Thank you for this opportunity. My regular job is to serve as a spokesman for U.S.-Africa policy. But let me step out of that role to do something a bit different – to be a spokesman for Africa.
I want to make two general points. First, that Africa’s primary investment obstacle is its bad image. If you get beyond preconceived notions and look at the facts, Africa is a good news story for investors. Second, that American companies and investors can and are succeeding in Africa while maintaining ethical standards; indeed, it is those very standards, sometimes called “doing business American-style,” that have helped make Americans favored partners in Africa.
II. IMAGE AND REALITY: BAD IMAGE KEEPS INVESTORS AWAY
Problem #1 blocking investment in Africa is its bad image. I may be preaching to the proverbial choir here, but the problem is serious. There’s a worldwide image of Africa that doesn’t match up with reality. That image is based on mass media stories of warfare, human calamity, natural disasters, and chronic political instability. But it goes beyond media sensationalism.
It is based on longstanding Western images of a primitive dark continent reflected in an entire genre of “B grade” Hollywood movies about the white man in Africa, starting with Tarzan; the 19th century expeditions of two white men, Stanley and Livingston, whose diaries turned into a media frenzy in its time; and an unstated anxiety in the white American consciousness about the place of the African American.
It is an image that is simply wrong.
Yet, a potential investor must think positively about a place before even considering it seriously. That’s the biggest obstacle to Africa today. Get beyond the out of date bad image, and there’s a good news story that’s still waiting to be told.
- 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, 2005-2006, 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).
III. CHALLENGES OF INVESTING IN AFRICA
This is all good news. But I don’t mean to sugarcoat the challenge of operating in Africa.
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. 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.
IV. BUSINESS ETHICS AND CORPORATE RESPONSIBILITY IN AFRICA
Corruption, of course, leads us to the question of business ethics,
The truth is that corruption and its many permutations runs rampant in numerous African countries. The truth is also that many non-American investors accept this as a cost of doing business in Africa, and are not hamstringed (as many would see it) by a Foreign Corrupt Practices Act… The old song is that Europeans, Brazilians, and more recently Indians and Chinese know how to do business in Africa, and Americans don’t. That’s code for corruption.
Yet, in Ghana, Kenya, Cameroon, and across Southern Africa governments are facing up to corruption, and understand its costs.
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 two of the more 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.
In Angola, it’s the oil sector. Chevron-Texaco, the largest single foreign company active there has a relationship that goes back to the colonial era. Some of you possibly know of the story back in the 1980s about what was then the Gulf Oil operation being protected by Cuban troops against American-armed UNITA rebels. Gulf Oil, now Chevron-Texaco, stuck by the terms of its agreement with the Angolan government through thick and thin. Today, Angolan view Chevron as vehicle of learning of how to do business.
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.
Take water, for instance; the lack of clean water is a major health challenge.
A new alliance will work with 10 sub-Saharan nations to bring the benefits of clean drinking water to up to 10 million people by 2010. I would like to note that this program is being funded through a public-private partnership between the United States Government, PlayPumps International, the Case Foundation, and other public and private sector partners.
The Global Development Alliance represents their commitment to change the way assistance programs are implemented.
This relatively new approach grew out of the recognition that the funding landscape has evolved. In the 1970s, 70 percent of funding from the United States to the developing world was official development assistance, and 30 percent of funds were private. Today, 85 percent of resources that this country sends to the developing world are private, and only 15 percent is public money.
In Angola, for example, USAID has formed a number of productive relationships with private actors. Oil giant Chevron is collaborating with USAID on a municipal development program and an agricultural development and finance program. These projects build on earlier efforts to help Angolans displaced by their civil war return to their homes and either resume farming or take advantage of loans from a new bank geared toward lending to micro, small, and medium sized enterprises.
ExxonMobil is working with USAID to reduce malaria deaths in Angola by 50 percent in the next three years. Over 100,000 houses were sprayed earlier this year to keep mosquitoes at bay, and together with the Ministry of Health and other donors, Exxon recently distributed nearly 900,000 insecticide-treated mosquito nets to young children in conjunction with a measles immunization campaign.
Diamond company Lazare Kaplan International has partnered with USAID to support an expansion of the Municipal Development Program to one of Angola's more remote provinces, and Coca-Cola has contributed money to introduce the Junior Achievement program to Angola's students. This is an incredible record of achievement. Every one of these programs is producing real benefits for the people of Africa.
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.
V. CONCLUSION
Let me repeat my two major points: First, we have to get beyond the bad image to the reality that Africa is a good news opportunity for business. Second, that Americans can and are succeeding without compromising ethics.
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 stimulated you to find out about these stories, and perhaps even to go to Africa yourselves, especially as business people.
I want to thank you again for inviting me to participate in this conference. This is an exciting time be working on Africa policy.
Thank you.
