WP: US Business Expanding in Africa
With Africa’s Private Sector on the Rise, U.S. Businesses Seek to Expand Their Presence
When officials representing about 200 U.S. and African companies and business organizations gathered in the District on Tuesday for a historic business forum, leaders in the extractive sectors — the mining, oil, and gas industries for which African economies are best known — were all there. But so, too, were private equity fund Carlyle, retail giant Wal-Mart, the Wal-Mart-owned South African retailer Massmart, and upstart Nigerian telecommunications company SOLO Phone — all signs, analysts said, of the dramatic expansion of the continent’s consumer economies in recent years. “It’s a bit of an outdated perception to think of Africa as a continent of value for natural resources because now it’s of value for human resources,” said Witney Schneidman, a senior international adviser for Africa at Covington and Burling.
Hoping in part to expand U.S. business presence in African markets, the Obama administration is hosting a three-day summit this week attended by nearly 50 African heads of state, the first gathering of its kind. On Tuesday morning, former president Bill Clinton moderated a discussion panel among the chief executives of Wal-Mart, General Electric, Dow, the Nigeria-based industrial conglomerate Dangote Group and the South African investment holding company Shanduka Group. The star-studded panelists sounded notes of optimism about the economic potential of closer partnership between U.S. and African businesses. “I’m excited about Africa,” Wal-Mart chief executive Doug McMillion said at the panel. “For us, it’s a long-term proposition. We invested $2.6 billion in 2011, and that’s just the beginning.”
Fueled by the consumption demands of a growing young middle-class, the African private sector is, unevenly yet surely, on the rise. Economic growth in Sub-Saharan Africa is expected to increase 5.2 percent this year, with some African nations showing even more buoyant growth, according to the World Bank. The region’s strong economic performance is attracting attention, particularly from foreign companies based in markets that are still recovering from the effects of the recession. Foreign investment in Africa’s economies is expected to grow to a record $80 billion in 2014, according to a report issued by the African Development Bank and two other groups in May.
Toby Moffett, a senior adviser at Mayer Brown who has represented African governments and companies, said these impressive growth numbers are already influencing the behavior of foreign companies that might have previously avoided investment in the continent for fear of risk. “Double-digit growth ultimately will be irresistible because they’re not going to find it anywhere else,” said Moffett, who is also a former Democratic congressman from Connecticut.
In recent years, China has arguably become the most formidable of these foreign players. Although the United States is still the leader in foreign direct investment in African economies, China surpassed the United States as Africa’s biggest trading partner in 2009. Trade between China and African countries topped $200 billion in 2013, Chinese President Xi Jinping said in February. In comparison, the total trade between Africa and the United States has grown more slowly. It reached about $100 billion in 2013, not including imported services, according to figures provided by the International Trade Administration at the U.S. Commerce Department.
At Tuesday’s panel, there was a sense that the United States was a latecomer to the party. “It strikes me that we’ve only barely scratched the surface of what we could and should be doing there and that we’re missing the boat,” Clinton said. “We should understand this is a massive opportunity for American business.” Before this week’s summit, the Obama administration has taken tentative steps to encourage U.S. business presence in Africa. Last summer, President Obama spoke at a forum of business leaders in Dar es Salaam, Tanzania, during a trip to Africa. And in April, Commerce Secretary Penny Pritzker more than doubled the size of her department’s presence in Africa, bringing Commerce’s African offices to a total of eight countries.
But that step seemed insignificant in comparison with China, which has commercial attaches in 54 countries in Africa. “The U.S. business footprint in Africa is small, no doubt about it,” Schneidman said. The Obama administration has repeatedly denied that the summit is intended to give U.S. business interests a leg up against their Chinese competition in Africa. But Ben Rhodes, the deputy national security adviser for strategic communications, said in a conference call last Thursday that the U.S. government thinks it brings “something unique to the table.”
“We are less focused on resources from Africa and more focused on deepening trade and investment relationships,” Rhodes said. Dara Owoyemi, the chief operating officer of African Private Equity and Venture Capital Association, a group that works to promote investment in the continent’s economies, said in a phone interview Monday she was hopeful about the economic possibilities that could result from the summit. “The Chinese have been very aggressive over the past couple of years,” Owoyemi said. “America really needs to do a lot more to promote relations.”
But at Tuesday’s panel, GE chief executive Jeffrey Immelt said that historic relationship was ready for change. On Monday, the first day of the summit, GE announced that it would invest $2 billion in Africa by 2018 to spur the development of infrastructure, human resources and energy projects. “We kind of gave Africa to the Europeans first and to the Chinese later, but today it’s wide open for us,” Immelt said.
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