US investors slow to tap African potential
IGNORE Africa at your peril. That was the warning from political and business leaders who attended the second US-Africa Business Forum in New York on Wednesday and dismissed an economic slowdown in the world’s poorest continent as a temporary blip. They highlighted the potential of its expanding middle class, untapped mineral riches and uncultivated arable land.
US President Barack Obama’s administration has reinforced the vision of an Africa on the rise, spearheading a programme to more than double access to power and extending a preferential trade accord by a decade.
The message does not appear to be getting through to many US companies. Sub-Saharan Africa accounted for just 1 percent of total US trade last year. While the numbers look a little better from the region’s perspective – 5.6 percent of its trade was with the US – that’s dwarfed by China, which made up 19.4 percent.
“We want Africa as a booming, growing, thriving market,” Obama told the forum. “We are making progress, but we are just scratching the surface. The fact is that despite significant growth, Africa’s entire gross domestic product (GDP) is just about the GDP of France. There is still so much untapped potential.”
Investor sentiment toward Africa has soured following the end of a commodities boom that had underpinned a two-decade growth surge. In July, the International Monetary Fund forecast that sub-Saharan Africa’s economy
Investor sentiment toward Africa has soured following the end of a commodities boom.
would expand just 1.6 percent this year, down from 3.3 percent in 2015, and an annual average of 5.7 percent in the decade prior to that. Foreign direct investment into Africa fell to $71.3 billion (R982.3bn) last year, down from $88.5bn in 2014, according to accounting firm EY.
Africa was working hard to address barriers to trade and investment, by concluding regional free trade accords, promoting democracy and resolving conflict, said Nkosazana Dlamini-Zuma, the chairwoman of the AU Commission.
Open arms
Nigeria’s Muhammadu Buhari and Ivory Coast’s Alassane Ouattara were among the presidents who said they welcomed foreign capital with open arms and were implementing policies to make their countries more attractive to investment.
“There is a realisation that Africa needs the world and the US, and the world needs Africa,” Bruce Cleaver, the chief executive of De Beers, the world’s largest diamond producer, said. “As global growth stalls there are huge opportunities in Africa.”
Household consumption in Africa was expected to grow 3.8 percent annually until 2025 when it would reach $2.1 trillion, McKinsey said in a research report released this month. – Bloomberg