Recently, Senator Dick Durbin (Democrat-Illinois), Chris Smith (Republican-New Jersey) and Bobby Rush (Democrat-Illinois) introduced “The Increasing American Jobs through Greater Exports to Africa Act.” This proposed act seeks to increase trade and investment between the U.S. and Africa.
The legislation, which calls on the Obama Administration to develop a comprehensive strategy for enhancing U.S. exports and investments in Africa, would triple US exports to Africa to $63 billion over the next ten years. This legislation could create an estimated 315,000 jobs in the U.S.
According to experts, this new act, if passed, will enhance a law signed by President Clinton in 2000, called the African Growth and Opportunity Act (AGOA), which was intended to contribute to poverty reduction in Africa by promoting light manufacturing and trade with the U.S. Under the legislation, which was strengthened thrice by President George W. Bush, 40 African countries are eligible to export up to 6,500 products to the U.S. duty- and quota-free.
“The African Growth and Opportunity Act (AGOA) that was signed into law by the U.S. Senate in 2000 offers tangible incentives for African countries to open their economies and build free markets. The trade activities between the two continents have grown during the last 12 years and there are still more opportunities for improvement, before the U.S. can be viewed as a major or super player in Africa from a trade perspective. U.S. companies should leverage all the various government initiatives in place to expand their markets into Africa,” Josiah Osibodu, president of Osibodu & Associates Exporting USA, LLC based in Tampa, FL., points out. “In addition, U.S. companies should learn to operate more outside their comfort zone, similar to their Chinese, Brazilian and Japanese counterparts. Africa is generating waves of fast-growing economies and U.S. companies should also be riding these waves.”
Through AGOA, according to reports, two-way trade with Africa has more than doubled to U.S. $73 billion and Africa’s non-energy exports to the U.S. Still many other countries are doing even greater volumes of trade with Africa, particularly China. China´s two-way trade with Africa increased from $10 billion in 2000 to $160 billion in 2011. Other governments have also revved up trade with the Continent of Africa, including Brazil, India, Turkey, Russia and Iran as well as the European Union.
“Today the U.S. is significantly behind China in investments and trade to Africa. Several BRIC countries—Brazil and China—have had growth slow recently. During the recent recession, Africa continued to grow while the rest of the world was affected. Africa continues to be one of the world’s fastest growing economies and U.S. companies can benefit from that continued growth,” says Sam Divine, Jr. CEO of Cross Atlantic Business Advisors, an international business consulting firm that helps companies do business in new markets including Africa.
“China sells affordable consumer goods, its construction firms build faster and cheaper than anyone and it asks no questions. Brazil has an agriculture sector built for Africa, and especially as regards Portuguese speaking countries, a natural advantage. The U.S- has some advantages in anglophone West Africa, from which a large diaspora has emerged in metro New York, Maryland/DC and Houston and which is highly educated and very entrepreneurial,” says Joel Patenaude, managing partner at J2 Partners Inc., who has worked in financial services in Nigeria since 2009 and in the building materials industry in Ghana since 1998.
The push for America to increase its trade with Africa, will be beneficial to both parties. “First, Africa’s middle class of 300M continues to grow. Projections by the African Development Bank points to the middle class growing to as much as 1B in 40-50 years,” says Divine, author of Battlegrounds to Boardrooms: Life Lessons from the Liberian Civil War to Corporate America. “Secondly, democracy is further on the rise. Recently in West Africa, regional leaders have stood together against coup leaders. Third, a significant percentage of African citizens are under 15. That means building your brands locally will give you significant first-mover advantages.”
Adds Patenaude, who is leading a University funded research project that examines how travelers arrange their finances as they move along the west African coast between Ghana, Togo, Benin and Nigeria., “Africa’s rising middle class provide new markets and U.S. companies, like any, must pay attention to capitalize. In order to best harness the potential for growth, there should be both investment in Africa and a reduction in anti-competitive trade policies, such as the duties on African cotton entering U.S. markets. What’s needed is a somewhat-more-level playing field, especially considering the poor productive capacities of most of these markets.”
There are several ways for the U.S. to engage Africa, say experts. “One way to engage more in Africa is to provide incentives to businesses that invest in Africa. It has been helpful to see Yum Brands and Wal-Mart making strides in Africa in addition to Coca-Cola which has been on the continent forever,” notes Divine. Trade, of course, say experts should increase. “One way for the U.S. to engage more in Africa is by increasing trade activities. The continent provides a significantly large market for various U.S. products (i.e. goods and services). For example, Nigeria the most populous African country with over 160 million people, is definitely a market the U.S. can’t ignore. Trading with new and emerging markets in Africa will contribute to the National Export Initiative (NEI) to double U.S. exports by the end of 2014. In summary, more trade and less aid, is a good way for the U.S. to engage more in Africa,” says Osibodu.
And some observers add that America’s charity work on the Continent has helped pave the way for future business partnerships. “The U.S. has tremendous goodwill in Africa. U.S. companies are welcome in many parts of Africa. Much of Africa is plagued with high unemployment and are also concerned that current partners are strictly focused on extraction and not win/win solutions,” says Divine. “If U.S. companies enter and can gain growth but also provide jobs that help take more people into the African middle class, they will be able to create their own niche.”
Osibodu agrees. “The U.S. has and continues to be the largest donor or provider of foreign aid to African countries, especially through organizations such as the World Bank, United Nations and African Development Bank. With this in mind, it is definitely a good move for the U.S. to be a more active business partner especially since they’ve invested (and continue to invest) in the development of the continent,” he explains.
There are many yet to be explored opportunities in Africa. “Africa has a fast-growing youth population (the youth boom) that is interested in not only strengthening their own communities and the continent, but doing business with companies and entrepreneurs internationally. Plus, there is a need for more Internet access, which provides a great opportunity for the U.S. to become involved in that development. There are huge opportunities in the USA supporting Africa’s entrepreneurship development, university and business incubator partnerships and development, as well as hi tech initiatives,” says Merri Christi Pemberton, editor GC Style Quarterly Magazine, which covers Global Business News.
The future for the U.S. and Africa business relations is bright—if America acts now, says Osibodu. “If China, Brazil and Japan can become major players, then the U.S. has the opportunity to become a “super” player in Africa,” he stresses.