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A year after urging U.S. companies to deepen their involvement in an African economic renaissance, President Barack Obama doesn’t have much to show for the effort.

U.S. companies still lag behind European and Chinese enterprises on a continent that is home to six of the world’s 10 fastest-growing economies. Apart from oil companies such as Chevron Corp. (CVX) and retailers such as Wal-Mart Stores Inc. (WMT) and YUM! Brands Inc. (YUM), U.S. businesses have been reluctant to brave African security risks and trade headaches.

African markets are “of increasing interest,” said David Cote, chief executive officer of Honeywell International Inc (HON)., which has offices in South Africa, Angola and Nigeria. “But corruption is the thing I always worry about the most.”
Cote said it’s not just a theoretical issue for Honeywell executives. “We’ve been asked,” he said in an interview. “This is not hearsay.”

Nigeria, Africa’s second-biggest market, ranked 139th in Transparency International’s annual corruption perceptions scorecard, putting it near the bottom of the 176 countries measured. South Africa, the No. 1 African economy, ranked 69th.

Obama, who began a three-nation African trip on June 26, aims to invigorate the U.S. effort with a July 1 roundtable in Tanzania with business leaders and a speech to U.S. and African chief executives. He’s expected to unveil a power-generation initiative, building on Symbion Power’s earlier success with an electric power plant in Tanzania.

Showing Potential

The visit follows Obama’s June 2012 approval of a directive setting forth a four-pronged approach to sub-Saharan Africa, including encouraging U.S. companies to trade and invest on a continent the White House said was poised to be “the world’s next major economic success story.”

To underscore U.S. interest in deeper trade ties with the more than 1 billion Africans, the president has brought along top officials, including U.S. Trade Representative Michael Froman, and Valerie Jarrett, a senior adviser.

Speaking to reporters aboard Air Force One today, the president said the U.S. isn’t engaged in a “zero sum” contest for African markets. And he said American CEOs have hesitated to invest in Africa for fear of political instability.
“One of the main things that we want American companies to see is that Africa is ready to do business and that there’s huge potential there,” Obama said.

Showing Life

Long an economic backwater, Africa in recent years has flashed signs of potential. The International Monetary Fund cites the sub-Saharan region’s “robust” growth and says output will rise by 5.4 percent this year and 5.7 percent next year.

“If Africa does take off economically, you’re going to have a rapidly growing middle class and market for U.S. goods,” said Ben Rhodes, deputy national security adviser. “What we hear from our businesses is that they want to get in the game.”

A fragmented U.S. government approach may be holding them back.
At least 10 government agencies have a hand in setting trade and investment policy, according to a March 7 report by Senator Chris Coons, a Delaware Democrat and chairman of the Senate Foreign Relations subcommittee on Africa. And only six foreign commercial service officers are stationed in sub-Saharan Africa, overseeing an area that stretches for more than 4,000 miles north to south and is home to about 900 million people.

Congressional Hurdle

The government’s Overseas Private Investment Corp., which provides financing and political risk insurance for U.S. companies’ foreign ventures, is ill-positioned for multiyear projects since it depends upon annual congressional appropriations, unlike British, Dutch or Chinese financing agencies, says Todd Moss, who directs the Emerging Africa Project for the Center for Global Development in Washington.

Coons, along with Richard Durbin of Illinois, the second-ranking Senate Democrat, and Republican Senator John Boozman of Arkansas, has introduced legislation designed to force the White House to better manage its promotion of trade with Africa.

“The U.S.’s continued failure to develop a coherent strategy to compete in Africa is hurting both American business interests, American workers and our political influence in the region,” the lawmakers said in a statement.

The legislation would create a White House post of Africa strategy coordinator, add diplomatic jobs on the continent and allow the U.S. Export-Import Bank to make larger loans to compete with Chinese government financing. The bill sets a goal of increasing U.S. exports to Africa in real terms by 200 percent in 10 years.

Not Serious

“I don’t think this administration is very serious about getting engaged on this,” says Moss. “The administration has no economic strategy.”

U.S. businesses considering African markets confront obstacles that extend beyond their own government. African commerce remains bedeviled by sub-par roads, ports and rail lines. In many countries, adequate electric power supplies remain a distant dream: Only 14 percent of Tanzanians have access to electricity, Froman said in a July 2012 speech.
Moving goods across African borders can exhaust the most patient trader. A coffee exporter in the three-nation East African Community requires 29 days to fill out paperwork, transport the product to a port, clear customs and load it aboard a vessel -- twice as long as in Brazil.

54 Markets

Rather than an integrated market like Europe or the U.S., the African continent is divided into 54 separate units, only some of which are large enough to warrant a multinational corporation’s attention. Senegal, Obama’s first stop, has an economy roughly half the size of Vermont’s.

Images of famine and warfare have left many U.S. companies slow to appreciate the political changes that have transformed much of Africa, analysts said. In the past two years, countries including Nigeria, Ghana and Kenya have completed peaceful transitions of power.

“It’s actually less risky than most investors think,” Larry Seruma, chief investment officer of Nile Capital Management, whose Pan Africa Fund has gained 22 percent over the past year, told Bloomberg Radio on June 17. “Political stability is a big story about why this time around is different.”

China Surges

Obama’s trip to Africa comes with China having surpassed the U.S. as a trading partner. In 2011, Chinese two-way trade with the continent was $160 billion, according to the state-run Xinhua news service. The U.S. total was $95 billion in 2011, while the European Union did $286 billion worth of business with African companies.

Chinese foreign direct investment in Africa also has surged in recent years, though it’s difficult to make a comparison with U.S. figures because much Chinese overseas spending shows up as investment in Hong Kong or various tax havens.

After lagging behind the U.S., China since 2005 has been more generous. Last year, both countries put a bit more than $3 billion to work on African projects, according to Xinhua and the Congressional Research Service.

Coupled with the Chinese government’s lavish provision of development loans, the trade turnaround has sparked concern in Congress that the U.S. is losing in a battle for African influence.

“China is all over Africa -- I mean, all over,” Secretary of State John Kerry said during his Jan. 24 confirmation hearing. “And there’re some places where we’re not in the game, folks.”

Overblown Concern

Concern over China dominating Africa at the expense of the U.S. are overstated, many analysts say. China tends to provide state financing for giant infrastructure projects -- roads, airports and bridges -- which companies from the Asian country often construct with imported Chinese labor.

The U.S. doesn’t offer that type of financing, and American companies specialize in other areas, from deepwater oil fields off West Africa to the consumer market in South Africa, where Wal-Mart (WMT) has a foothold.

Chinese investment in infrastructure -- smoothing the trade barriers that today discourage some companies from getting involved in Africa -- will ultimately benefit U.S. companies, too, says Jennifer Cooke, director of the Africa Program for the Center for Strategic and International Studies in Washington.

The continent is big enough for both powers, and direct commercial competition between U.S. and Chinese firms is rare, according to Moss, who was the No. 2 official in the State Department’s Bureau of African Affairs in 2007-08.

“This notion that we need to counter moves China is making is exactly the wrong way to think about our engagement in sub-Saharan Africa,” he said. “In a mercantilist, business-to-business sense, there’s really very little direct competition with China.”
In 2007, when the state-controlled Industrial & Commercial Bank of China Ltd. spent $5.6 billion for 20 percent of Africa’s largest bank, South Africa’s Standard Bank, an American investment bank -- Goldman Sachs Group Inc. (GS) -- was an adviser in the deal.

To contact the reporter on this story: David J. Lynch in Washington at
To contact the editor responsible for this story: Steven Komarow at



Author: Nobuyoshi Ozaki

A long forty six years have passed since I stepped on to American soil. I have had various odd jobs in the past until I recently retired. Examples include working with Steven Spielberg as assistant director in a film called "1941." I was supervisor and later became Public Relation representative for Toyota Group - USA. My last occupation was a Senior Research analyst working in Silicone Valley for a major news paper from Tokyo, Japan. My spouse, Christine is a flight attendant, traveling often to the Middle East and Africa. We have spent three quarters of our life together as world adventurers. This photo was taken in Argentina. We now live in swampy Louisiana.