Expanding United States-Africa Economic Relations. The past several decades have laid witness to tremendous economic progress in Africa.

Transcription

1 1 Alex Hasapidis September 1, 2014 United States Department of Commerce John Brademas Center for the Study of Congress Expanding United States-Africa Economic Relations The past several decades have laid witness to tremendous economic progress in Africa. The reasons for these changes are myriad improved political stability in a number of countries; increased public investment in infrastructure; and the rapid proliferation of technology, specifically, cell phones. The results of this transformation are apparent: throughout Africa, real income has increased more than 30 percent over the last 10 years, halting two decades of decline. According to the World Bank, almost half of Africa s countries have attained middle-income status. GDP is expected to increase an average of six percent per year over the next decade. This tremendous growth and economic renewal has resulted in Africa becoming home to seven of the ten fastest growing economic in the world. 1 Despite ongoing problems in many African nations including the HIV/AIDS epidemic, political strife, and corruption, among others Africa s strides towards a more prosperous and stable future have not gone unnoticed outside of the continent. Ambassador Liu Jieyi, Permanent Representative of China to the United Nations, acknowledged Africa as an important driving force for global economic growth; 2 this past June, Secretary-General Ban Ki-Moon recognized 1 Pritzker, Penny. "Remarks on Africa Trade Mission Announcing U.S.-Africa Business Forum." Remarks As Prepared for Delivery by Secretary Pritzker in Nigeria. Nigeria. 21 May Web. 2 Jieyi, Liu. "Statement by Ambassador Liu Jieyi, Permanent Representative of China to the United Nations at the High-level Thematic Debate of the UN General Assembly on "Promotion of Investment in Africa in Achieving Africa's Development Objectives"" High-level Thematic Debate of the UN General Assembly on "Promotion of Investment in Africa in Achieving Africa's Development Objectives" 10 Aug Web.

2 2 Africa s stability, economic growth and continued progress; 3 and in June 2013, on a trip to Tanzania, President Obama called Africa the world s next major economic success story. 4 In short, Africa is increasingly becoming what many have called the world s last economic frontier. 5 That is why Africa represents an outstanding exporting and investment opportunity for the United States. Already, 250,000 American jobs 6 are supported by exports to Africa a number that stands to grow as Africa s thriving energy, agriculture, banking, and mining industries continue to expand. 7 However, in 2013, American imports from Africa totaled $50.2 billion 8 representing only 2% of all American-manufactured exports 9 demonstrating that many American businesses have yet to take advantage of the economic opportunity offered by this continent. America cannot afford to remain detached from Africa s economic future. In order to remain globally competitive and to spur business expansion at home, the United States must do more to encourage American businesses to look across the Atlantic for their next customer. Economic success in African nations as exemplified by Nigeria and South Africa and bolstered by the United States public and private sectors has the potential to transform the international economy and secure the Untied States and Africa s futures for years to come. 3 Ki-Moon, Ban. "Malabo, Equatorial Guinea, 26 June Secretary-General s Remarks at the African Union Summit in Malabo." African Union Summit. Malabo. 26 June Web. 4 Obama, Barack. "Remarks by President Obama at Business Leaders Forum." Business Leaders Forum. Dar Es Salaam. 1 July Web. 5 "Africa as the Last Frontier: Why It Matters in the Global Economy." The Wilson Center. N.p., 15 Aug Web. < 6 Pritzker, Penny. "U.S. Secretary of Commerce Penny Pritzker Delivers Remarks at U.S.-Africa Business Forum." U.S.-Africa Business Forum. Washington, DC. 5 Aug Web. 7 Gaibi, Zakir, Andrew Maske, and Moraje Suraj. "Africa's Path to Growth: Sector by Sector." McKinsey & Company. N.p., June Web. < 8 "The U.S. Partnerships and Initiatives Spurring Economic Growth in Africa." U.S. Department of Commerce, 29 July Web. < 9 Bloomberg, Mike. "Mike Bloomberg Opening Remarks." U.S.-Africa Business Forum. Washington, DC. 5 Aug Web.

3 3 Nigeria has become one of Africa s greatest success stories, despite decades of civil unrest and turmoil. In 2014, Nigeria surpassed South Africa as Africa s largest economy, with a GDP valued at $510 billion, far outstripping that of South Africa s, valued at $370 billion. 10 This reversal of fortune for Nigeria been driven by Nigeria s enormous population (63.1% of which is under the age of 25), the deep penetration of mobile phones among the populace, 11 its success in fashioning itself as Africa s foremost technology hub, and the remarkable growth of its oil industry. 12 Key to these trends have been Nigeria s rapidly expanding base of consumers, currently figured at 40 million, and expected to grow to 160 million. 13 The Nigerian government has certainly played a role in cultivating this vibrant economy: financial reforms have consolidated banks, making the country a destination for foreign capital, and tremendous investment in public infrastructure has made doing business easier. A number of other initiatives targeting key industries have catalyzed innovation and set important goals for the country as a whole. 14 However, this is not to say that the Nigerian government has maximized its efforts in bolstering economic growth. According to a report issued by the McKinsey Global Institute, in order to improve its occasionally lethargic government, Nigeria must empower capable leaders, prioritize programs, intensify pressure to perform, use delivery units, build critical capabilities, and leverage external stakeholders. Executing on these goals 10 "Africa's New Number One." The Economist, 12 Apr Web. < 11 "Nigeria Rising: Inside Africa's Cradle of Innovation." Meet the Innovators: Nigeria. N.p., n.d. Web. < 12 "Africa's New Number One." The Economist, 12 Apr Web. < 13 Leke, Acha, Reinaldo Fiorini, Richard Dobbs, Fraser Thompson, Aliyu Suleiman, and David Wright. Nigeria s Renewal: Delivering Inclusive Growth in Africa s Largest Economy. Rep. McKinsey Global Institute, July Web. 14 Gaibi, Zakir, Andrew Maske, and Moraje Suraj. "Africa's Path to Growth: Sector by Sector." McKinsey & Company. N.p., June Web. <

4 4 will continue to be difficult as long as poverty remains rampant (nearly 130 million people live below the poverty line in Nigeria) 15 and as terrorist organizations, such as Boko Harem, remain empowered in large swaths of the country. South Africa, once Africa s economic giant, faces a different set of challenges. Nearly 25% of South Africa s population is unemployed, including 65% of its youth, severely affecting productivity in the automotive and agricultural sectors. While the unrest that first marked such high unemployment rates has abated, other issues in South Africa remain, including high household debt and inflation. That is not to say that South Africa is no longer a vital economic power in the region. Since it began working to overcome its own checkered past twenty years ago, South Africa has become an assembly hub for the African automotive industry and a global force in mining. Further, South Africa has become home to the most advanced retail and financial sectors on the continent; yet another sign of South Africa s promise. 16 Recognizing this opportunity, between 2001 and 2012, the United States foreign direct investment (FDI) in South Africa increased 14 percent to $31 billion, 17 and as of 2012, the goods and services trade with South Africa stands at $21 billion; thereby demonstrating the penetration by some United States businesses of the South African market Leke, Acha, Reinaldo Fiorini, Richard Dobbs, Fraser Thompson, Aliyu Suleiman, and David Wright. Nigeria s Renewal: Delivering Inclusive Growth in Africa s Largest Economy. Rep. McKinsey Global Institute, July Web. 16 "South Africa Economic Outlook." African Development Bank. N.p., n.d. Web. < 17 Copley, Amy, Fenohasina Maret-Rakotondrazaka, and Amadou Sy. "The U.S.-Africa Leaders Summit: A Focus on Foreign Direct Investment." The Brookings Institution, 11 July Web. < 18 "South Africa." Office of the United States Trade Representative, 7 May Web. <

5 5 Recognizing the promise and problems of Africa s many nations, the Obama Administration has committed great resources and time towards fostering their growth and deepening economic ties with the United States. That is why President Obama released the U.S. Strategy Toward Sub-Saharan Africa, a policy strategy that addresses the long-term opportunities and challenges facing Africa. Specifically, the Strategy will aim to, according to the Department of Commerce, strengthen democratic institutions; spur economic growth, trade, and investment; and advance peace and security. As part of the Strategy, the U.S. Department of Commerce ( Commerce ) initiated the Doing Business in Africa Campaign, which has assisted American businesses in taking advantage of the many export and investment opportunities in sub-saharan Africa by expanding trade programs tailored toward Africa, in addition to creating a dedicated online business portal directing businesses to federal resources that will assist them in doing business in Africa. The Doing Business in Africa Campaign is echoed by another initiative, Trade Africa. Trade Africa, a partnership between the United States and East African Community (EAC) an organization composed of Burundi, Kenya, Rwanda, Tanzania, and Uganda has the stated goal to, according to the Department of Commerce, increase exports from the EAC to the United States by 40 percent, reduce the average time needed to import or export a container from African ports by 15 percent, and decrease by 30 percent the average time a truck takes to transit certain borders. Lack of access to electricity in Africa is a widespread problem in Africa. To address this problem, President Obama started Power Africa an initiative that has catalyzed investment in energy solutions to assist African nations in providing reliable electricity and power to their citizens. In pursuit of this commitment, the United States has committed $7 billion toward Power

6 6 Africa, and additional private sector commitments have amounted to $14 billion. Already, Power Africa has secured transactions totaling nearly 3,000 megawatts, and an additional 5,000 megawatts are being planned. As the Department of Commerce is executing many of these initiatives, Commerce will expand its human resources footprint in Africa. Recently, U.S. Secretary of Commerce Penny Pritzker announced the opening of new United States Commercial Service (USCS) offices across the continent (the USCS helps United States businesses begin exporting or increase sales to global markets). The Department of Commerce hopes to help United States businesses expand their businesses abroad and create jobs in Africa by expanding the USCS s presence in Ghana, Kenya, Morocco, and Libya, and opening offices in Angola, Tanzania, Ethiopia, and Mozambique. 19 Finally, to further the U.S.-Africa economic relationship, the Commerce Department and Bloomberg Philanthropies hosted the U.S.-Africa Business Forum, an event that sought to bring together private and public sector leaders to, as said by former New York City Mayor Michael Bloomberg: recast our relationship as a full, equal, and advanced economic partnership a partnership that holds as much promise for African countries as it does for America. 20 In discussing Americans misperceptions concerning African markets, including those of Nigeria and South Africa, Mayor Bloomberg astutely observed that in America, there is a disconnect between the reality of the African market and the perception of the African market 19 "The U.S. Partnerships and Initiatives Spurring Economic Growth in Africa." U.S. Department of Commerce, 29 July Web. < 20 Bloomberg, Mike. "Mike Bloomberg Opening Remarks." U.S.-Africa Business Forum. Washington, DC. 5 Aug Web.

7 7 countries and companies that ignore the African market do so at their own peril. 21 In short, as Secretary Pritzker explained at the Forum: the time to do business in Africa is no longer five years away. The time to do business there is now. 22 In the future, these misconceptions of the continent as largely poor, uneducated, and unstable may be the greatest obstacle to Africa s continued successes. These perceptions, as noted by Mayor Bloomberg, have had a major impact on business and investor s willingness to invest their economic futures in Africa. Eliminating these perceptions will require not only that awareness is raised widely among businesses and investors, but also that African nations continue along the path of reform and modernization. At the U.S.-Africa Business Forum, President Obama announced that the Forum catalyzed nearly $33 billion in commitments from governments and businesses across the Atlantic. 23 This is undoubtedly a staggering figure more than the GDP of some African countries which signals growing interest in Africa in the public and private sectors. But for Africa to unlock its full potential, the American public sector and private sector must continue to uphold their commitments to the continent. If the United States wishes to benefit and invest in Africa s rise, then businesses can no longer afford to wait on the sidelines. They must get involved, or risk being left behind. Works Cited 21 Bloomberg, Mike. "Mike Bloomberg Opening Remarks." U.S.-Africa Business Forum. Washington, DC. 5 Aug Web. 22 Pritzker, Penny. "U.S. Secretary of Commerce Penny Pritzker Delivers Remarks at U.S.-Africa Business Forum." U.S.-Africa Business Forum. Washington, DC. 5 Aug Web. 23 The White House. Office of the Press Secretary. FACT SHEET: The Doing Business in Africa Campaign. N.p., 5 Aug Web. <

8 8 "Africa as the Last Frontier: Why It Matters in the Global Economy." The Wilson Center. 15 Aug Web. < "Africa's New Number One." The Economist, 12 Apr Web. < Bloomberg, Mike. "Mike Bloomberg Opening Remarks." U.S.-Africa Business Forum. Washington, DC. 5 Aug Web. Copley, Amy, Fenohasina Maret-Rakotondrazaka, and Amadou Sy. "The U.S.-Africa Leaders Summit: A Focus on Foreign Direct Investment." The Brookings Institution, 11 July Web. < foreign-direct-investment-us-africa-leaders-summit>. Gaibi, Zakir, Andrew Maske, and Moraje Suraj. "Africa's Path to Growth: Sector by Sector." McKinsey & Company. June Web. < _by_sector>. Jieyi, Liu. "Statement by Ambassador Liu Jieyi, Permanent Representative of China to the United Nations at the High-level Thematic Debate of the UN General Assembly on "Promotion of Investment in Africa in Achieving Africa's Development Objectives"" High-level Thematic Debate of the UN General Assembly on "Promotion of Investment in Africa in Achieving Africa's Development Objectives" 10 Aug Web.

9 9 Ki-Moon, Ban. "Malabo, Equatorial Guinea, 26 June Secretary-General s Remarks at the African Union Summit in Malabo." African Union Summit. Malabo. 26 June Web. Leke, Acha, Reinaldo Fiorini, Richard Dobbs, Fraser Thompson, Aliyu Suleiman, and David Wright. Nigeria s Renewal: Delivering Inclusive Growth in Africa s Largest Economy. Rep. McKinsey Global Institute, July Web. "Nigeria Rising: Inside Africa's Cradle of Innovation." Meet the Innovators: Nigeria. Web. < Obama, Barack. "Remarks by President Obama at Business Leaders Forum." Business Leaders Forum. Dar Es Salaam. 1 July Web. Pritzker, Penny. "Remarks on Africa Trade Mission Announcing U.S.-Africa Business Forum." Remarks As Prepared for Delivery by Secretary Pritzker in Nigeria. Nigeria. 21 May Web. Pritzker, Penny. "U.S. Secretary of Commerce Penny Pritzker Delivers Remarks at U.S.-Africa Business Forum." U.S.-Africa Business Forum. Washington, DC. 5 Aug Web. "South Africa Economic Outlook." African Development Bank. Web. < "South Africa." Office of the United States Trade Representative, 7 May Web. < "The U.S. Partnerships and Initiatives Spurring Economic Growth in Africa." U.S. Department of Commerce, 29 July Web. <

10 10 The White House. Office of the Press Secretary. FACT SHEET: The Doing Business in Africa Campaign. 5 Aug Web. <