AGOA – The Africa Advantage Source Africa June 8, 2016 Cape Town, South Africa

Agenda I.Overview/Setting the Stage – Clay Hickson, VP, Strategy & Business Development, Worldwide Responsible Accredited Production (WRAP), USA II.XYZ & ABC – Paul Pleva, Regional Trade Adviser/Regional Economist, USAID/Southern Africa III.ABC & XYZ – Finn Holm-Olsen, Director, Trade Promotion & AGOA, East Africa Trade and Investment Hub IV.The Tanzanian Story – Tim Armstrong, Investment Promotion Director, Textile Development Unit, The Ministry of Industry and Trade, Tanzania V.The Mauritian Story – Geerish Bucktowonsing, Divisional Manager Textiles, Enterprise Mauritius VI.The South African Story – Shakeel Meer, Divisional Executive: Chemicals and Textiles, Industrial Development Corporation, South Africa VII.Q&A

Overview The African Growth and Opportunity Act (AGOA), provides duty-free entry into the US for textiles and apparel from 24 eligible Sub- Saharan Africa countries into 2025 (40 are eligible for preferences in other sectors.

Overview AGOA provides incentives for countries deemed to be making continual progress toward establishing market-based economies, the rule of law and political pluralism; elimination of barriers to US trade and investment; protection of intellectual property; efforts to combat corruption; policies to reduce poverty, increase availability of healthcare and educational opportunities; protection of human rights and worker rights; and elimination of certain child labor practices.

The Environment Increasing wage levels across Asia, shifts in foreign exchange rates, rising raw material costs, global retail trends, and changing consumer behaviors complicate sourcing. Political changes and investment shifts allow new countries to emerge as potential sources for apparel production. Buyers expect to decrease sourcing from China, but China is still growing. Many Chinese garment makers are investing in facilities in Cambodia, Vietnam, Myanmar… and Africa. – Bangladesh, Vietnam and India remain top sourcing destinations. Africa is receiving a great deal of attention.

Questions How does Africa compare to parts of the world with advanced garment industries? Is there a “Next China?” What is the potential for Africa to grow into a major garment sourcing hub? What are the opportunities? What are the challenges? Will AGOA provide sufficient competitive advantage? What will be the effect of TPP?

Opportunities Buyers expect to be sourcing more from Africa over the next several years – More US buyers than European buyers Africa’s potential as a sourcing hub still largely untapped – Currently, the majority of clothing exports from Africa come from North Africa ( e.g., Morocco, Tunisia, Egypt) rather than Sub-Saharan nations

Opportunities Governments using legislation and incentives to leverage textile and apparel industries as tools for industrialization and economic development Capacity is growing

Challenges Inadequate infrastructure: roads, rails, and ports Insufficient number of trained/skilled garment workers and management Unproductive workers High worker turnover Lack of a upstream industry—quality fabrics have to be imported (mainly from China) Unreliable and costly power

Challenges High costs: energy, labor, logistics, raw materials Bureaucratic customs processes Inefficient ports High corruption High crime rates and lack of security Lack of concern for social compliance

Priorities Governments – Focus on economic development plans – Seek regional collaboration – Work with suppliers and buyers Buyers – Build long-term relationships with suppliers Suppliers – Ensure social and environment compliance

Sourcing Imperatives

Responsible Sourcing Best Practices Auditing Alone Not Enough – Social compliance is a two-way street Engagement necessary at all levels – Understanding the practical challenges faced – Being consistent with message No “disconnect” between sourcing and compliance – Building partnerships Continuous improvement – Ongoing training and education

Summary Sustainability and social compliance certification are becoming increasingly important aspects of supply chain management in today’s global value chain. A properly implemented, and credibly certified social compliance system serves the dual purpose of meeting buyer requirements as well as increasing worker efficiency and morale, and, thereby, productivity & profitability.

Clay E. Hickson Vice President of Strategy & Bus. Dev. Worldwide Responsible Accredited Production Arlington, VA, USA Thank you!