African Trade and Economic Prospects

Good morning. I want to thank you for this opportunity. I envision this gathering as a two-way street, a discussion. I propose to start off with ten minutes or so of formal remarks, then open it up to questions and discussion.

Those of you who saw my brief biography may have noticed I once worked in the Jacksonville, FL, International Relations Commission, which is part of the Jacksonville’s Economic Development Commission. In that position, I promoted Jacksonville business overseas with trade delegations, Sister Cities, tourism in both directions, academic exchanges, and citizen to citizen diplomacy.

I know that much of the creativity now taking place in the world of international relations is happening right here at the local level: in local government, in business, in education, in the arts, and in religious organizations.

Let me say, too, that I have served twice in Mexico, first in Mexico City, and more recently in Tijuana. The San Ysidro border crossing is the busiest in the world. That millions of people, and billions of dollars worth of trade, cross over it yearly is testimony to the importance of international trade to California. Working on the border meant above all working with local government on both sides of the border. The municipalities of San Diego County proved practical partners in every sense of the word, whether police, social service, or economic development. I also had the opportunity to work with Governor Schwarzenegger’s office, which has a special Border Coordinator.

In Tijuana, we also performed another, less heralded service that affects San Jose directly: We renewed work visas. Every day, dozens of foreign professionals came to our consulate in Tijuana to renew visas. They were the world’s best and brightest – information technologists, software designers, physicists, biologists, cinematographers in Hollywood, even screenwriters. They were Indians, Chinese, Britons, Mexicans, Russians, and Israelis. What they shared was a work visa and the knowledge that going to Tijuana was the most convenient way of renewing their visa.

Let me return to Africa. First, Africa continues to be a good news story, especially on the economic front. As I’ve said before, Africa’s #1 obstacle to investment is its own bad image. Too many investors, especially Americans, don’t even think of Africa in the first place as a place to make money. Much of the explanation lies in the media’s coverage of disasters and wars, which make for better television and headlines than increasing wealth and democratic institution building. A good part also lies in our own historical view of Africa as the Dark Continent, chronically undeveloped – not even underdeveloped.

Now I say this precisely at the moment that one of the most successful countries, Kenya, is suffering through a self-made political crisis. My own boss, Assistant Secretary of State for Africa Affairs, Jendayi Frazer, just returned from there to try to encourage a political resolution. It is still too early to say how much damage the violence and anxiety has done to what has been a booming economy growing 5-8 percent per year and fueling a sizable new middle class. How fast Kenya resolves this crisis will be a measure of the strength of its institutions and economy.

But Africa is a bigger place than one country. Sub-Saharan Africa consists of 53 countries. You know the ones that make the news – the bad news: Sudan, Somalia, Zimbabwe, maybe Eastern Congo.

The good news is that much of the continent is doing well. In terms of U.S. policies, our long-term objectives of laying the groundwork for rule of law and economic prosperity are starting to pay off. The record speaks for itself:

· ECONOMIC GROWTH: In 2006, the economy of all sub-Saharan Africa grew by 5.5 percent -- the same rate the world economy grew. Put differently, twenty-three African nations grew at a rate faster than 5 percent. Only one – Zimbabwe – failed to grow at all.

· TRADE: Two-way trade between the U.S and Africa has risen from $29 billion in 2000 to over $71 billion last year. In just one year, 2005-6, U.S. exports to sub-Saharan Africa rose by 17 percent (to $12 billion). Imports from Africa also rose by 17 percent (to $59.2 billion).

· AGOA: These figures didn’t happen by chance. The African Growth and Opportunity Act – AGOA, -- has helped jump-start the rise in bilateral trade. AGOA – originally a Clinton Administration initiative -- has become the cornerstone of our trade and investment policy in Africa. It was and is a great idea that has worked.

· AGOA is designed on purpose to benefit responsive and responsible partners in Africa. That is why eligibility in AGOA requires a commitment to economic openness, transparent and democratic government, human rights, and poverty reduction. 38 countries have so far qualified. Put differently, 98% of goods arriving in the U.S. from AGOA-eligible countries enter duty-free.

· The Africa Global Competitiveness Initiative (AGCI) is expected to provide $200 million of additional resources from FY 2006 to FY 2010 to expand African trade with the United States under AGOA, as well as other international and regional trading partners within Africa to promote the export competitiveness of African countries.

· MCC: A revolutionary concept in foreign assistance - the Millennium Challenge Corporation - that rewards countries that are doing things right. MCC has compacts worth $2.4 billion in such countries as Ghana, Cape Verde, Benin, Lesotho, Mali, Madagascar, and Mozambique, countries that stay out of the news exactly because there are no disasters or wars.

· MCC requires that African governments – not Americans – must come up with ideas, a change in our way of doing development. MCC has signed compacts totaling $2.4 billion with Ghana, Cape Verde, Benin, Lesotho, Mali, Madagascar, and Mozambique. MCC requires that African governments – not the U.S. government – come up with ideas. Once again, we seek a partnership of equals, American and Africa, where Africans take ownership and responsibility.

· AFSI: The new African Financial Sector Initiative (AFSI). This initiative will establish new private equity funds for businesses with a high developmental impact such as water, healthcare, small business, and education. AFSI also will provide training to banking regulators and help build up payment systems and credit bureaus.

· PEPFAR: We have taken on Africa’s most daunting health challenges. The President’s Emergency Plan for AIDS Relief (PEPFAR) was launched in 2003 as a five-year, 15 billion dollar program to combat HIV/AIDS in 15 countries, 12 of them in sub-Saharan Africa. A few months ago, President Bush doubled this commitment to $30 billion over ten years.

· PMI: In 2005, President Bush launched the President’s Malaria Initiative (PMI), promising to fight Africa’s Number #1 killer with $1.2 billion over five years. In that first year alone in Angola, to cite one example, PMI helped increased the number of children protected by nets from less than 5 percent to 70 percent.

IV. CHALLENGES OF INVESTING IN AFRICA

This Administration has quadrupled development assistance to Africa, from $1.4 billion in 2001 to $5.6 billion in 2006. U.S foreign aid spending in Africa has increased at a faster rate and at a pace higher than any since the days of the Marshall Plan after World War II.

This is all good news, too, but don’t let me sugarcoat reality. You know all too well the practical challenges of operating in a difficult environment.

The challenges are immense.

Nearly 12 percent of the world’s population lives in sub-Saharan Africa, yet the region accounts for less than 2 percent of world economic output.

Electricity is scarce. The region generates about 4 percent of global electricity, and much of that is in South Africa. There is a desperate need for more power stations, a crucial basis for economic growth.

The continent remains heavily dependent on hydropower. Overall, 13 countries use it for 60 percent or more of their energy needs.

The West Africa Gas Pipeline, which will carry gas from Nigeria to Benin, Togo, and Ghana, could offer a stabilizing alternative. Windmills, water mills, solar, and biomass all could make a difference.

Finally, corruption is a paralyzing reality that has to be dealt with. It hinders economic growth and breaks down rule of law. It also makes it possible for illegal drug smuggling to flourish in some countries, Guinea Bissau, Ghana, and Nigeria among them.

Let tell you an open secret, for those who bother to listen to knowledgeable Africans. American business not only is desired around the continent, it is sometimes even preferred.

It is preferred precisely because we are not viewed as playing politics and playing favorites. Americans have the good reputation for doing business fairly, openly, and sticking by their contracts. I’ve witnessed this personally in several difficult environments, Guinea and Angola. In Guinea, an American bauxite consortium lead by Alcoa has decades of experience that have made Guinea a major exporter of bauxite to the U.S. – through Morehead City, NC.

Another area that private investors have faced is the notion of “social responsibility,” basically funding community projects as a cost of doing business. You could argue that this is a form of corruption, as well, though we tend to subsume it into the area of public relations.

We in the U.S. Government view social responsibility as an opportunity and have encouraged the notional of “public-private” partnerships.

The Department of State takes the notion of corporate responsibility seriously. In fact, ever since 1999, the Secretary of State has recognized American firms for exemplary business practices, innovation, and good corporate citizenship in their overseas operations through the Secretary's Award for Corporate Excellence program.

One of this year’s winners is the Transnational Automotive Group in Cameroon (TAUG). TAUG won the award in the small-medium sized category for its work providing safe, affordable transportation (mostly busses), and thereby improving the quality of life in Cameroon. It is now starting up similar operations in Ethiopia and Mozambique.

CONCLUSION

I hope that these comments provoke a good look at Africa.

Africa is an exciting place for business now. It is truly a frontier awaiting those with vision. I haven’t even begun to talk about the thriving stock markets, the growing middle class, and the economic locomotive of modern, democratic South Africa. I hope that at least I have stimulate you to find out about these stories, and perhaps even to go to Africa yourselves, especially as business people.

San Jose at first glance is not the obvious place to look for trade connections. Houston and Atlanta have a big head start on you.

I encourage you to consider Department of Commerce trade missions -- there’s one scheduled for March 3-11 to Ghana, Nigeria, and South Africa. It will look at a variety of sectors, including energy, health care, telecommunications, and information technology. It’s now past the deadline, but it won’t be the last delegation.

Let me note too that San Jose’s powerful international connections make it a natural candidate for more engagement with Africa. Already, San Jose State has a program for outreach to libraries around the continent.

Please consider the State Department as a potential partner. I don’t mean this simply as a courtesy. While Commerce is the U.S. Government’s lead agency on export promotion, the reality in Africa is that in most countries, State officers are your points of contact on the ground in our embassies. Consider them your partners. I personally am happy to help you begin this process.

Thanks you again.