Infrastructure levels in South and East Africa have historically been among the

lowest in the world.33 Utilities, such as electricity and telecommunication services, are basic

inputs necessary for the operation of financial institutions, particularly as advances in

technology allow remote service provision and international financial intermediation.34

Services that can be delivered digitally are more likely to become increasingly

internationalized, and can facilitate increased exports through linkages with other modes of

service provision, as mentioned above.35 Transportation infrastructure, such as road and

railway systems, also indirectly affect the ability to export financial services by influencing

volumes of agricultural and merchandise exports, thus affecting the level of demand for

financial services supporting trade.

Country Profiles

Mauritius, Uganda, Swaziland, and Côte d’Ivoire are among the largest SSA exporters of

financial services and also are among the countries that demonstrated significant growth.
 36 IMF, Balance of Payments Statistics Yearbook 2005.

 37 Western African Economic and Monetary Union member countries are: Benin, Burkina Faso, Côte

d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo. World Bank, Africa Development Indicators 2006.

 38 Economist Intelligence Unit, Country Profile: Côte d’Ivoire.

 39 Côte d’Ivoire Embassy Cable.

 40 CIA World Factbook, “Côte d’Ivoire.”

 41 Economist Intelligence Unit, “Country Report Côte d’Ivoire–Main Report, December 2003" and

“Country Report Côte d’Ivoire– Main Report, September 2006.” 

 42 Economist Intelligence Unit, “Country Report Côte d’Ivoire– Main Report, September 2006.” 

 43 USITC phone conversation with State Dept. Representative, November 15, 2006.

 44 Côte d’Ivoire Embassy Cable.

 45 IMF, “ Access to Bank Credit in Sub-Saharan Africa: Key Issues and Reform Strategies,” 8–9.

4-10

Côte d’Ivoire

Financial service exports from Côte d’Ivoire increased from $23.4 million in 1999 to

$47.5 million in 2003.36 Although Côte d’Ivoire has experienced significant political and

economic instability during this period, several factors likely contributed to the increase in

its exports of financial services including, increased demand for trade financing and stronger

stock market performance.

Côte d’Ivoire is a member of the central bank and monetary authority for WAEMU and has

the largest banking sector in the region.37 Côte d’Ivoire also hosts the regional stock

exchange, the Bourse Regionale des Valeurs Mobilieres (BRVM), which opened in 1998.38

The banking sector is concentrated, with six banks holding more than 75 percent of total

assets.39

Côte d’Ivoire is a leading exporter of agricultural goods, such as coffee and palm oil, which

creates demand for export financing.40 Although the economy contracted in 2002 due to

political instability, the country was more stable in 2003, and goods exports increased from

$4.6 billion in 1999 to $5.8 billion in 2003.41 Côte d’Ivoire is the world’s largest exporter

of cocoa, and cocoa exports were strong until the end of the period.42 These exports were a

driving factor in economic growth, and Côte d’Ivoire benefitted from higher prices in the

world market through 2002.43

During the period 1999–2003, the trading volume of the stock and bond exchange also

increased, which may have driven demand for investment-related financial services.

Domestic law promotes Côte d’Ivoire as a regional financial center and also promotes

technology to enable electronic trading, facilitating cross-border provision of financial

services. All trading on the BRVM, the regional stock exchange for the WAEMU, must

occur electronically and take place through a resident broker.44

Government initiatives to reform and strengthen the regulatory system also positively

influenced exports. The government established a new accounting system in 2001 and is

working to improve the regulatory system. In particular, it is working to supplement the

current Central Credit Register with another credit bureau, further strengthening the financial

support systems.45

Mauritius

Mauritius’s financial sector accounts for around 10 percent of Gross Domestic Product

(GDP) and has been growing at an average rate of 9 percent annually. Mauritius also hosts

the Stock Exchange of Mauritius, established in 1988, which has been successful at raising
 46 Economics Intelligence Unit, “Country Profile Mauritius - Main Report: November 1, 2005.”

 47 IMF, Balance of Payments Statistics Yearbook 2005.

 48 Offshore banking is defined as the cross-border intermediation of funds and provision of services to

non-residents by banks residing in offshore centers. Transactions generally occur between financial

institutions and in currencies other than that of the country hosting the offshore center. Offshore centers are

defined as jurisdictions offering preferable regulations to offshore banks, particularly exemption from a

number of regulations normally imposed on onshore financial institutions, such as reserve requirements,

certain taxes, and interest or exchange rate regulations. IMF, “Offshore Banking: An Analysis of Micro- and

Macro-Prudential Issues,” 5; and U.S. Department of State, U.S. Embassy, Port Louis. “USITC Study on

Sub-Saharan Africa: Information on Mauritius and Seychelles.”

 49 IMF, Financial Sector Assessment: Mauritius, 3.

 50 U.S. Department of State, Country Background Note: Mauritius.

http://www.state.gov/r/pa/ei/bgn/2833.htm [accessed January 5, 2007].

 51 Data is not available for 1999–2002; IMF, Balance of Payments Statistics Yearbook of Statistics: 2005.

 52 GTIS, Global Trade Atlas.

 53 Genesis Analytics, “Access to Financial Services in Swaziland,” 52.

 54 The three banks are: Nedbank, Standard and FNB. Genesis Analytics, “Access to Financial Services in

Swaziland,” 8.

 55 Genesis Analytics, “Access to Financial Services in Swaziland,” 25.

 56 Central Bank of Swaziland, “Recent Economic Developments.”

4-11

local capital through bonds, stocks, and securities.46 From 1999 through 2003, the value of

financial services exports fluctuated, increasing from $21.4 million in 2000 to $68 million

in 2001, decreasing in 2002, reaching a low of $12.7 million in 2003, and then rebounding

in 2004 to more than $17.9 million (table 4-1).47 Demand for trade financing was a major

factor in export trends during the period.48

The onshore banking industry is highly concentrated, with the two multinational Mauritian

banks, Mauritius Commercial Bank and the State Bank of Mauritius, accounting for

70 percent of market share.49 Mauritius’ major exports are sugar and textiles, and 40 percent

of bank credit is concentrated in these two industries, in addition to tourism. Fluctuations in

export volumes of sugar and textiles influence the volume of financial services exports, due

to changes in demand for trade financing activities. For example, in 2002, a hurricane

significantly diminished sugar production, which makes up 25 of export earnings.50

Swaziland

In 2003, Swaziland exported $97.7 million in financial services, which increased to

$290.8 million in 2004.51 This increase was most likely linked to a significant increase in

merchandise trade from $593 million in 2003 to $792 million in 2004.52 Other factors

influencing export volumes are an improving exchange rate and recent economic growth. 

The contribution of the banking, insurance, and real estate sector to GDP has been growing

rapidly, accounting for 7.5 percent of GDP in 1999.53 Swaziland’s banking sector consists

of three South African-based commercial banks, the government-owned Swazibank, and the

Swaziland Building Society.54 Swaziland’s capital market, the Swaziland Stock Exchange,

currently has low levels of market capitalization and liquidity.55

Swaziland’s export-based economy, particularly in agricultural products, is linked to growth

in financial services. Swaziland frequently generates trade surpluses from exporting sugar,

often in the form of soft drink concentrate, and wood pulp. In 2003, Swaziland became the

largest supplier of soft drink concentrates in Africa.56 

Possibly in recognition of the economy’s reliance on merchandise exports, the financial

services industry offers an increasing number of services supporting merchandise
 57 WTO, “Trade Policy Review, Swaziland.”

 58 IMF, Balance of Payments Statistics Yearbook 2005.

 59 U.S. Department of State, “Background Note: Swaziland.” Economics Intelligence Unit, “Country

Report Swaziland – Main Report: October 1, 2005.” 

 60 IMF, Balance of Payments Statistics Yearbook 2005.

 61 USITC Staff calculations based on World Bank Wolrd Development Indicator data. WDI Online.

 62 Non-traditional products are defined as all commodities other than raw form coffee, cotton, tea, and

tobacco. WTO, “Trade Policy Review, Annex 3: Uganda,” 239.

 63 Bank of Uganda, Current State of the Ugandan Economy, 13.

 64 IMF, “Uganda: Financial System Stability Assessment,” 8.

 65 IMF, “Bank Behavior in Developing Countries, Evidence from East Africa,” 7.

 66 IMF, “Access to Bank Credit in Sub-Saharan Africa: Key Issues and Reform Strategies,” 30; and IMF,

“Uganda: Financial System Stability Assessment,” 22.

4-12

exportation, particularly for smaller businesses. The Small Scale Enterprise Loan Guarantee

Scheme was initiated in the 1990s to increase the participation of small-scale enterprises in

the economy and is administered by the Central Bank through the commercial banking

industry.57 The government further increased access to financing for small- and mediumsized enterprises from 2002 through 2004, promoting a rapid increase in general merchandise

exports.58 During the period, Swaziland’s exports also became more competitive as a result

of a depreciated currency value.59 

Uganda

Exports of financial services from Uganda increased from less than $1 million in 2002 to

$15.7 million in 2003 and $45.8 million in 2004 (table 4-1).60 The primary factor in the

growth of Uganda’s financial services exports is demand for trade financing, as a result of

economic growth and commercial lending. Research suggests other factors include increased

investment activity, government reforms, and investment in infrastructure. 

From 1999 through 2003, Uganda’s economy increased at an average annual rate of

7 percent.61 The state-owned Bank of Uganda, in charge of financing and administering the

Export Refinance Scheme, provides export finance for nontraditional products by channeling

credit through commercial banks.62 From June 2000 through December 2003, the percent of

total credit provided by commercial banks designated for trade and services activities

increased from 47 percent to 57 percent.63 Ugandan banks have also increased levels of

lending to foreign institutions, which likely accounts for growth in exports of financial

services. From 2001 through 2002, the levels of lending to foreign banks almost doubled.64

Research suggests that efforts by the Ugandan government to improve financial support

systems have also contributed to increases in exports. In late 2002, Uganda’s largest stateowned bank was privatized, increasing efficiency and competitiveness in the financial

services sector.65 The government has also introduced improvements to accounting

standards, initiated plans for a national credit reference bureau, increased supervision of

banks, and drafted anti-money laundering legislation.66 

Uganda has also made improvements in infrastructure that have promoted exports of

financial services. Initiatives to improve the road system facilitate exports of manufacturing

and agricultural goods, thus increased demand for trade financing. The telecommunication

infrastructure has also been improving, with a growing number of Internet service providers
 67 WTO, “Trade Policy Review, Annex 3: Uganda,” 263.

 68 Bank of Uganda, Current State of the Ugandan Economy, 28.

 69 OICU-IOSCO, “Report on Cross-Border Activities of Market Intermediaries in Emerging Markets,” 17. 

4-13

and increased accessibility to both land and mobile phone lines. This facilitates sectoral

growth and exports of financial services.67

The Uganda Stock Exchange is another factor promoting financial exports. Although current

trading volume is small, Uganda’s stock exchange attracts regional investors, and levels of

capitalization in the market have been increasing.68 Moreover, all management and brokerage

services are provided by Ugandan firms. Thus all stock purchases on behalf of non-Ugandan

firms result in fees and commissions for Ugandan brokers, which register as exports in the

current account.69 
4-14

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 ———. “Annex 3: Uganda.” WT/TPR/S/171/UGA, September 2006.
 71 Data for 2000–04 are from 30 reporting economies. For 1999–2003, total growth was 56.5 percent, a

9.4 percent compound annual growth rate, with 41 economies reporting. In total, SSA has 48 economies.

USITC calculations based on data from IMF, Balance of Payment Manual.

 72 UNWTO, Tourism Highlights.

4-18

Tourism

Summary of Findings

From 2000 through 2004, SSA tourism service exports grew by nearly 87 percent, an

average annual growth rate of more than 17 percent.71 By comparison, global international

tourism receipts grew 26 percent over the same period, an average annual growth rate of

5 percent.72 Fifteen countries in SSA saw significant increases in tourism service exports

(table 4-2). South Africa is the largest provider of tourism services among all SSA countries,

accounting for more than one-half of all exports of tourism services in 2004. Other large

exporters included Mauritius, Tanzania, Botswana, Kenya, and Ghana—each with more than

$450 million worth of travel service exports in 2004. Common factors can be seen in these

countries’ increased exports. First, the countries were free of civil conflict; not only do

tourists avoid areas with conflict, stable countries attract business and these businesses attract

business travelers. Second, countries that provided incentives for investment in the

accommodations sector experienced an increase in tourism. Such investments increased the

availability and improved the quality of available hotel rooms, facilitating tourist arrivals.

Finally, nations that marketed their tourism potential succeeded in attracting more tourists.

Industry Overview

Apart from a country's endowment of tourist attractions, which include climate, scenery,

ecology, ethnography, history, architecture, and business opportunities, other factors can

affect appeal to prospective tourists. These include accessability, comfort, value, and image.

Accessability refers to the amount of time and effort needed for tourists to reach the country.

Travelers prefer destinations that are conveniently and inexpensively reached, both when in

transit to the country and when traveling within the country. After arriving, tourists prefer

a destination with clean, comfortable, and modern accommodations. Additionally, tourists

seek value in transport, accommodations, and shopping. Finally, the projection of a positive

image attracts tourists. Tourists' individual preferences for a destination vary; however, to

attract tourists a destination must have visibility and be perceived as safe. Advertising can

affect perceptions in both these areas. Additionally, tourists might choose a destination

perceived to be eco-friendly or have a benevolent government (box 4-2).

Sub-Saharan Africa Trade in the Global Context

Large, stable, and highly developed economies tend to have substantial and well-developed

tourism industries specifically designed to cater to domestic travelers and foreign visitors,

primarily from adjacent and other developed economies. These countries account for a large

share of global exports of tourism services. In contrast, small, developing SSA countries,

which may be expensive and difficult to get to from some destinations, accounted for a small

portion of the global market for tourism service exports.
4-19

Box 4-2 Product Description for Tourism Services

A country is said to have exported travel and tourism services when foreign nationals make purchases in that country

during a visit of less than one year. The value of tourism exports is measured by the total expenditures of foreign visitors

irrespective of the purpose of visit, be it leisure, recreation, business, or other activities. In general, the largest

components of exported tourism services are expenditures for meals and lodging. Expenditures on transportation

services between countries, such as airfare, and direct spending on education or health care services are excluded from

the measure of tourism exports. (In the case of visitors whose primary purpose is the consumption of education or

health care services, their spending on goods and services other than direct expenditures on education and health care

is considered a tourism export, even if their stay exceeds one year.) Expenditures by foreigners who work for a domestic

business during their visit are also excluded.1

_____________________

1

 IMF, Balance of Payment Manual.

Table 4-2 Sub-Saharan Africa travel services exports, value of expenditures, by selected exporter, 2000–04

Countries 2000 2001 2002 2003 2004

Percent

change

2001–04

Million dollars

Angola 18 22 37 49 66 267

Botswana 222 230 319 457 549 147

Cape Verde 41 54 65 85 125 205

Ethiopia 57 51 72 114 173 204

Ghana 335 351 358 414 466 39

Kenya 283 309 276 339 495 75

Mali 40 88 104 128 130 225

Mauritius 632 612 697 856 871 38

Namibia 160 236 218 333 405 153

Rwanda 23 25 31 30 44 91

Sierra Leone 11 14 38 60 58 427

South Africa 2,677 2,564 2,909 5,523 6,300 135

Swaziland 37 31 62 101 95 157

Tanzania 377 432 444 461 594 58

Uganda 165 165 172 184 266 61

Total of profiled

exporters 5,078 5,184 5,802 9,134 10,637 109

Total SSA 5,934 6,080 6,827 10,056 11,074 87

Source: UNWTO, Yearbook of Tourism Statistics and IMF, Balance of Payments Manual.
 73 UNWTO, Tourism Highlights.

 74 Ibid.

 75 UNWTO, Yearbook of Tourism Statistics.

 76 Ibid.

 77 Data for the 2000–2004 period are from 30 reporting economies. For the period 1999–2003, total

growth was 56.5 percent, a 9.4 percent compound annual growth rate, with 41 of the 48 SSA economies

reporting. USITC calculations based on data from IMF Balance of Payment Manual.

 78 UNWTO, Tourism Highlights.

 79 Data on expenditures for visitors from individual foreign economies are limited. EIU, South Africa

Country Profile, July 1, 2006.

4-20

Leading Exporters

The five largest global exporters of tourism services in 2004 were the United States

($74.5 billion), Spain ($45.2 billion), France ($40.8 billion), and Italy ($35.7 billion)

(figure 4-3).73

 In 2004, SSA accounted for 2.7 percent of total tourist arrivals, and only

2.0 percent of total tourist expenditures.74 The five largest SSA exporters were South Africa,

Mauritius, Tanzania, Botswana, Kenya, and Ghana (figure 4-3).75 South Africa, by itself,

represented more than one-half of SSA’s total tourism exports.76 SSA’s overall tourism

exports grew by 88.6 percent from $6 billion in 2000 to $11 billion in 2004, an average

annual growth rate of 17.4 percent.77 By comparison, global international tourism receipts

grew 26 percent from $496 billion in 2000 to $623 billion in 2004, an average annual growth

rate of 5 percent.78 The strongest growth among SSA countries was seen in the following 15

countries: Angola, Botswana, Cape Verde, Ethiopia, Ghana, Kenya, Mali, Mauritius,

Namibia, Rwanda, Sierra Leone, South Africa, Swaziland, Tanzania, and Uganda, which are

detailed below. In these 15 countries, tourism exports grew by 109 percent, an average

annual rate of nearly 22 percent, from 2000 through 2004 (table 4-2).

Leading Export Markets

Tourists to the largest global exporters of travel services primarily arrived from adjacent or

other developed countries. Nearly 57 percent of tourist arrivals to the United States came

from Canada and Mexico in 2005; travelers from the United Kingdom and Japan were also

among the most frequent visitors to the United States. More than three-quarters of tourists

arriving in Spain and France came from other EU countries, primarily the United Kingdom,

Germany, and the Netherlands; and the French represented a significant share of the visitors

to Spain. Primary visitors to Italy included Germans, French, Swiss, and Austrians.

In contrast, the primary consumers of SSA tourism services are Europeans, although intraSSA tourism is a significant portion of total arrivals in some countries (table 4-3). Even in

countries where African tourist arrivals exceed European tourist arrivals, total expenditures

by Europeans often exceed expenditures by Africans, due to longer durations of stay by

Europeans and preferences in accommodations.79 African travel appeals to European tourists

because, in addition to historic and cultural significance, shared time zones and established

air routes increase accessibility.
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United States

15%

Spain

7%

France

Italy 7%

6%

SSA

2%

Other

63%

 Global Tourism

South Africa

55%

Mauritius

9%

Tanzania

5%

Botswana

5% Ghana

4%

Kenya

3%

Other

20%

SSA Tourism

Figure 4-3 Global and sub-Saharan Africa tourism, 2003

$541,256 million $10,056 million

Source: International Monetary Fund Balance of Payments Manual 2005.
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Table 4-3 Sub-Saharan Africa travel services exports, total arrivals and leading sources by selected exporterCountries

Totalarrivals

Leading sources 

Country % Country % Country % Country % Country %

Angola (2002) 90,532 Portugal 19.0 France 13.4 South Africa 10.7 Brazil 7.6 United Kingdom 7.5

Botswana(2003) 975,465 Zimbabwe 44.7 South Africa 36.4 Zambia 3.6 Namibia 3.0 United Kingdom 1.5

Cape Verde(2005) 197,844 Italy 35.2 Portugal 25.4 Germany 10.7 France 7.2 South Africa 4.8

Ethiopia(2003) 179,910 United States 12.5 Djibouti 12.1 United Kingdom 5.0 Kenya 3.9 Italy 3.5

Ghana (2003) 530,827 Nigeria 13.7 United Kingdom 8.7 United States 6.6 Germany 4.8 Côté d’Ivoire 4.8Kenya (2003) 1,146,099 Germany 15.7 United Kingdom 15.5 Tanzania 11.2 Uganda 7.0 UnitedStates 6.6

Mali (2005) 142,814 France 26.5 United States 6.8 Benelux countries 6.3 Spain 4.9 Italy 4.9

Mauritius(2005) 761,063 France 42.0 United Kingdom 12.5 South Africa 7.7 Germany 7.4 Italy 5.7

Namibia(2003) 695,221 Angola 32.0 South Africa 31.9 Germany 8.3 Zambia 4.8 Botswana 3.3Rwanda(2001) 113,185 Uganda 34.0 Dem. Rep. of Congo 25.2 Tanzania 16.5 Burundi 8.4 Kenya 2.0

Sierra Leone(2005) 40,023 Africa 54.5 Europe 24.7 Americas 11.8 Asia 5.9 Middle East 3.2

South Africa(2005) 7,368,742 Lesotho 22.5 Swaziland 12.3 Botswana 10.8 Zimbabwe 10.5 Mozambique 8.1

Swaziland(2005) 311,656 South Africa 43.1 Europe 31.4 Unspecified 23.0 Americas 1.4 Asian 1.0

Tanzania(2005) 617,754 European Union 50.0 United States 20.0Uganda(2005) 467,728 Kenya 29.6 Rwanda 17.2 Tanzania 10.8 United Kingdom 6.0 United States 4.7

Source: UNWTO, Yearbook of Tourism Statistics.
 80 Hudleston, “Angola Looks to Beaches, Game to Put It On Africa’s Tourist Map.”

 81 EIU, Cape Verde Country Profile, February 1, 2006. 

 82 UNWTO, “UNWTO Signs New Agreement to Help African Tourism.” 

 83 Ibid.

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Factors Affecting Trade Patterns

Over the period 2000-2005, SSA tourism export growth was driven by increased demand

from both business and leisure travelers and by changes in domestic government policies that

facilitated or promoted tourism and travel. However, in addition to growth in demand and

domestic government promotion, fluctuating currencies may also have affected tourism

exports from SSA.

In several SSA countries, currency depreciations appear to have had a positive effect on

tourism service exports. Among the fifteen countries with significant increases in tourism

exports, five had currencies that depreciated by more than 50 percent vis-a-vis IMF Special

Drawing Rights. However, depreciation of the local currency does not always facilitate

additional tourism. If tourism service transactions take place in something other than the

local currency, then the benefits of a depreciation are mitigated. For example, significant

depreciation of the Angolan kwanza from 2000 through 2004 had a limited effect on the

tourism industry, as all tourist transactions in Angola are conducted in U.S. dollars.80

Moreover, if the local currency is pegged to the currency of most visitors, changes in the

value of the local currency have little impact. For example, Cape Verde’s currency is pegged

to the euro, the local currency of the majority of visitors to Cape Verde, so exchange rates

have had a limited impact on tourism.81

Demand Growth

Decreased conflict and more stable governments in SSA countries have contributed to

increased demand for tourism services in SSA. Both business and leisure travelers have

increased their demand for travel services in SSA. For example, business persons increased

their travel to diamond mines in the Democratic Republic of the Congo, copper reserves in

Zambia, and other countries with resource industries in the region.82 This reflects the

common practice of joint ventures between domestic and foreign companies, in which

managerial, and technical personnel from a company’s foreign partner travel to SSA. These

individuals’ expenditures while in SSA increase tourism exports.

More-stable governments and less conflict provide leisure travelers with a greater sense of

security and comfort. A greater sense of security opens Africa’s natural beauty, distinctive

cultures, and diverse wildlife to more potential travelers.83 People that were previously

unwilling to travel because of security concerns are now willing to travel to SSA. A number

of the domestic government policies outlined below are also aimed at increasing the demand

for travel to SSA.

Policies to Promote the Industry

Government policies, including the reintroduction of wildlife, new investment in

transportation infrastructure, enhanced spending on advertising, and improved conditions for

foreign investment in the tourism industry have contributed to expanded tourism exports in
 84 Trivedi, “Elephants Airlifted to Repopulate War-Torn Park in Angola;” and The World Conservation

Union, “African Rhino Numbers Increase.”

 85 Tourism Trust Fund, “The Tourism Marketing Recovery Programme (TMRP).”

 86 WTO, Trade Policy Review Mali, 65.

 87 UNWTO, Yearbook of Tourism Statistics, CDRom.

 88 Airports Company South Africa, “Traffic Stats.”

 89 EIU, South Africa Country Profile, July 1, 2006.

 90 In 2005, South African Tourism received 80 percent of its budget through government grants. South

African Tourism, 2005/06 Annual Report, 153.

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many SSA countries. For example, efforts to re-populate animals that attract safari-goers

include Angola’s reintroduction of the elephant and Uganda’s reintroduction of the rhino.84

Direct spending on advertising increases international recognition, thereby attracting tourists.

SSA countries with recent advertising campaigns include Kenya, South Africa, Swaziland,

and Tanzania. In the case of Kenya, for example, tourist arrivals from countries targeted by

a marketing campaign increased, while arrivals from similar countries where marketing

campaigns were not conducted decreased.85

Streamlining regulations and providing tax breaks for foreign investment in tourism also

facilitate expansion of the tourism industry. SSA countries that have recently improved

investment conditions in the tourism industry include Angola, Djibouti, Ethiopia, Ghana,

Mali, Tanzania, and Uganda. In Mali, for instance, increased construction in the hotel sector

followed 2002 legislation providing tax relief for such activities.86 Consequently, total hotel

rooms increased by one-third from during 2002–04.87

Infrastructure Improvement

Examples of SSA transportation upgrades include airport improvements, which increase

tourist arrivals by facilitating accessability. SSA countries with recent airport expansions

include Angola, Mozambique, South Africa, and Uganda. Increased airport capacity in South

Africa, for instance, allowed for a 38.9 percent increase in incoming international flights.88

This and other examples are discussed in more detail in the individual country profiles

below.

Country Profiles

South Africa

South Africa has many features that indicate a strong comparative advantage in providing

tourism services, such as a good climate, sandy beaches, modern cities, wildlife reserves,

sporting facilities, and extensive use of the leading tourism language, English.89 In order to

capitalize on its potential as a tourism destination, South Africa Tourism (SAT), a quasigovernmental agency, conducted a global marketing campaign over the past five years.90 In

addition to such marketing, other factors in South Africa’s recent tourism growth include

improved facilities for business travelers, liberalization in entry visa requirements, and an

increase in international flights to South Africa.
 91 In addition to its promotion and marketing functions, SAT also has a research function, such as

cooperating with South African government agencies to improve South Africa’s TSA. South African

Tourism, 2002/2003 Annual Report, 49; and South African Tourism, Manual for Promotion of Access to

Information, 2.

 92 South African Department of Environmental Affairs and Tourism, “SA Takes Steps to Ensure a Wide

Range of 2010 Tourism Options.”

 93 South African Tourism, 2004/05 Annual Report, 54.

 94 EIU, South Africa Country Profile, August 1, 2003.

 95 South African Tourism, Tourism Growth Strategy, 20. Additionally, from 2003 through 2005

advertising was expanded to include Australia, Botswana, Japan, Lesotho, Mozambique, Nigeria, Swaziland,

and Zambia.

 96 South African Tourism has representational offices in Australia, China, France, Germany, India, Italy,

Japan, the Netherlands, the United Kingdom, and the United States, and also provides toll free hotlines in

Austria, Belgium, Canada, Ireland, Sweden, and Switzerland. South African Tourism, 2005/06 Annual

Report, Back cover. 

 97 The training is known as the “SA Fundi Tourism Expert Course.” South African Tourism, 2002/03

Annual Report, 52.

 98 South African Tourism, 2005/06 Annual Report, 102.

 99 Deloitte, “South Africa’s Popularity Drives Double-digit Hotel Growth.”

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SAT was established by the Tourism Act of 1993 to promote tourism in South Africa.91 It

does so through advertising, operating foreign promotional offices, and training foreign

travel agents. The success of SAT’s marketing strategy has received praise from South

African government officials who believe its marketing efforts have been the central driver

behind the increase in tourism in South Africa.92 SAT estimates that for each rand spent on

marketing South Africa as a business-tourism destination, it sees an additional 35 rands in

tourist receipts.93

SAT’s advertising budget was expanded beginning in 2000. A $25.3 million advertising

campaign was undertaken in France, Germany, Italy, the Netherlands, the United Kingdom,

and the United States.94 In 2002, SAT reviewed the countries targeted; and the advertising

campaign was extended to China, India, Kenya, and Tanzania.95 The marketing campaign

uses traditional means of advertising, including billboards (both stationary and on public

transportation), magazine ads, television, and radio. Arrivals have increased from each of the

countries in which advertising campaigns were conducted, and in some cases growth from

targeted countries has exceeded the pace of the overall increase in arrivals to South Africa.

Aside from advertising, SAT’s other programs involve direct outreach. For instance, SAT

has promotional offices in ten countries and provides toll-free hotline service in six others.96

A second form of outreach is the online training of foreign travel agents in how to sell South

Africa as a tourism destination. Travel agents who complete the training are permitted to

advertise on SAT’s website.97 A final SAT outreach program is the creation of strategic

alliances with foreign travel agents. For instance, in 2004, SAT solidified partnerships with

the top ten travel agencies in Kenya.98

Business tourism, another sector promoted by SAT, was further stimulated by the opening

of the Cape Town International Convention Centre in 2003. The new facility hosted both the

Cape Town Grand Champions Tennis tournament and the World Convention for the

International Confederation of Principals in 2005.99 Business tourism makes a large

contribution to increased tourism revenues. The expenditures of a meeting delegate are, on

average, three times greater than those of a leisure tourist. Furthermore, business tourism has
 100 Deloitte, “South Africa’s Popularity Drives Double-digit Hotel Growth”; and South African Tourism,

2004/05 Annual Report, 53.

 101 South African Department of Home Affairs, “South Africa and Mozambique Sign a Visa Waiver

Agreement.”

 102 South African Tourism, 2005/06 Annual Report, 139.

 103 South African Tourism, 2005/06 Annual Report, 139; and South African Tourism, 2004/05 Annual

Report, 107.

 104 South African Tourism, 2005/06 Annual Report, 102; and UNWTO, Yearbook of Tourism Statistics,

CDRom.

 105 Airports Company South Africa, “Traffic Stats.”

 106 Kenya Tourist Board, Kenya Tourist Board Corporate Strategic Plan 2005/2008, iv.

 107 Wichira, “The horrifying result of US travel ban on Kenya.”

 108 UNWTO, Yearbook of Tourism Statistics, CDRom.

 109 Kenya Tourist Board, Kenya Tourist Board Corporate Strategic Plan 2005/2008, iv.

 110 Kenyan Tourist Board Official, interview by Commission staff, Nairobi, Kenya, December 7, 2006.

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been proven to generate future tourism—37 percent of business travelers to South Africa

return as leisure travelers within five years.100

Liberalization in entry visa requirements has attracted tourists by facilitating entry. South

Africa currently allows visa-free entry for visitors from five of its neighboring countries:

Botswana, Lesotho, Mozambique, Namibia, and Swaziland.101 Visitors from these five

countries in 2005 represented 56.7 percent of arrivals and 59.2 percent of tourism receipts.102

In April 2005, South Africa began offering visa-free entry for citizens of Mozambique.

Consequently, arrivals from that country increased 67.6 percent in 2005.103 Additionally,

South Africa recorded progress in processing entry visas for Tanzanians in 2004. This

reduced processing time from five days to three days and likely contributed to the 5 percent

rise in Tanzanian tourist arrivals in 2005.104

Finally, additional international flights to South Africa have facilitated increased arrivals.

From 2000 through 2005, the number of international flights arriving at South Africa’s three

international airports—Johannesburg O.R. Tambo, Cape Town, and Durban—increased

38.9 percent from 19,537 to 27,129.105 The larger number of international flights to South

Africa has lowered costs and increased convenience for travelers, thereby stimulating

demand.

Kenya

Kenya’s established game parks, diverse cultures, and beach resorts readily attract tourists.

However, growth in Kenya’s tourism exports has been uneven, with insecurity limiting

growth from 1997 through 2003.106 Stagnation in tourism growth began in 1997 following

unrest in refugee camps and continued as Kenya suffered terrorist attacks in 1998, 2001, and

2002. In May 2003, due to continued terrorist threats, air traffic from the United Kingdom

was terminated for nearly one month.107 Consequently, tourism exports decreased

10.7 percent in 2003.108 It was not until 2004 that tourist arrivals exceeded 1996 levels.109

An expanded marketing initiative by the Kenya Tourist Board (KTB) to counteract the

negative effects of civil unrest, terrorist attacks, and disrupted air connections contributed

to increased tourism exports. The KTB is a quasi-governmental organization that was

established in 1997 and charged with marketing Kenya as a tourist destination.110 The KTB

marketing effort incorporates print and electronic media, trade show booths, public relations
 111 Kenya Ministry of Tourism and Wildlife, “Destination Marketing.”

 112 Ibid.

 113 The KTB worked collectively with the Tourism & Transport Consult and the Tourism Trust Fund in

implementing the program. EIU, Kenya Country Report, May 8, 2006. 

 114 TMRP was implemented in the United Kingdom, Germany, France, Italy, Belgium, the Netherlands,

Switzerland, Denmark, Sweden and Spain. Tourism Trust Fund, “The Tourism Marketing Recovery

Programme (TMRP).”

 115 Tourism Trust Fund, “The Tourism Marketing Recovery Programme (TMRP).”

 116 Ibid.

 117 Kenya Tourist Board, Kenya Tourist Board Corporate Strategic Plan 2005/2008, 29.

 118 Ibid., 18.

 119 Ibid., 18.

 120 Ibid., 15.

 121 Ibid., 15.

 122 Nathan Associates Inc., Angola: Diagnostic Trade Integration, 15–17.

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initiatives, industry outreach, and the Internet.111 The KTB also operates eight

representational offices abroad.112

In 2003, the KTB was expanded under an initiative known as the Tourism Market Recovery

Programme (TMRP), which was partially funded by a $26.4 million grant from the EU.113

The TMRP was implemented between September 2003 and March 2004 and specifically

targeted ten European markets.114 The TMRP expanded the KTB’s advertising and outreach

programs, established partnerships with 64 tour operators, and updated and translated the

KTB Website into five languages.115

The TMRP was a success for the markets it targeted. Visitor arrivals from TMRP markets

during the period January–July 2004 increased 17.4 percent compared with the same period

in 2003, while arrivals from non-TMRP European markets fell 24 percent.116 Following the

success of the TMRP, the government of Kenya has increased funding to the KTB, matching

the budget levels that achieved success over the TMRP period.117

In addition to security assurance marketing, substantive measures to increase security have

also contributed to increased exports of tourism services. In 2003, Kenya established the

200-member Kenya Tourist Police Unit (KTPU). The sole purpose of the KTPU is to

provide increased security in tourist areas.118 Kenya also established a national

counterterrorism center to decrease the threat of terrorism against the tourist industry.119

An additional factor in Kenya’s increased tourism exports is wildlife conservation. The

conservation program is part of the trilateral agreement with Tanzania and Uganda that

formed the East African Community in 2000.120 The three countries now mutually conserve,

manage, and promote the sustainable use of wildlife that migrate across their borders.

Initiatives include anti-poaching operations and concordance in hunting regulations.121

Angola

The end of Angola’s 26-year civil war in 2002 has allowed its tourism service exports to

grow. Land mines and damaged infrastructure, however, still limit tourism growth outside

the capital, Luanda.122 Business travelers, led by oil industry workers, are the primary
 123 UNWTO data on Angolan tourist arrivals is unclear, with 6.2 percent of arrivals reporting the purpose

of visit as “leisure, recreation and holiday,” 10.8 percent reporting “business and professional,” and

83.0 percent reporting “other.” Nathan Associates Inc., Angola: Diagnostic Trade Integration, 15–17.

 124 U.S. Department of Energy, Energy Information Administration, Angola Energy Data.

 125 Trivedi, “Elephants Airlifted to Repopulate War-Torn Park in Angola.”

 126 Nathan Associates Inc., Angola: Diagnostic Trade Integration, 15–17.

 127 UNWTO, Yearbook of Tourism Statistics, CDRom; and Nathan Associates Inc., Angola: Diagnostic

Trade Integration, 15–17 and Hudleston, “Angola Looks to Beaches, Game to Put It On Africa’s Tourist

Map.”

 128 EIU, Botswana Country Profile, April 1, 2006.

 129 Ibid.

 130 UNWTO, Yearbook of Tourism Statistics, CDRom.

 131 EIU, Cape Verde Country Profile, February 1, 2006.

 132 UNWTO, Yearbook of Tourism Statistics, CDRom.

 133 EIU, Business Africa, April 1, 2005.

 134 Ethiopian government official, interview by Commission staff, Addis Ababa, Ethiopia, December 13,

2006.

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consumers of Angolan tourism services.123 Foreign oil workers provide technical assistance

in drilling because there is a lack of domestic expertise.124 To attract recreational tourists,

Angola has also worked to replenish animal populations, such as elephants, in its national

parks.125

Nevertheless, growth in Angolan tourism services has been constrained by a lack of

accommodations.126 Although the number of available hotel rooms grew 37.0 percent (from

6,832 to 9,358) from 2000 through 2004, the hotel occupancy rate exceeds 90 percent in

Luanda, and the shortage has pushed the average price of a hotel room in Luanda to $220.127

Botswana

Botswana’s government policies contributed to growth in tourism services exports. For

example, a November 2003 bill established a Tourism Board and a tourism development

fund.128 Moreover, the government of Botswana has facilitated the growth in lodges, bed and

breakfasts, and self-service apartments by issuing micro-loans financed by the Citizen

Entrepreneur Development Agency.129 Consequently, tourist accommodations grew

49.5 percent from 2000 through 2003.130

Cape Verde

Tourism is a significant and growing portion of the Cape Verdean economy, accounting for

11.2 percent of GDP in 2004, up from 4 percent in 1998. In fact, the tourism sector received

90 percent of the nation’s total foreign direct investment in 2005 and 56.3 percent of total

investment in 2004.131 The number of hotel rooms rose accordingly from 2,489 in 2001 to

4,406 in 2005, helping to accommodate increased demand.132 Investment is attracted by Cape

Verde’s stable government and favorable climate.

Ethiopia

Ethiopia has tremendous potential as a recreational tourism destination, with numerous

historic sites, such as the churches at Roha and the recently repatriated Axum obleisk, and

regions of natural beauty that include the Simien Mountains. Additionally, the African Union

headquarters in Addis Ababa also draws business travelers to Ethiopia.133 However, until

recently tourism has not been a government priority, and development in the sector lagged.134
 135 EIU, Ethiopia Country Profile, February 9, 2006 and Hammer, “Ethiopia Opens Its Doors, Slowly.”

 136 However, this recorded decline in hotel beds is contested by Ethiopian officials, who believe the

number of beds have increased over time with stability and estimate the current total to be approximately

12,000 (Ethiopian government official, interview by Commission staff, Addis Ababa, Ethiopia, December

13, 2006); and EIU, Ethiopia Country Profile, February 9, 2006 and UNWTO, Yearbook of Tourism

Statistics, CDRom.

 137 EIU, Ethiopia Country Profile, February 9, 2006.

 138 U.S. Department of State official, e-mail message to Commission staff, September 8, 2006.

 139 UNWTO, Yearbook of Tourism Statistics, CDRom.

 140 EIU, Ghana Country Profile, August 10, 2006.

 141 The four UNESCO world heritage sites in Mali are the cliff of Bandigara, the old towns of Dejenné,

Timbuktu, and the tomb of Askia.

 142 In 1998, Mali was chosen to host the 2002 African Nations Cup, a biennial soccer tournament of

African nations.

 143 Colombant, “Soccer Cup injects hope and worry into Mali,” 7.

 144 EIU, Mali Country Profile; August 3, 2005, and Colombant, “Soccer Cup injects hope and worry into

Mali,” 7.

 145 Ibid.

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Conflict has been a limiting factor in Ethiopian tourism services exports. Although exports

increased through 2004 after the end of Ethiopia’s war with Eritrea in 2000, the trend ended

in 2005 due to domestic political violence and unrest in neighboring Somalia.135 Conflict has

not only constrained tourist demand, but also may have damaged tourism infrastructure,

including hotels. Available hotel rooms fell from 6,499 in 2000 to 3,497 in 2003.136

However, construction is underway on new hotel facilities in Addis Ababa, including a joint

venture between Kuwaiti and French investors.137

Ghana

Increased tourism in Ghana can be attributed to tax incentives to businesses investing in the

tourism sector and other government-backed stimuli.138 Partly as a result of these incentives,

increase in the supply of hotel rooms in Ghana has been steady, up from 13,641 in 2000 to

18,079 in 2004.139 New hotel facilities have helped Ghana attract conferences. Additionally,

Ghana’s strategic tourism development plan, initiated in 2003, builds tourism capacity by

promoting education in the hospitality industry, providing evaluation of tourism business

plans, and organizing cultural festivals.140

Mali

Mali’s tourism potential is based on a diverse cultural history. Attractions include four

United Nations Educational, Scientific, and Cultural Organization world heritage sites and

an ethnologically interesting population, including the Dogon and Touareg peoples.141 Two

stimuli—hosting the African Nations Cup and tax relief for tourism sector investors—have

enabled Mali to begin to achieve its tourism potential.

Hosting the 2002 Confederation of African Football Nations Cup required Mali to increase

its tourism capacity.142 Providing sports venues, transportation, and lodging of internationally

recognized standards is a prerequisite for Nations Cup hosts.143 To improve lodging capacity,

Mali increased its number of hotel rooms from fewer than 1,000 in 1992 to 3,492 by 2002.144

Furthermore, airports in five cities—Bamako, Kayes, Mopti, Segou, and Sikasso—were

upgraded.145 Even after the Cup, the upgraded facilities allowed Mali to continue to attract

tourists previously deterred by a lack of amenities.
 146 The Tourism and Hotel Investment Code is law Number 02-015 of June 3, 2002. WTO, Trade Policy

Review Mali, 65.

 147 Mali Ministry of Crafts and Tourism, “Inauguration of the Hotel Massaley”; and Mali Ministry of

Crafts and Tourism, “Summit of the CEN-SAD in Mali.”

 148 EIU, County Profile Mauritius, July 1, 2006.

 149 EIU, Country Report Mauritius, March 1, 2006.

 150 Ibid.

 151 EIU, Country Profile Namibia, August 16, 2006.

 152 UNWTO, Yearbook of Tourism Statistics, CDRom.

 153 EIU, Rwanda Country Profile, May 2, 2006.

 154 Ibid.

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Legislation favorable to investment in the tourism industry helped maintain momentum in

the tourism sector’s growth after 2002. The Tourism and Hotel Investment Code, ratified in

2002, grants investors relief from the business tax, the tax on industrial and commercial

profits, and customs duties on equipment.146 Hotel expansion in Bamako since the passage

of the bill includes the construction of the Hôtel Massaley and the refurbishment of both the

Hôtel de l'Amitié and the Grand Hôtel.147 Consequently, the rise in the total number of hotel

rooms continued from 2002 through 2004, growing from 3,492 to 4,659.

Mauritius

Both the influence and budget of the Mauritius Tourism Promotion Authority (MTPA) were

recently expanded, likely contributing to increased tourist arrivals. An August 2004 law

authorized penalties for tourism operators that do not meet statutory quality requirements.148

Also, the MTPA’s promotional budget was doubled, and it shifted focus to middle-price

tourist markets from the premium-price market it previously sought.149 As part of this shift,

it has tried to encourage tourism from India, including encouraging businesses to accept

payment in Indian rupees.150

Namibia

Namibia’s careful ecological management has contributed to increased tourism exports.

Namibia’s tourism development policy focuses on low-volume, high-value tourism. Annual

visitors are capped at 800,000 to avoid resource depletion and ecological damage.

Furthermore, Namibia continues to expand preserved natural spaces. For instance, in 2004,

the government of Namibia designated over 16,000 square miles as a new national park,

Sperrgebiet.151 Overall, the development policy has been a success with the average

expenditure per visitor increasing from $211 in 2000 to $363 in 2003.152

Rwanda

As violence in Rwanda has decreased, tourism has increased. In 2000, only 3,700 foreigners

visited its national parks. By 2005 the number had grown to over 16,000.153 Rwanda has

chosen to develop low-volume, high-value tourism. For example, at Virunga National Park,

where visitors can see gorillas, daily passes cost $250 and capacity is limited to 35 visitors.154

Sierra Leone

Sierra Leone’s 10-year civil war ended in 2002, and foreign nationals are beginning to

return. The majority of arrivals reported “other” than business or leisure as their purpose of
 155 EIU, Sierra Leone Country Profile, September 30, 1996.

 156 EIU, Swaziland Country Profile, September 7, 2006.

 157 Ibid.

 158 Ibid.

 159 EIU, Business Africa, July 1, 2006 and EIU, Swaziland Country Report, July 1, 2004.

 160 EIU, Tanzania Country Report, June 9, 2006.

 161 EIU, Tanzania Country Report, February 1, 2004; and EIU, Tanzania Country Report,

February 18, 2000.

 162 TTB official, interview by Commission staff, Dar es Salaam, Tanzania, December 11, 2006.

 163 Ibid.

 164 Ibid.

 165 Airline Industry Information, “British Airways adjusts schedules for east African routes;” and Air

Highways Magazine, “British Airways Dar to London”; and Air Highways Magazine, “KLM Royal Dutch

Airlines Daily Service to Tanzania.”

4-31

travel and are likely visiting friends and family. Prior to the war, approximately 100,000

tourists, mostly French beach-goers, arrived annually.155

Swaziland

The government of Swaziland has engaged in tourism promotion in order to regain market

share. Although Swaziland’s tourism services exports have been growing, tourism as a

percent of GDP is still below its 1995 level.156 Since neighboring South Africa’s 1995

legalization of casinos, Swaziland’s gaming industry is no longer a significant attraction for

South African tourists.157 As a result, the government of Swaziland has sought new methods

to attract tourists and extend their length of stay. One such method is rail tourism. From 2003

through 2005, the number of rail tourists increased from 4,060 to 8,500.158 However, rail

passengers’ length of stay tends to be short, so other investments are being made. Examples

include a $290 million investment in a resort and game reserve at Lavumisa, on the country’s

southern border with South Africa, and the construction of a new international airport at

Sikhuphe.159

Tanzania

Tourists are attracted by both Tanzania’s beach resorts, including those on Zanzibar, and its

national parks, including Serengeti.160 Beginning in 2000, Tanzania began a privatization

program, selling state-owned lodges and hotels. For instance, Hotels and Lodges Limited,

a Mauritian investment group, purchased four such hotels. Privatization has introduced new

investment and marketing skills, which have aided tourism services export growth.161

Other factors contributing to Tanzania’s increased tourist arrivals include a marketing

campaign in the United States and increased international flights to Tanzania.162 In 2004,

marketing campaigns promoting Tanzania were conducted in Florida, New York, Los

Angeles, and Houston;163 and arrivals from the United States increased from 40,000 in 2004

to 45,000 in 2005.164 Added flights to Tanzania increased passenger convenience, stimulating

demand. Beginning in April 2002, British Airways introduced direct air service from

London, shortening flying times by two hours, while KLM added additional weekly flights

in both 2001 and 2002.165

Uganda

Uganda has focused on niche and community-based sustainable development to foster

tourism growth. Uganda’s niche products include white-water rafting, birdwatching, and
 166 Kenya and Tanzania also promote beach holidays. Uganda, as a landlocked country, cannot.

 167 Leonard, “Can tourism bring Africa back to life?”; and EIU, Uganda Country Report,

February 25, 2000.

4-32

angling, in contrast to the safari focus of its neighbors, Kenya and Tanzania.166 Examples of

Uganda’s development style include the distribution of 20 percent of national park gate

receipts to local communities, while providing additional support to park management

through sustainable activities such as bee-keeping and agro-forestry.167
4-33

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———. “The Domestic Economy: A New Tourism Policy is in the Offing.” Tanzania Country Report.

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———. “The Domestic Economy: Good Tourism Sector Performance in 2005." Country Report

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———. “The Domestic Economy: Hotel Occupancy Rates Rise.” South Africa Country Report.

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———. “The Domestic Economy: Passenger Rail Tourism is Growing.” Swaziland Country Report.

July 1, 2004.
4-34

———. “The Domestic Economy: Tourism Targets Move Closer.” Tanzania Country Report.

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———. “Economic Policy: The Countdown to the 2010 World Cup has Started.” South Africa Country

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———. “Economic Sectors: Other Services.” Botswana Country Profile. April 1, 2006.

———. “Economic Sectors: Other Services.” Cape Verde Country Profile. February 1, 2006.

———. “Economic Sectors: Other Services.” Ghana Country Profile. August 10, 2006.

———. “Economic Sectors: Other Services.” Kenya Country Profile. August 22, 2005.

———. “Economic sectors: Other Services.” Mauritius County Profile. July 1, 2006.

———. “Economic sectors: Other Services.” Namibia Country Profile. August 16, 2006.

———. “Economic Sectors: Other Services.” Rwanda Country Profile. May 2, 2006.

———. “Financial and Other Services: There is a Pause in Tourism Growth.” Tanzania Country Report.

February 18, 2000.

———. “The Number of Overseas Visitors Continues to Rise.” South Africa Country Profile.

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———. “The Number of Overseas Visitors Continues to Rise.” South Africa Country Profile.

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———. “Outlook 2006–07: Economic Growth.” Kenya Country Report. May 8, 2006.

———. “The Tourism Industry is Showing Strong Growth.” South Africa Country Profile. July 1, 2006.

———. “Tourism.” Sierra Leone Country Profile. September 30, 1996.

———. “Tourism.” Swaziland Country Profile. September 7, 2006.

———. “Tourism—A Source of Growth and Employment.” South Africa Country Profile.

August 1, 2003.

———. “Tourism is Growing Strongly.” Tanzania Country Profile. October 1, 2003.

———. “Travel & Tourism: Swaziland.” Business Africa. July 1, 2006.

Hammer, Joshua. “Ethiopia Opens Its Doors, Slowly.” The New York Times, September 17, 2006.

Hudleston, Sarah. “Angola Looks to Beaches, Game to Put It On Africa’s Tourist Map.” Business Day

(Johannesburg), December 22, 2005.
4-35

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———. World Economic Outlook Database.

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2005.

Lonard, Terry. “Can Tourism Bring Africa Back to Life?” Deseret News, January 1, 2006.

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http://www.malitourisme.com/fr/cgi-bin/view_article.pl?id=316 (accessed January 11, 2007).

———. “Summit of the CEN-SAD in Mali,” May 1, 2004.

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March 2006.

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a Wide Range of 2010 Tourism Options,” January 9, 2007. 

http://www.environment.gov.za//NewsMedia/MedStat/2007Jan9/09012007.html (accessed

January 16, 2007).

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Waiver Agreement,” April 15, 2005. http://home-affairs.pwv.gov.za/media_releases.asp?id=229

(accessed January 16, 2007).

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South African Tourism. 2002/2003 Annual Report.

http://www.southafrica.net/satourism/about/annual_reports.html (accessed January 16, 2007).

———. 2004/2005 Annual Report. http://www.southafrica.net/satourism/about/annual_reports.html

(accessed January 16, 2007).

———. 2005/2006 Annual Report. http://www.southafrica.net/satourism/about/annual_reports.html

(accessed January 16, 2007).

———. Manual for Promotion of Access to Information, August 8, 2006.

http://www.southafrica.net/satourism/downloads/manual.pdf (accessed January 16, 2007).

———. Tourism Growth Strategy, May 2002.

http://www.southafrica.net/satourism/research/viewResearchDetail.cfm?Action=Download&FileI

D=29273&ReportTypeCategoryID=36 (accessed January 16, 2007).
4-36

The World Conservation Union. “African Rhino Numbers Increase.” Gland, Switzerland: International

Rhino Foundation, June 11, 2002. http://www.rhinos-irf.org/news/african/2002update.htm

(accessed December 6, 2006).

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Trivedi, Bijal P. “Elephants Airlifted to Repopulate War-Torn Park in Angola.” National Geographic

News, September 4, 2001.

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geographic.com&fs=plasma.nationalgeographic.com (accessed December 16, 2006).

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Wichira, Nick. “The Horrifying Result of US Travel Ban on Kenya.” The East African Standard,

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 September 23, 1998.

———. Trade Policy Reviews. “Mali.” WT/TPR/S/133, May 24, 2004.
A-1

APPENDIX A

REQUEST LETTER

A-3
A-4
B-1

APPENDIX B

FEDERAL REGISTER NOTICE

B-3

51212 Federal Register / Vol. 71, No. 167 / Tuesday, August 29, 2006 / Notices

INTERNATIONAL TRADE COMMISSION 

[Investigation No. 332-477]

Sub-Saharan Africa: Affecting Trade

Patterns of Selected Industries

AGENCY: United States International Trade

Commission.

ACTION: Institution of investigation and

scheduling of hearing.

SUMMARY: Following receipt on July 27,

2006 of a request from the United States

Trade Representative (USTR) under section

332(g) of the Tariff Act of 1930 (19 U.S.C.

1332(g)), the U.S. International Trade

Commission (“the Commission'') instituted

investigation No. 332-477, Sub-Saharan

Africa: Factors Affecting Trade Patterns of

Selected Industries. 

EFFECTIVE DATE: August 18, 2006.

 Background.—As requested by the

USTR, the Commission will conduct an

investigtion under section 332(g) and

prepare three annual reports providing

certain information on the competitive

factors affecting industries within SubSaharan Africa (SSA) that have experienced

significant shifts in exports.

 In each of the reports, the Commission

will provide an overview of the trends in

SSA exports in the (1) Agriculture, (2)

mining and manufacturing, and (3) services

sectors, as well as profiles of SSA industries

within those sectors that produce products

(as identified by the USTR) that have shown

significant export shifts in recent years. The

reports will be based on the most recent 5-

year period for which data are available.

 Each industry profile will provide the

following information, to the extent data are

available:

 ! A description of the leading industries

within SSA that export the subject products,

including their position relative to global

competitors;

 ! Identification of the leading SSA

exporting countries and their key markets;

and

 ! Analysis of the competitive factors, by

country, that have contributed to the shift in

exports. (Such factors may include access

to inputs, labor, technology, investment,

trade policies-e.g., tariffs and trade

preference programs such as the African

Growth and Opportunity Act (AGOA),

privatization, and liberalization.)

 As specified in the USTR’s letter, the first

annual report will cover industries producing

the following products: (1) Agriculture—cut

flowers, cocoa butter and paste, nuts

(coconuts, Brazil nuts, and cashews), and 

prepared and preserved fish; (2) mining

and manufacturing—acyclic alcohol,

unwrought aluminum, textiles and

apparel, petroleum gas (liquified natural

gas), flat-rolled steel, and wood veneer

sheets; and (3) services—financial

services and tourism.

 The Commission expects to deliver the

first annual report to the USTR by April 3,

2007. The second and third reports will

be delivered 12 and 24 months,

respectively, after delivery of the first

annual report.

 The Commission anticipates that

industry coverage for the subsequent

reports will be determined in consultation

with the USTR no later than 2 months

after delivery of the previous year’s

report.

FOR FURTHER INFORMATION

CONTACT: Project Leader: Brad C.

Gehrke (202-205-3329 or

brad.gehrke@usitc.gov). Deputy Project

Leader: Joanne E. Guth (202-205-3264

or joanne.guth@usitc.gov).

 Industry-specific information may be

obtained fromthe above persons. For

more information on legal aspects of the

investigation, contact William Gearhart of

the Commission’s Office of the General

Counsel at 202-205-3091 or

william.gearhart@usitc.gov. The media

should contact Margaret O’Laughlin

Office of External Relations at 202-205-

1819 or margaret.olaughlin@usitc.gov.

Hearing impaired individuals are advised

that information on this matter can be

obtained by contacting the TDD terminal

at 202-20501810. General information

concerning the Commission may also be

obtained by accessing its Internet server

(http://www.usitc.gov). The public record

for this investigation may be viewed on

the Commission’s electronic docket

(EDIS–ONLINE) at

http://www.usitc.gov/secretary/edis.htm.

 Public Hearing: A public hearing in

connection with the first report in this

investigation will be held beginning at

9:30 a.m. on December 6, 2006, at the

United States International Trade

Commission Building, 500 E Street, SW.,

Washington, DC. All persons have the

right to appear by counsel or in person, to

present information, and to be heard.

Persons withing to appear at the public

hearing should file a letter to such effect

with the Secretary, United States

International Trade Commission, 500 E 

Street, SW., Washington, DC 20436, not

later than the close of business (5:15 p.m.

EST) on November 13, 2006, in 

accordance with the requirements

in the “Written Submissions”

section below.

 Written Submissions: In lieu of

or in addition to participating in

the hearing, interested parties are

invited to submit written

statements or briefs concerning

the first report in this

investigation. All written

submissions, including requests

to appear at the hearing,

statements, and briefs, should be

addressed to the Secretary,

United States International Trade

Commission, 500 E Street, SW.,

Washington, DC 20436. Any

prehearing statements or briefs

should be filed not later than

close of business, November 15,

2006; the deadline for filing

posthearing statements or briefs

is close of business, December

15, 2006. All written submissions

must conform with the provisions

of section 201.8 of the

Commission’s Rules of Practice

and Procedure (19 CFR 201.8)

Section 201.8 of the rules

requires that a signed original (or

a copy designated as an original)

and fourteen (14) copies of each

document be filed. In the event

that confidential treatment of the

document is requested, at least

four (4) additional copies must be

filed, in which the confidential

information must be deleted (see

the following paragraph for further

information regarding confidential

business information). The

Commission's rules do not

authorize filing submissions with

the Secretary by facsimile or

electronic means, except to the

extent permitted by section 201.8

of the rules (see Handbook for

Electronic Filing Procedures, 

http://www.usitc.gov/secretary/fed

_reg_notices/rules/documents/ha

ndbook_on_electronic_filing.pdf;

persons with questions regarding

electronic filing should contact the

Office of the Secretary at 202-

205-2000 or edis@usitc.gov. 

 Any submissions that contain

confidential business information

must also conform with the

requirements of section 201.6 of

the Commission's Rules of

Practice and Procedure (19 CFR

201.6). Section 201.6 of the rules 
B-4

Federal Register / Vol. 71, No. 167 / Tuesday, August 29, 2006 / Notices 51213

requires that the cover of the document

and the individual pages be clearly

marked as to whether they are the

“confidential” or “non- confidential''

version, and that the confidential

business information be clearly

identified by means of brackets. All

written submissions, except for

confidential business information, will

be made available in the Office of the

Secretary to the Commission for

inspection by interested parties.

 In her request letter, the USTR

stated that she intended to make the

Commission’s report available to the

public in its entirety, and asked that the

Commission not include any

confidential business or national

security information in the report it

sends to her office. Consequently, the

Commission’s report will not contain

any such information. Any confidential

business information received by the

Commission in this investigation and

used in preparing the report will not be

published in a manner that would

reveal the operations of the firm

supplying the information. 

 Persons with mobility impairments

who will need special assistance in

gaining access to the Commission

should contact the Secretary at

202-205-2000.

 By order of the Commission.

 Issued: August 23, 2006.

Marilyn R. Abbott, 

Secretary to the Commission.

[FR Doc. E6-14302 Filed 8-28-06; 8:45

am]

BILLING CODE 7020-02-P
APPENDIX C

SUMMARY OF VIEWS OF INTERESTED

PARTIES

 1

 S.C. Young Kim Fat (Ms), Charge d’Affaires, Embassy of the Republic of Mauritius, written

submission.

C-3

S.C. Young Kim Fat (Ms), Chargé d’ Affaires, a.i.

Embassy of the Republic of Mauritius1

In her submission, the charge d’affaires for Mauritius indicated the importance of the U.S.

market to Mauritian exports, particularly with respect to apparel. However, she said that

Mauritius has not benefitted from and, in the case of apparel, has actually been harmed by

the African Growth and Opportunity Act (AGOA). Exclusion from the third country fabric

rule and expiration of the Multi-Fiber Arrangement (MFA) have caused foreign investment

in the apparel industry to exit Mauritius. The charge d’affaires indicated that Mauritius

needed more flexible rules of origin with respect to AGOA to prevent further erosion in its

apparel industry. Furthermore, she said that Mauritius lacks the capacity to take advantage

of AGOA provisions as they relate to agricultural exports and that Mauritius’s agricultural

exports to the United States could benefit from trade capacity-building activities.

The submission noted that, at the time that AGOA was enacted, Mauritius was the largest

sub-Saharan Africa (SSA) exporter of apparel to the United States. Mauritius has since

dropped behind Lesotho, Kenya, Madagascar, Swaziland, and South Africa into sixth place,

as apparel exports have decreased from a 2002 peak of 47 million square meter equivalents

(SMEs) to 29 million SMEs. The charge d’affaires attributed this decline to two factors.

First, Mauritius does not qualify for the Special Rule for Lesser Developed Beneficiary

countries (third-country fabric provision) that allows duty-free access to apparel made from

fabric not originating in beneficiary countries. (Mauritius requested and received temporary

access to the third-country fabric provision; however, the charge d’affaires stated that the

waiver was in place for only 7 months, which was an insufficient time to generate or

maintain investment in the apparel and textile industry.) Second, expiration of the MFA

eliminated benefits to Mauritian apparel production resulting from quota restrictions. Both

of these factors have resulted in the closing of apparel factories and the loss of jobs as

foreign investors moved their production to more-favorable locations. The charge d’affaires

states that termination of the MFA and unavailability of third-country fabric has caused 23

factories to close, entailing the loss of 25,600 jobs. She advocated the addition of a valueadded provision to AGOA to determine origin as a way for Mauritius to promote local fabric

production and increase its apparel exports.

The charge d’affaires identified agriculture as an area where Mauritius might benefit from

AGOA provisions. However, she stated that Mauritius’s agricultural exports are restricted

by its lack of capacity to penetrate the U.S. market for agricultural goods because of high

U.S. standards and lack of knowledge of the marketing and distribution system. She

indicated that Mauritius would benefit from capacity-building assistance with respect to

meeting U.S. standards and understanding the U.S. distribution system.
 2

 Suzanne Morgan, International Wood Products Association, written submission.

 3

 Christopher D. Lischewski, President and CEO, Connor Bros., Bumble Bee Foods, written submission.

C-4

Suzanne Morgan

International Wood Products Association2

In her statement, Suzanne Morgan said that the International Wood Products Association

(IWPA) represents importers, manufacturers, transportation companies, port authorities,

customs brokers, and overseas producers, many of whom import wood veneer sheets from

SSA. She identified two markets for SSA wood veneer sheets in the United States: (1) the

market for high-end architectural applications in residential and commercial construction,

which is expanding; and (2) the market for core-stock veneer used by U.S. hardwood

plywood manufacturers, which is contracting, though it is by far the largest in terms of

volume.

Ms. Morgan further indicated that shifts in U.S. imports of SSA wood veneer products are

the result of U.S. market conditions, not the result of the availability or quality of SSA wood

veneer. First, the U.S. economy, in general, has slowed. Second, direct imports of hardwood

plywood (most notably from China) has lessened demand for domestic hardwood plywood

produced from African core-stock. Other factors that the IWPA identified as constraints on

U.S. imports of SSA wood veneer are availability and cost of shipping services, greater

scrutiny during inspection of product from Africa relative to product from other sources, and

weakness in the U.S. dollar.

Ms. Morgan indicated that many IWPA members have worked with SSA wood veneer

suppliers for decades and the Ghana Forestry Commission is an IWPA overseas member.

The IWPA also works with SSA wood veneer producers through its involvement in the

International Tropical Timer Organization.

Christopher D. Lischewski, President and

CEO of Connors Bros. 

Bumble Bee Foods3

In his statement, Mr. Lischewski said that Bumble Bee Foods, with several brands of seafood

and other foods, distributes tuna under the largest brand of seafood in the United States. It

operates the last two remaining tuna canneries in the United States, in California and Puerto

Rico. He indicated that Bumble Bee Foods supports the current U.S. duty structure for

canned tuna and believes it has provided significant economic benefits to the SSA region.

SSA exporters currently supply large amounts of tuna loins to Bumble Bee for the U.S.

market. Five years ago, virtually no such trade existed. The firm attributes the growth of such

trade to the AGOA. 

Much of the tuna used by Bumble Bee is harvested by Taiwanese vessels, purchased by

Bumble Bee, and shipped to Mauritius (and elsewhere) for loining and re-export to Bumble

Bee for canning. The loining stage of processing is labor intensive, and this system helps

provide jobs in Mauritius and other SSA countries. Bumble Bee has invested significant
C-5

procurement and technical resources in the SSA industry and favors policies that encourage

the growth of the tuna loining industry in that region.

However, Mr. Lischewski said that U.S. duties on whole or loined tuna (0 to 1 percent) from

Africa are lower than those on canned tuna (6 to 35 percent); therefore reduction of canned

tuna duties would encourage exports from Africa of canned tuna and weaken the U.S. canned

tuna industry. Bumble Bee does not favor reductions in the U.S. duties on canned tuna,

especially when the EU duty of 24 percent is prohibitively high for U.S. exporters. Enabling

SSA countries to undertake the low-cost, labor-intensive stages of tuna processing helps both

their industries and the U.S. industry.

D-1

APPENDIX D

HARMONIZED TARIFF SCHEDULE

CATEGORIES

D-3

Table D-1 Harmonized tariff schedule categories included in select industries

Industry

sector

HTS headings or

sub-headings

included Description

Cut flowers 0603 Cut flowers and buds suitable for bouquets or ornamental purposes, fresh, dried,

dyed, bleached, impregnated or otherwise prepared

Cocoa butter

and paste

1803 Cocoa paste, whether or not defatted

1804 Cocoa butter, fat and oil

Nuts 1801 Coconuts, brazil nuts and cashew nuts, fresh or dried

Prepared or

preserved fish 1604 Prepared or preserved fish; caviar and caviar substitutes prepared from fish eggs

Acyclic alcohol 2905 Acyclic alcohols and their halogenated, sulfonated, nitrated or nitrosated derivatives

Unwrought

aluminum 7601 Aluminum, unwrought

Petroleum

gases

2711 Petroleum gases and other gaseous hydrocarbons

Flat-rolled steel 7208 Flat-rolled iron or nonalloy steel products, 600 mm (23.6 in.) or more wide, hot-rolled,

not clad, plated or coated 

7209 Flat-rolled iron or nonalloy steel products, 600 mm (23.6 in.) or more wide,

cold-rolled, not clad, plated or coated 

7210 Flat-rolled iron or nonalloy steel products, 600 mm (23.6 in.) or more wide, clad,

plated or coated 

7211 Flat-rolled iron or nonalloy steel products, less than 600 mm (23.6 in.) wide, not clad,

plated or coated

7212 Flat-rolled iron or nonalloy steel products, less than 600 mm (23.6 in.) wide, clad,

plated or coated 

7219 Flat-rolled stainless steel products, 600 mm (23.6 in.) or more wide

7220 Flat-rolled stainless steel products, less than 600 mm (23.6 in.) wide

Wood veneer

sheets 4408 Veneer sheets and sheets for plywood and other wood sawn lengthwise, sliced orpeeled, not more than 6 mm (.236 in.) thick 

Textiles and

apparel

The U.S. International Trade Commission includes in the definition of textiles and apparel the following items: 

3926.20, 4015, 4203, 4303, 4304, 50, 5103, 5104, 5105, 5106, 5107, 5108, 5109, 5110, 5111, 5112, 5113,

5202, 5203, 5204, 5205, 5206, 5207, 5208, 5209, 5210, 5211, 5212, 53, 54, 55, 56, 57, 58, 59, 60, 61, 62, 63,

7019, 9404.30, 9404.90. Exports from sub-Saharan Africa in most of these categories were small or

negligible; exports from sub-Saharan Africa were dominated by subheadings: 6110, 6203, and 6204.

6110

Articles of Apparel and Clothing Accessories, Knitted or Crocheted; sweaters,

pullovers, sweatshirts, waistcoats (vests) and

similar articles, knitted or crocheted

6203

Articles of Apparel and Clothing Accessories, Not Knitted or Crocheted; Men's or

boys' suits, ensembles, suit-type jackets, blazers, trousers, bib and brace overalls,

breeches and shorts (other than swimwear)

6204

Articles of Apparel and Clothing Accessories, Not Knitted or Crocheted; Women's or

girls' suits, ensembles, suit-type jackets, blazers, dresses, skirts, divided skirts,

trousers, bib and brace overalls, breeches and shorts (other than swimwear)

Source: Compiled by Commission staff from U.S. International Trade Commission, Harmonized Tariff Schedule of the United

States (2006).