Has the African Growth and Opportunity Act Promoted US FDI in Africa? Reflections on a Post-2025 AGOA on Investment

This chapter studies the African Growth and Opportunity Act (AGOA) and its impact on US foreign direct investment (FDI) in Africa. It finds evidence of a positive relationship between AGOA apparel exports to the US and US FDI. Nonetheless, this effect has not been sufficiently strong to override the overall negative effect of AGOA on US FDI in Africa. Indeed, despite the prevalence of various investment agreements with the US, including bilateral investment treaties and Trade and Investment Framework Agreements with regional economic communities, these have not had a bearing on increasing US investment in the continent. Hence, the secondary objectives of AGOA of promoting investment into Africa and fostering regional integration do not appear to have been fulfilled. The exception is the Southern African region, which experienced greater FDI associated with the Trade, Investment and Development Cooperative Agreement it holds with the US. Given the limited positive impact of AGOA on FDI, and in light of the approaching AGOA extension beyond 2025, a case is made for revamping it in order to harness regional FDI that is expected through the AfCFTA and its associated backward and forward linkages to support Africa’s integration into the global economy.