Tiagha & Associates is a boutique firm that provides transactional legal and business advisory services to small and medium businesses on corporate and real estate matters. We work closely with entrepreneurs from the African Diaspora and those SMEs that do business in sub-Saharan Africa or are trying to access the United States market. Give us a call today at +1.215.543.7970 or email us at [email protected] to get started on your journey towards success. Visit us at www.tiaghalaw.com.
How do I pay for a feasibility study for my project overseas? USTDA, that’s how! pt 2
Noncompetitive grant example: In March 22, 2013, a U.S. company was seeking to collaborate with Ghanaian energy company Ghana Grid company Limited (GRIDCo) to develop a new power transmission line in southwestern Ghana. The U.S. Company engaged in negotiations with GRIDCo directly. After the negotiations, both sides agreed that a pilot project was necessary to demonstrate proof of concept and the U.S. company’s capacity to execute the project. Subsequently, the U.S. company applied for support from USTDA and was awarded a $655,000 grant to conduct a feasibility study.
The proceeds of the grant were used to create nearly 150 miles of new transmission of linkage between three different cities. Because of successful implementation of the pilot project, the U.S. company was able to demonstrate to GRIDCo as well as potential investors both the scalability of the project and the company’s capacity to execute the project. In addition, due to successful implementation of the project more than 200 businesses and families gained accesses to a reliable source of energy. Moreover, because of the project success, Ghana is now a market for further U.S. electricity distribution technologies.
Since the U.S. company in this example engaged directly with GRIDCo prior to applying for USTDA support, the grant process was not competitive. In the noncompetitive grant the USTDA requires applicant company to have some equity (or, skin in the game) invested the project. Otherwise, the mechanics of the grant are the same, including the fact that the U.S. company was paid directly by USTDA from the $655,000 grant. For more examples of USTDA activities, check out USTDA’s events calendar.
Trade Missions
USTDA also connects U.S. businesses with African buyers by hosting trade missions. Trade missions are platforms for U.S. SMEs to display their technologies and services that can aid Sub-Sahara African countries reach their development goals. Thus, U.S. SMEs are able to familiarize foreign delegates with U.S. technologies, as well as best practices applicable in various sectors. Delegates often include representatives of power utilities, federal regulatory and standards-setting bodies, among other official in both the private and public sector. In turn, U.S. SMEs have a chance to learn about upcoming opportunities in developing countries and have individual meetings with the senior level delegates where they present their procurement needs and discuss specific solutions to development challenges.
Trade missions are often conducted in foreign countries. However, periodically, USTDA host “reverse” trade missions in the U.S. to afford foreign delegates an opportunity to tour manufacturing facilities and see how various technologies are used in practice. For example, from April 11-21 the USTDA ias hosting Brazil Healthcare IT Reverse Trade Mission. This reverse trade mission will an opportunity for Brazilian hospitals and governments delegates, to familiarize themselves with the latest U.S. technologies and services relating to healthcare IT. For a list of upcoming USTDA trade missions please follow this link.
For more information please contact Tiagha & Associates, a legal and business advisory firm to SMEs with specific experience with the African Diaspora and those SMEs that do business in sub-Saharan Africa, by Email: [email protected] or by telephone: +1.215.543.7970.
To qualify for OPIC funding, the applicant SME must be a U.S. entity and have significant participation of the U.S. private sector. The “significant participation of the U.S. private sector” requirement can be fulfilled with either equity or a long-term debt investment. OPIC defines a “U.S. entity” as an entity organized in the U.S. with a minimum of 25% U.S. ownership, or as, a not-for-profit organization established in the U.S. However, for entities organized outside of the U.S., to qualify for OPIC funding, there must be a minimum of 50% U.S. ownership. Finally, to qualify for OPIC funding the applicant SME’s management team must demonstrate competence by having a proven record of success in the same or related industry.
Conversely, OPIC is “categorically prohibited” from financing projects that engage in activities that have an irremediable impact on the environment. For example, OPIC will not support project that involve the manufacturing of ozone-depleting substances or projects that involve conversion or degradation of critical forest areas. OPIC’s list of “Categorically Prohibited Sectors” is extensive. For more information and clarification, please contact Tiagha & Associates.
In addition, OPIC will not support projects that will have a detrimental impact on the U.S. economy or employment. Thus, projects that will result in the closing of a U.S. industry, result in a substantial reduction of the U.S. workforce, or projects in sectors which have experienced substantial job loss in the U.S. within the past ten years, would not be supported by OPIC.
Moreover, OPIC will not support projects that do not strictly adhere to internationally recognized worker rights standards. A list of internationally recognized worker rights includes the following: i) the right of association; the right to organize and bargain collectively; ii) prohibition of forced or compulsory labor; iii) minimum age for employment; and iv) acceptable conditions of work with respect to minimum wages, hours of work, and occupational health and safety.
OPIC provides U.S. SMEs with financing and insurance protection in order to secure and protect investment in emerging frontier markets in the developing countries of sub-Saharan Africa. This article briefly outlined the loan structure of OPIC financing and the qualification criteria. The next one will outline OPIC’s Political Risk Insurance.
For application assistance and a more comprehensive overview of the Overseas Private Investment Corporation (OPIC), please contact Tiagha & Associates, a legal and business advisory firm to SMEs with specific experience with the African Diaspora and those SMEs that do business in sub-Saharan Africa, by Email: [email protected] or by telephone: +1.215.543.7970.
How do I pay for a feasibility study for my project overseas? USTDA, that’s how!
The U.S. Trade Development Agency (USTDA) is a government organization that aids U.S. small to medium sized enterprise growth and creates U.S. jobs by facilitating the export of U.S. goods and services for critical development projects in developing and middle-income countries. USTDA is currently operating in six of Sub-Saharan Africa’s key emerging markets: Uganda, Tanzania, Nigeria, Ghana, South Africa and Kenya. Thus, USTDA promotes the advancement of economic growth in Sub-Saharan Africa and domestic economic growth. Specifically, USTDA assists U.S. small to medium size enterprises (SME) gain export opportunities in Sub-Saharan African markets by funding project planning activities, pilot projects, and trade missions. Below we will outline USTDA grants programs and trade missions, two mechanisms that the organizations uses to achieve its development objectives.
USTDA Grant Program
In order to fund development projects in emerging markets USTDA issues U.S. SMEs two types of grants, one competitive and the other noncompetitive. In the competitive grant process, USTDA identifies development projects and then accepts competitive proposals from U.S. SMEs to determine which entity is best suited to complete the project. In the noncompetitive grant process, U.S. SMEs, can independently identify development projects in Sub-Saharan Africa, and apply directly to USTDA for grants. If approved, USTDA will issue an exclusive grant for applicant SME to fund a feasibility study, to evaluate critical technical and economic aspects of their proposed projects, perform environmental and social impact assessments, and due diligence, in order to determine viability of proposed project. An example of each process follows below.
Competitive Grant example: The USTDA is currently accepting proposals from U.S. SMEs for a project in Guadalajara, a city of 4.4 million residences in Mexico. Due to the rapid growth of the Guadalajara’s population and the growing number of pedestrian, vehicles and passengers in the city’s Metropolitan Area its traffic network and public transportation system are now antiquated and need to be renovated and modernized. Thus, USTDA issued Guadalajara a Technical Assistance Grant to hire a U.S. SME to assist in the development of Guadalajara’s transportation infrastructure.
Therefore, the USTDA is currently in search of a U.S. SME that possesses the requisite expertise and capacity to complete the project. The U.S. firm selected to complete the project will be paid in U.S. dollars directly from a Technical Assistance Grant of $686,275 issued to Guadalajara by the USTDA. Since the price of the project is predetermined by the size of the grant, price will not be a factor in contractor selection. Thus, the winning proposal will be determined strictly on the merits and of competing SMEs to complete the project. For a complete list of current USTDA overseas business opportunities follow this
Does my project in Africa qualify for OPIC Risk Insurance? Part 3 of 3
Political Violence Coverage (War, terrorism and other politically motivated violence) For our U.S. SMEs political uncertainty, politically motivated violence and terrorism can be disastrous. Thus, OPIC’s Political Violence coverage will protect our SME’s housing projects for equity assets (including property) and income losses caused by politically motivated violence. Specifically, OPIC Political Violence coverage protects our U.S. SME against war (declared or undeclared), hostile actions by national or international forces, revolution, insurrection, and civil strife and terrorism and sabotage. So hypothetically speaking, if our U.S. SME incurs losses due to any of the above-mentioned circumstances, OPIC will issue reimbursement for two types of losses i) assets and ii) business income. Asset coverage will protect our U.S. SME against damage to covered tangible assets, and business income coverage will protect our U.S. SME against income losses resulting from damage to assets of the caused by political violence.
There are always risks associated with doing business; but doing business overseas, particularly in the emerging markets of Sub-Saharan Africa compounds the risk due to the potential for political instability. However, the trick for SME is not to avoid the risks associated with doing business in Sub-Saharan Africa; rater the trick is to mitigate the risks by acquiring products such as OPIC’s political risk insurance. Now is an opportune time for U.S. SMEs to develop their business by accessing the emerging markets of sub-Saharan Africa. Do not miss out.
For application assistance and a more comprehensive overview of the Overseas Private Investment Corporation (OPIC), please contact Tiagha & Associates, a legal and business advisory firm to SMEs with specific experience with the African Diaspora and those SMEs that do business in sub-Saharan Africa, by Email: [email protected] or by telephone: +1.215.543.7970.
Does my project in Africa qualify for OPIC Risk Insurance? Part 2 of 3
OPIC’s PRI is available to U.S. investors, lenders,contractors, exporters, and NGOs for investments in more than 30 sub-Sahara African markets, including some the most high-risk countries such as the Democratic Republic of Congo. OPIC offers several types of PRI coverage: Currency Inconvertibility, Expropriation, Political Violence and more targeted specialty products.
In order to convey what protections the various types of coverage OPIC PRI offers SMEs we will present a hypothetical (yet viable) investment opportunity. Let us imagine a U.S. SME is considering investing in an affordable housing development project in Ghana. What benefits could OPIC’s political risk insurance offer them? Using the example of the hypothetical U.S. SME investing in a affordable housing development project in Ghana, we will explore OPIC PRI.
Prior to investing in the affordable housing project in Ghana, our SME did its due diligence, including a feasibility study and research concerning Ghana’s business laws. Based on the results of the due diligence our SMEs decide to precede with its investment. We will see below, at times the actions or inactions of host government can cause political risk issues.
Currency Inconvertibility (inability to convert and transfer currency back to U.S.)
Let us assume OPIC insured our U.S. SME against currency inconvertibility on its affordable housing project. When OPIC issued the contract of insurance, Ghanaian law allowed foreign investors operating in the country to convert and transfer abroad the proceeds of their investments. However, within two years, the Ghanaian exchange control authority amended the laws in a manner that imposed stricter exchange controls on the conversion of Ghanaian Cedi to U.S. Dollars. Thus, as a direct result of actions of the Ghanaian Government our U.S. SME was unable to convert, legally, its proceeds from the Ghanaian Cedi to U.S. dollars through the official channels. As result our U.S. SME summited a claim to OPIC, who determined that the claim was valid. OPIC then issued insurance proceeds in U.S. dollars equal to the amount our SME was unable to convert due to the tighter restrictions. In summary, OPIC currency inconvertibility coverage assure U.S. SMEs doing business in Sub-Sahara African Markets, that their proceeds will remain liquid convertible and transferable from local currency to U.S. dollars.
Expropriation Coverage (illegal confiscation or nationalization of assets by Gov)
OPIC expropriation coverage protects our U.S. SME from expropriatory acts or any improper government (including corruption) that deprive it from its rights to conduct business. OPIC coverage protects against actions such as abrogation, repudiation, and impairment of contract, including forced renegotiation of contract terms. In addition, OPIC coverage will also protect our SME against the imposing of confiscatory taxes or the outright nationalization of money and tangible assets, including real estate. Thus, in summary OPIC Expropriation coverage protects our SME against a range of governments’ actions that result in the loss of revenue or property. So hypothetically, if the Ghanaian government nationalized our SMEs housing development, OPIC expropriation reimburse them for the total amount of all assets and revenue lost.
Does my project in Africa qualify for OPIC Risk Insurance? Part 1 of 3
Not too long ago the international business community looked upon sub-Saharan Africa with a sense of skepticism or more aptly pessimism. A sentiment captured in the now infamous May 11, 2000 Economist headline: Hopeless Africa [article here]. Due to mainstream media’s depiction of “Africa” as a place of poverty, disease and war the consensus among the international business community was “the world might just give up on the entire continent”[1]
Today, however, the international business community now looks upon sub-Saharan Africa as a place of unparalleled growth and opportunity. A sentiment captured in the Mar 2, 2013 Economist Headline: The Hopeful Continent [article here]. So, how did the international business community’s sentiments change from “Hopeless Africa” to “Hopeful Continent” in just over a decade? According to many observers in the international business community, “[a] booming economy has made a big difference.”[2] Africa is now the world’s fastest-growing continent.
Over the past ten years, the international business community has observed sub-Saharan Africa become home to eight of the world’s ten fastest growing economies. The expectation is for the remarkable growth to continue, as the indicators suggest the region will achieve an average of 6% growth annually over the next ten years. Because of sub-Saharan Africa’s phenomenal growth the international business community has responded in kind by increasing foreign direct investment (FDI), “from $15 billion in 2002 to $37 billion in 2006 and $46 billion in 2012”. [3] Not surprisingly, the stark rise in FDI correlates, strongly, with the efforts of governments in the region to improve business conditions in their respective countries. According to the World Bank’s ease of doing business index, the business environment in many sub-Saharan Africa markets have improved markedly in recent years.
Although key business indicators have improved, there are still considerable risks associated with doing business internationally especially in emerging markets in. It is no secret that many of sub-Sahara African markets face the challenges of corruption, poor regulations and labor union issues. These challenges notwithstanding, now is an opportune time for U.S. SMEs to consider doing business on the continent.
Investing in sub-Saharan Africa can be unpredictable even for the most experienced investors. Although, sub-Sahara African markets offer U.S. SMEs great opportunity, they can also present a number of political risks beyond a SME’s control. Fortunately, there are a number of insurance products on the market, which mitigate the risks associated with doing business in sub-Sahara African markets. One such product is OPIC’s political risk insurance, OPIC coverage protects SMEs against “acts of politically-motivated violence including terrorism, expropriation, repudiation and/or impairment of contract and other improper host government interference”. [4] Below we will outline OPIC’s political risk insurance (PRI).
[1]"Hopeless Africa." The Economist. The Economist Newspaper, 13 May 2000. Web. 18 Feb. 2015.
[2] "A Hopeful Continent." The Economist. The Economist Newspaper, 02 Mar. 2013. Web. 18 Feb. 2015.
[3] "A Hopeful Continent." The Economist. The Economist Newspaper, 02 Mar. 2013. Web. 18 Feb. 2015
OPIC is a governmental development finance institution that work in partnership with U.S. Small to Medium size Enterprises (SMEs) to mobilize private capital and expertise in order to help solve development challenges throughout the world. OPIC provides financial products, such as loans and guarantees, political risk insurance and support for investment funds in order to help SMEs establish traction in emerging market, in world regions such as Sub-Saharan Africa.
OPIC services are available to new and expanding SMEs in more than 30 Sub-Sahara African countries. According to its official website, OPIC has, year to date, supported more than $200 billion in investment funds and has generated an estimated $75 billion in U.S. exports.[1] Thus, OPIC private/public partnerships have proven to be mutually beneficial, serving to advance U.S. trade and foreign policy, while simultaneously serving to assist SMEs with gaining accesses to international emerging markets, e.g., sub-Saharan Africa.
We encourage U.S. SMEs to take full advantage of the OPIC’s vast resources and the opportunities they provide. Therefore, the following article will briefly outline the framework OPIC’s financing options in terms of loan structure and qualification criteria. Forthcoming, articles will outline OPIC’s political risk insurance and support for investment funds.
OPIC Loans and Guarantees
OPIC provides financing, for projects in countries where traditional financial institutions are frequently unwilling or unable to lend due to their uncertain business environment. OPIC financing, thus, expands the scope and range of investment opportunities for SMEs willing to accept the challenges (and rewards) of investing in the emerging markets of Sub-Saharan Africa. For SMEs with gross revenues of less than $400 million, OPIC offers direct fixed rate loans and loan guarantees, designed to meet their long-term capital investment financing needs that range in size from a minimum of $350,000 to a maximum of $250 million. Although the minimum loan size is $350,000, it is important to note that, due to the cost of the underwriting and the due diligence process, OPIC rarely grants loans for less than $1 million.
Furthermore, OPIC loans have equity requirement; which vary, depending on the impact that the project is expected to have on host country’s development, and depending on how the financial risk and returns are distributed between the investors and lenders. In other words, projects that are deemed by OPIC as high impact in terms of development in host country are more likely to receive considerable support from OPIC. Likewise, projects that are deemed by OPIC to have a favorable risk distribution in terms of shared risk among investors are strong candidates for OPIC funding.
On occasion, OPIC will finance a significant portion, as much 75%, (rarely up 90%) of the total cost of a project. Meaning that in most cases applicant SMEs must secure a minimum of 25% equity in order to qualify for OPIC financing. However, as a general rule OPIC requires applicant SMEs to have considerably more equity, typically in the range of 50%-60% to qualify for OPIC funding. In addition to equity considerations, Applicant SMEs are expected to have collateral in the host country and/or in the U.S in order to secure the loan.
Once approved, applicant SMEs can use OPIC proceeds to cover capital costs, associated with the establishment expansion of a project such as construction or renovation, equipment, or design and engineering services. In addition, OPIC proceeds can also be used in the financial industry. For example, a financial services provider can use OPIC proceeds to expand lending capacity for activities such as microfinancing, SME lending or mortgage lending.
For application assistance and a more comprehensive overview of the Overseas Private Investment Corporation (OPIC), please contact Tiagha & Associates, a legal and business advisory firm to SMEs with specific experience with the African Diaspora and those SMEs that do business in sub-Saharan Africa, by Email: [email protected] or by telephone: +1.215.543.7970.
SBA Export Loan Programs: International Trade Loan Program
This is the third and final article in a series outlining the three SBA Export Loan Programs. For a brief review, the two previous articles outlined, 1) Export Express Loan Program, which is a $500,000 line of credit and 2) Export Working Capital Program, which is a 5 Million line of credit. Also, to reiterate, “SBA has made it a priority to help small business exporters by providing a number of loan programs specifically designed to help [SMEs] develop or expand export activities”. This article will outline the “International Trade Loan”, which is a line of credit up to $5 million for businesses seeking to accesses international markets such as the emerging frontier markets of Sub-Sahara Africa. Finally, this article will outline China’s trade partnership with Sub-Sahara Africa.
International Trade Loan Program (ITLP)
The ITLP offers loans up to $5 million for fixed assets and working capital for SMEs, who are well situated to expand current or develop new international markets. What differentiates ITLP from the other SBA Export Loan Programs is the fact that ITLP is also available to SMEs who have been unfavorably affected by import competition and who are able to demonstrate that the ITLP proceeds will improve the SME applicant’s competitive position.
ITLP proceeds can be deployed for a number of purposes including the acquisition, construction, renovation, expansion or modernization of business facilities, infrastructure and or equipment located in the United States to be used in the production of goods or services dedicated to international trade. As previously mentioned, ITLP proceeds, can also be used to develop or expand export activities. Finally, ITLP proceeds can be used to refinance an existing loan.
The ITLP application process is simple. First, applicants should determine whether your current lender is an SBA-approved 7(a) lender. If not, you need to find and locate an approved lender with whom to partner, at which point the SBA will work directly with the lender to determine your eligibility.
China’s Trade Partnership with Sub-Sahara Africa
Over the past decade, China has rapidly increased her trade interests in sub-Saharan Africa. Initially, the international community characterized China’s trade interest in sub-Saharan Africa as strictly a quest for oil and other natural resources. Yet, more recently, observers have noted that China’s investment goals and strategies in sub-Saharan Africa have become more diversified and sophisticated. In fact, due to a decline in her once rapidly growing economy, China’s trading priorities sub-Saharan Africa have, as described by this report, transitioned over time from a “resource-heavy capital spending” to a more “refined, consumer-led sort of growth.
More significantly, however, is the fact that China has surpassed the U.S. as the number one trade partner in an increasing number of countries throughout the sub-Saharan region. As reported by The Economist, today China is Sub-Sahara Africa’s biggest trade partner, exchanging approximately $200 billion worth of goods and services? annually.
Also noteworthy, as reported by The Economist, both India and Brazil have joined China as significant trade partners with sub-Sahara African Countries. Together China, Brazil and India represent a bloc (BIC?), which collectively dwarf U.S. trade proportion with sub-Saharan Africa. Although, China seems to be leading the “new scramble for Africa” other emerging markets such as India and Brazil have taken notice. Increasingly, even middle-income countries are using the emerging frontier markets of sub-Saharan Africa to fuel domestic GDP growth.
The forces of globalization have flattened the international business terrain, thus, China’s rapid excursion into the emerging frontier markets of sub-Saharan Africa have significant implications, with regards to import competition, in the U.S. domestic market. Therefore, it is now more pertinent than ever for U.S. SMEs to compete with their international counterparts on all fronts, particularly, in the emerging frontier markets of Sub-Sahara Africa.
SBA Export Loan Programs, such as the ITLP, provide U.S. SMEs the the exploiting the growth potential in emerging frontier markets of sub-Saharan Africa. For Application assistance and a more comprehensive overview of the SBA Export Loan Programs please contact Tiagha & Associates, a legal and business advisory firm to SMEs with specific experience in the African Diaspora and those SMEs that do business in sub-Saharan Africa, by Email: [email protected] or by telephone: +1.215.543.7970.
SBA Office of International Trade Export Loan Programs - Export Working Capital up to $5 Million
Last week’s article outlined the SBA Office of International Trade’s “Export Express”, which is the simplest of three SBA Export Loan Programs. This week’s article will outline a more sophisticated SBA export loan program, the SBA Export Working Capital Program (“EWCP”). Further, this article will elaborate on why, for small and medium enterprises (“SMEs”), it is a good idea to expand and diversify your company’s revenue streams by exporting to frontier markets, especially the emerging markets in sub-Saharan Africa.
Export Working Capital Program (EWCP)
The EWCP is an advance of up to $5 million to finance exporting transaction “from purchase order to collections”. Two immediate benefits of the EWCP are the low guaranty fee and the quick processing time, which is typically 36 hours or less. To be eligible for the EWCP, your SME must (i) meet the SBA definition of a SME, which can be found here, (ii) can demonstrate the SME has been in existence for a minimum of 12 months, and (iii) your company must have a purchase order from a foreign buyer that is creditworthy has methods of payment that the SBA accepts.
If your SME meets these eligibility criteria then it is work towards securing a EWCP loan up to $5 million, the proceeds of which can be used to finance suppliers, inventory or the export goods or services. Moreover, EWCP proceeds can be used as working capital or as down payment guarantees, among other things. A few of the benefits of the EWCP include an increase of working capital, an ability to offer competitive terms, or the allocation of risk.
The EWCP application process is as simple as contacting your current lender to determine if they are approved to underwrite EWCP loans. If not, it is necessary to locate and work with an approved lender. The next step will be to complete and submit an application to the approved lender, who will submit the necessary paperwork to the SBA, if approved. Although you can apply for EWCP financing before finalizing an export sale or contract, EWCP loan proceeds can only be disbursed against “firm purchase orders from a foreign buyer or to support foreign account receivables”. The EWCP is an excellent financing vehicle that SMEs can use to accesses the frontier markets of sub-Saharan Africa.
Africa, the Next Frontier
It is well documented in a litany of reports, articles and studies that among all the frontier markets, sub-Saharan Africa is realizing the fastest growth. One example, according to this CNBC report, last year alone, Africa’s consumer sector spent over a trillion dollars, which is more than India’s consumer sector. Africa’s burgeoning middleclass, which is the fastest growing in the world, is prepared to absorb any number of goods, services and products. Sub-Saharan Africa is the next hot spot for industry as diverse as broadband and private housing, banking and consumer goods, and healthcare and professional services. In fact, just this week Apple named, Nigerian singer D'banj the official African ambassador for Beats by Dre, story here. The fact that Apple chose Africa as a target market for its luxury brad headphones is a powerful testament to the region’s consumer power.
So, how well positioned are SMEs to take advantage of the frontier markets of sub-Saharan Africa? Surprisingly, the answer is SMEs are positioned as well or better than large companies such as Apple are. According to the SBA, more than 97% of American exports are conducted by SMEs. For SMEs ready to explore the possibilities and challenges of exporting, to sub-Saharan Africa, SBA products such as EWCP can help you achieve your goal.
For Application assistance and a more comprehensive overview of the SBA Export Loan Programs please contact Tiagha & Associates, a legal and business advisory firm to SMEs with specific experience in the African Diaspora and those SMEs that do business in sub-Saharan Africa, by email at [email protected] or by phone: +1.215.543.7970.
SBA Office of International Trade Export Loan Programs - Export Express up to $500,000
If you are a small to medium enterprise[1] (“SME”) looking to expand your company by offering your goods or services in the emerging market of Sub-Saharan Africa, the Small Business Administration (“SBA”) has a number of Export Loan Programs for which your company may be eligible. The SBA Office of International Trade is a U.S. federal agency whose objective is to encourage small business exports by providing support to SMEs with aspirations of engaging with international markets. The SBA Office of International Trade uses an elaborate network of private-public partnerships to provide a variety of services/partnerships in order to “direct and coordinate SBA's ongoing export initiatives”. The SBA Office of International Trade operates regionally through 19 U.S. Export Assistance Centers (“USEACs”) located throughout the United States. The USEACs’ mission “is to enhance the ability of small businesses to compete in the global marketplace”. This article, the first of a series, will outline the SBA Office of International Trade’s “Export Express”, which is one of three SBA Export Loan Programs. Export Express is one of the most useful products/services offered to SMEs with a specific focus of accessing sub-Saharan African markets.
The Export Express is the simplest export loan product offered by the SBA Office of International Trade. It offers financing up to $500,000 for SMEs in order to enter and grow in international markets. SMEs, which (i) have been in operation for at least one full year and (ii) can demonstrate that the loan will facilitate export, are eligible for Export Express. Export Express can take the form of either a term loan or a revolving line of credit. The proceeds of which can be deployed for a variety of business purposes, including but not limited to, the purchase of equipment, inventory and real estate or the finance of specific export orders. Simply stated, Export Express proceeds can be used for any business activity that will assist a company’s export expansion.
The Export Express application process is a simple two-step process. The first step is to determine whether your current bank is a SBA Export Express lender. If not, it is necessary to locate and work with a SBA Export Express lender. The second step is to apply directly to a SBA Express Lender with their application material and SBA’s Borrower Information, which is available here. If the loan request is approved, the lender will submit eligibility information directly to the SBA. For SMEs, Export Express makes accesses to Sub-Saharan African markets more obtainable than ever.
Why is it a good idea to consider expanding your business by accessing Sub-Saharan African markets? Because, companies that export perform better than companies that do not. Consider the following, according to the SBA, companies that export are: 1) 20% more productive 2) 9% less likely to go bankrupt 3) experience 20% job growth 4) wages paid by exporting companies are 15% higher and benefits are 11% higher than non-exporting companies are. Furthermore, according to a Business Insider report, 10 of the fastest growing world economies are in Sub-Saharan Africa.
If you are an SME seeking to diversify your company’s revenue streams by accessing the emerging markets in sub-Saharan Africa, you may be able to leverage your growth by using the Export Express Loan Program. For a more comprehensive overview of the SBA Export Loan Programs or for assistance with your loan, please contact Tiagha & Associates, a transactional legal and business advisory firm to SMEs with specific experience in the African Diaspora and those SMEs that do business in the US and in sub-Saharan Africa, by email: [email protected] or by telephone: +1.215.543.7970.
[1] The Small Business Administration defines a small business here.
We provide corporate, real estate, immigration and business litigation services. We are the premier law firm for the African diaspora and for individuals and businesses seeking access to sub-Saharan Africa and the U.S. marketplace...
The Legal & Immigration Committee of the Mayor's Commission of African & Caribbean Immigration Affairs in Pennsylvania has grave concerns about the pending Immigration Reform bill due for mark up over the next few weeks.
KEY ISSUES:
We urge you to repeal section 2303. The DV Lottery should not be eliminated. Congress must preserve the American Dream for those who may not be “superstars” in the global migration system.
This program was originally conceived to address the historical and legislative inequity in the immigration system that restricted the migration of people from certain countries. The DV Lottery program is built upon foundational, democratic and egalitarian principles that strengthen America. These principles advance equal opportunity, attracts entrepreneurs and visionaries who contribute immensely to the American small business sector, and improves the quality of our social, economic, political and cultural life. It has been a very successful foreign policy, civil rights achievement and national security tool.
African DV Lottery Winners:
• Thousands of DV lottery winners from African countries have served in the U.S. military in Iraq, Afghanistan and elsewhere.
• The DV lottery has had the effect of lifting families out of poverty; provided opportunities to the affected families; and provided a talent pool for the U.S. economy. Nearly 48% of DV lottery visas benefit African immigrants.
• The DV Lottery especially helps African immigrants who may not have ties to United States’ corporations, United States citizen or lawful permanent resident family members or favored institutions that might enable them to lawfully immigrate to the United States.
• African immigrants provide vital services to United States citizens, especially the young and aging American population through services such as Home Health Care Center and by serving as au pairs.
• African immigrants contribute to the transportation service industry as taxi cab and limousine drivers, owners of taxi cab and limousine drivers and as owners of small businesses in the United States. As part of a highly educated group, they will also contribute to nation’s global competitiveness in Science, Technology, Engineering and Mathematics (STEM) fields.
Your continued commitment to the immigrant community and your anticipated help in ensuring fairness and equality in our Immigration laws is appreciated.
By repealing section 2303 and restoring the diversity visa you will address the historical inequity and bias with respect to Africans and advocate for fairness and equality.
Thank you,
[TYPE YOUR NAME HERE]
The African & Caribbean Immigration Community & Friends
Hello, My name is ____________________ and I am writing to express my concern about the proposed Immigration reform bill and the elimination of the diversity lottery visa (section 2303). The Diversity Visa was one of the few ways that people from African Countries had access to America. Please reinstate this visa category for the following reasons:
· America should send a POSITIVE Message to Africa and African people because the economies in Africa are getting stronger and stronger and Immigration reform is one of America’s opportunities to foster positive foreign relations and benefit from Africa’s emerging markets.
· Africans are overrepresented in the areas of Science, Technology, Engineering, and Mathematics. The diversity lottery visa creates a pathway for these skilled individuals from Africa to come to America and contribute to America’s economy.
· Sending a positive message to the emerging economies in Africa is a win-win situation and failure to do so might have future implications for America’s national security as nations from continental Africa might seek allies with America’s competitors.
Thank you for bringing this to your attention. Please pass legislation that is favorable to African people and send a positive message to these highly educated minority voters in America.
Thank you,
[TYPE YOUR NAME HERE]
The African & Caribbean Immigration Community & Friends
Hello, my name is ____________________ and I am writing about the proposed Immigration reform bill regarding the W visa category (section 4701). Africans are overrepresented among those that have careers in Health care. A 2012 study in the Annals of Family Medicine suggests that by 2025 the United States will require nearly 52,000 more primary-care physicians. The opportunity for African immigrants to fill those gaps in underserved areas is significant.
Please consider including home health care professionals, radiology technologists, and occupational therapists in the W visa category.
Thank you for bringing this to your attention. Please consider the African people and send a positive message to these highly educated minority voters in America.
Thank you,
[TYPE YOUR NAME HERE]
The African & Caribbean Immigration Community & Friends
If you would like more information on immigration reform or on your current status and how it could be affected by the proposed reform, please contact Tiagha & Associates, Ltd. at +1.215.543.7970 or William S. Ravenell, II at [email protected].
Thank you for your support in making our voices heard!
The African Growth and Opportunity Act (AGOA) - An Overview
The African Growth and Opportunity Act (AGOA)
written by Naana E. Halm
edited by Johann R. Cornielle
review by Kahiga A. Tiagha
An overview:
The African continent has been richly endowed with natural resources. For a long time, however, and some may argue that even till now, there has been little fairness at the negotiating table when it comes to trade, investment and benefits to reach the people of Africa. Over the years, there has been a great increase in the need to create a sustainable socio-economic environment, where wealth is generated not just by the governments but by the individual and small and medium enterprises (SMEs) which are quite numerous on the continent. The need for the creation and sustainability of this environment is regarded to have a direct effect on wealth creation in the region.
In January 2000, the Congress of the United States of America enacted a law entitled the ‘Trade and Development Act’ of 2000. One of its aims was “to authorize a new trade and investment policy for sub-Saharan Africa”.
One of the main benefits of the AGOA regime is to build on existing U.S trade programs. It does this by expanding duty-free and quota-free benefits which were once only made available under the so-called Generalised System of Preferences (GSP) program. Due to this collaboration between the AGOA and GSP programs, there are presently approximately 7,000 product tariff lines, including items such as apparel, footwear, wine, agricultural products and steel. There are currently some 1,835 product lines that have been added under AGOA to the GSP program.
Country eligibility:
Section 104 of the African Growth and Opportunity Act singles out the requirements for a sub-Saharan country to be eligible for the AGOA benefits. An issue to be noted is that the GSP and AGOA eligibility requirements overlap somewhat. It is necessary for a country to be GSP eligible before it can become AGOA eligible. Though GSP eligibility does not automatically translate into AGOA eligibility, the majority of the applicable countries are both GSP and AGOA eligible.
There are six (6) main requirements which a country must meet, including the fact that the beneficiary country must either have established or be in the process of establishing a market-based economy which protects private property rights, eliminates any barriers to U.S trade and investment by way of protecting intellectual property rights and a strong system which fights bribery and corruption. The Act specifically makes mention of the beneficiary countries being signatories of the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, as a way of creating a system that combats bribery and corruption. This Convention was established by the Organisation for Economic Co-operation and Development (OECD) in 1989 but came into force in February 1999. Its purpose was to reduce bribery and corruption in developing countries in order to create a level playing field in international business transactions across the globe.
Rules of Origin:
The main rule to ensure that the beneficiary receives duty-free access to the United States, is that the product/s be the “… growth, product or manufacture…” of an AGOA beneficiary country. This means that the product must be imported directly from the AGOA-beneficiary sub-Saharan country into the U.S. Although the beneficiary country is allowed to source materials incorporated in the items from outside the AGOA member state, there is a strict requirement that the sum of the direct cost/ value of the AGOA produced item and the direct processing costs undertaken in the AGOA country amount to at least 35% of the item’s appraised value at the U.S ports of entry.
There is a further allowance for the item/s to have up to 15% of the incorporated materials of the 35% (as appraised at the U.S ports), originating from the U.S. It is worthwhile to make mention at this juncture, the fact that apparel and textiles are NOT included in the GSP schedule, which AGOA is based on. Instead, AGOA itself provides the beneficiary country with duty-free access to the U.S market for apparel. This is subject to certain rules of origin whose specifications include among others that:
“AGOA-eligible Sub-Saharan African countries wishing to export apparel duty-free into the U.S. under AGOA must first be certified as having complied for the 'Wearing Apparel' provisions. This entails having taken adequate steps to "establish effective product visa systems to prevent illegal transshipment and the use of counterfeit documentation, as well as having instituted required enforcement and verification procedures";
Apparel made in qualifying Sub-Saharan African countries from U.S. fabric, yarn, and thread is provided with duty-free and quota-free access to the U.S. market without limitations. Such apparel may also have been "embroidered or subject to stone-washing, enzyme-washing...screen-printing or other similar processes;
Apparel otherwise eligible for preferential treatment under AGOA shall not be ineligible for the duty-free benefits simply because the article contains certain interlinings of foreign origin, as long as the value of such interlinings (and any findings and trimmings) does not exceed 25 percent of the cost of the components of the assembled apparel article”.
Successes and failures:
AGOA’s goal was to open up the U.S market to selected sub-Saharan countries by expanding the GSP program on certain quota and duty-free products. Though Nigeria and Angola are the largest exporters under AGOA (in the energy sector), countries such as South Africa, has been one of the most diverse exporters under AGOA.
The Act is seen to have provided, thus far, limited successes to the beneficiary countries that are not utilizing it to its fullest potential. As such, technical assistance is being provided to eligible countries by the U.S government through its Agency for International Development (USAID). There have thus been established three (3) regional trade hubs set up in Accra, Ghana; Gaborone, Botswana and Nairobi, Kenya.
Another issue raised about AGOA is that it was formulated in a one—sided manner, not having involved African views etc. in its preparation. Similarly, it has been also said, that AGOA could have a greater impact if the scope of products was expanded to include all products from all African countries, in order to create more export opportunities. For example, complete access to products such as sugar, beef and footwear is not included under AGOA, but could have great potential for African producers if it was added.
In addition, there has been quite a bit of concern for the quality of the products being imported into the U.S. There has been major concern that due to a general lack of proper infrastructure in the beneficiary countries which simply do not have the tools to ensure adherence to the quality standards expected of the U.S market, very little is actually being imported into the U.S.
Irrespective of the successes or failures, as may be viewed by some, of AGOA, the fact remains that this trade agreement between the U.S and the beneficiary countries has as its continued goal, to ease the inclusion of sub-Saharan African goods/products into the U.S market. There are bound to be teething problems and some countries will invariably make better use of it than others. This will all be dependent on the technological and infrastructural advancement of each country. Perhaps it would not be too audacious to suggest that before each of these beneficiary countries is truly able to take full advantage of the Act, certain basic infrastructure must be first put in place, such as industrial tools, especially as there are strict standards to be met before the goods can enter the U.S market. There is a need to produce quality goods, however, with a lack of adequate tools to manufacture the goods to be imported into the U.S, how is it possible to effectively utilise the Act? Majority of sub-Saharan countries are consumer countries and there is often little incentive or desire to manufacture the goods due to a number of reasons, a couple being that there just are not proper industrial tools and there is a lack of skilled labour. Until this problem is resolved, it is unlikely that this Act will ever be utilized to its full potential. Resolving this, it is believed, will aid in the effective implementation and utilization of AGOA.
Trade and Development Act, 2000
The Act was initially signed into law by former President Clinton in May 2000. It was originally signed in to cover a period of eight (8) years running from October, 2000 to September, 2008. However, amendments were later signed into law by then President George Bush in July 2004. The amendments extended AGOA to 2015. Different provisions, such as those relating to garment provisions were also extended to 2012.
There are currently 40 sub-Saharan beneficiary countries of the AGOA regime. The list can be found at: http://www.agoa.info/index.php?view=about&story=country_eligibility
http://www.agoa.info/
19 USC 2462(b)(2) of the GSP Act lays out the eligibility criteria that countries have to meet before they can take advantage of the scheme. Amongst the list of eligibility requirements are that the country must not be a Communist country, is taking steps or has already taken steps to afford internationally recognised worker rights and must eliminate the worst forms of child labour.
The African Growth and Opportunity Act can be found at: http://www.agoa.gov/build/groups/public/@agoa_main/documents/webcontent/agoa_main_002118.pdf
It is in fact the driving force behind the U.S Foreign Corrupt Practices Act, 1977
