Sub-Saharan Africa: An Investable Continent
Despite several initiatives, programs, agreements and bilateral investment treaties established to promote trade and investment between the U.S. and Sub-Saharan Africa, U.S. trade with this region has continued on a downward trend since 2011.
U.S. trade with Sub-Saharan Africa declined from more than $96 billion in 2011 to $36 billion in 2015, and, according to the U.S. Census Bureau’s data for first five months of 2016, total trade is down by 13.01 percent versus same period in 2015.
There exists a variety of trade preferences and programs including the African Growth and Opportunity Act (AGOA) which is a strong driving force for U.S.-Africa trade and investment development. One of the goals of AGOA is to stimulate foreign direct investment in Sub-Saharan Africa and support development of the region by making it an attractive destination for U.S. corporations to establish manufacturing operations.
Sub-Saharan Africa has a population of about a billion people, a fast growing middle class with increasing demand for quality products, and growing demand for improvement in energy, healthcare, transportation and communication networks. With an average of about $20 billion in U.S. exports to the region annually in the last five years, U.S companies have not fully maximized the enormous potential of this emerging market.
What are the contributing factors responsible for the declining trend in U.S.-Africa trade?
While many factors can be attributed to the total trade decline, something more fundamental such as “poor understanding” and “negative perception” about the Sub-Saharan Africa market may be responsible for the U.S. relatively low investment in this market. The level of understanding about opportunities in Africa is significantly low, particularly in North America. The media coverage and discussions around the challenges of poor infrastructure, corruption, governance issues, and poverty have overshadowed the positive developments recorded in Africa.
There are 48 countries in Sub-Saharan Africa, and, while it is true that some countries are still plagued by these challenges, it is not a uniform experience across the region as many countries have witnessed considerable improvements in governance, institutions, macro-economic environment, trade facilitation, economic growth, political and social stability in the last few years.
To dismiss the prevalent misconceptions of Africa within the international community, I will make reference to testimonies of Nouriel Roubini, a foremost American economist who was part of the group of investors on tour of Africa about two years ago, and Rob Hersov, an entrepreneur and founder of Invest Africa who facilitated the tour.
Roubini, on his first visit to Nigeria, said he “had low expectations because usually what you read in the U.S. press about Nigeria is only bad news, violence, terrorism and lots of other bad stuff.”
“I was actually positively surprised,” Roubini added. “Africa has come as a positive surprise and all in all, I think over the last 20 years, the macro framework for many of these frontier economies has improved.”
“I think people perceive a lot more risk in Africa than there really is,” said Hersov. “Africa is open for business in an extraordinary way. People have perceptions of corruption, poverty and chaos, the kind of old-world story of Africa. On the contrary, we have met dynamic business people, extraordinary entrepreneurs, and governments liberalizing and welcoming foreign investment.The entrepreneurial spirit that you find across the continent is second to none and the level of professionalism of the people is world class.”
The emerging markets of Sub-Saharan Africa present a huge trade and investment opportunity for U.S. firms and many of these countries are now more open to trade and foreign direct investment. There is stronger trade infrastructure in the form of regional integration networks that can expand market opportunities for companies operating in the continent. This is the right time for U.S companies to take advantage of the environment.
According to Rob Hersov, in five to ten years, investors who don’t penetrate the market now will look back and regret having missed one of the greatest opportunities of their lifetimes.
Kemi Arosanyin is a trade development specialist for Africa at the World Trade Center Miami.
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