When it comes to sub-Saharan Africa, U.S. President Barack Obama is a little late to the game.
The continent is on the fast track, boasting six of the 10 fastest-growing economies on earth. Widespread poverty, food insecurity, government corruption and deadly conflicts still plague Africa, but the opportunities for international trade and investment are too great to ignore.
Obama acknowledged as much during his first visit to Africa in 2009. Speaking in front of the Ghanaian Parliament, he made a heartfelt promise: “America will be with you every step of the way, as a partner, as a friend.”
That 2009 trip to Ghana was just a one-night stopover. No other countries on the continent were on the president’s itinerary, and Obama has never been back to sub-Saharan Africa. That track record has been a disappointment to those who expected the son of a Kenyan citizen to make a special effort to connect with the continent.
Starting Wednesday, Obama will travel to the West African country of Senegal, the East African nation of Tanzania, and South Africa. But even that may be too little, too late -- when it comes to establishing trade and investment partnerships, the U.S. has already missed out.
“We tend to look at Africa as a place in need of assistance,” J. Peter Pham, director of the Michael S. Ansari Africa Center at the Atlantic Council, said. “But Americans have to get used to what others have already picked up on: Africa really is a place of extraordinary economic opportunity.”
Much to Gain
Obama’s arrival in Africa will be far from low-key. He’ll come with a delegation of 1,200 people, including hundreds of business executives and a coterie of economic advisers. Warships and fighter jets will be on security detail. In the three countries on his itinerary, hotel rooms are already filling up with visitors who don’t want to miss out on the historic occasion.
Senegal, Tanzania and South Africa are all relatively stable and democratically governed, but they make up a diverse set of economies. Senegal is a Francophone country in farthest West Africa that has enjoyed decades of peace in a region plagued by war. Tanzania is an East African country experiencing an acceleration in economic growth, bolstered mostly by mining, telecommunications and natural gas. South Africa is the continent’s largest economy, home to revered former President Nelson Mandela. Obama had hoped to visit the ailing leader, but that seems unlikely since Mandela is now in critical condition at a Pretoria hospital.
But the president’s main goal will be to spur trade and investment, which will benefit Africans and Americans alike. Bilateral trade in goods reached $100 billion last year, and American foreign direct investment in to sub-Saharan Africa was around $3.1 billion in 2011. But considering Africa’s fast growth -- and China’s expanding footprint in the region -- those figures need to be higher.
“Africa has a vast untapped marketplace, a growing middle class, and a big youth bulge,” Pham said. “By 2050, one quarter of the world’s workers are going to be found in Africa. It’s a strategic economic player.”
One key talking point will be the renewal of the African Growth and Opportunity Act, or AGOA, which was established under former President Bill Clinton in 2000. The law eases trade barriers for countries that pursue market reforms; it also mandates more frequent meetings between African and U.S. officials.
When George W. Bush took office shortly after the bill came into effect, he had until 2008 to renew the program. But he wasted no time, signing off on an extension in 2004. AGOA now has a fast-approaching expiration date of 2015. It will almost certainly be renewed, but the fact that it has been put off for so long -- thus hurting businesses’ abilities to plan for long-term investments -- reflects poorly on U.S. efforts to participate in Africa’s growth.
Improving economic relationships with African countries won’t cost Obama any political capital; in Washington, the idea has traction on both sides on the aisle. Sen. Chris Coons, D-Del., who is chairman of the Foreign Relations Subcommittee on African Affairs, released a report last month calling for more bilateral trade and investment.
“America is losing ground and ceding economic opportunities in Africa to competitors,” Coons said. “China, which has made dramatic inroads across the continent in recent years, may undermine or even counter value-driven U.S. goals in the region, and should serve as a wake-up call for enhanced American trade and investment.”
In Africa, the calls for stronger economic ties with the United States are just as loud. Alexandre Diouf, managing director of the Senegalese development-focused firm A&B Consulting, notes that he and his employees would benefit from a stronger relationship with the world's largest economy.
"We hire young, highly educated Senegalese as interns and consultants to work for our firm, providing many with their first proessional experience in the formal sector," Diouf said. "A better trade realtionship between the U.S. and Senegal with fair and balanced investment practices would benefit the Senegalese economy by encouraging small businesses like A&B, and would provide more opportunity for prosperity to Senegalese youth."
To be fair, the Obama administration has been bogged down by two long wars abroad and a stubborn economic recession at home. Former Secretary of State Hillary Clinton has visited Africa several times in the president’s stead.
But as Coons pointed out, the real sense of urgency comes not from Obama’s absence in Africa, but from the ramped-up presence of the U.S.’ biggest economic competitor. The new Chinese president, Xi Jinping, has made Africa a clear priority, stopping there during his very first overseas trip in March.
As African business leaders wait to see what Obama’s visit will bring, some are noting that it’s high time the U.S. follow China’s lead.
“China is now the dominant economic presence on the continent, and the U.S. has some catching up to do,” Carel Botha, CEO of the South African enterprise development firm Bizco Consulting, said. “President Obama will have to overcome a general perception that the U.S. has withdrawn from Africa, as the relationship with the U.S. is critical to South Africa's economic, security and diplomatic interests.”
As far back as 2009, China surpassed the U.S. to become Africa’s biggest bilateral trade partner. Beijing’s Ministry of Commerce reported that total trade with the continent amounted to $198.5 billion last year. What’s most remarkable about this figure is its steep rate of increase; it is expected to exceed $380 billion by 2015.
Beijing is clearly interested in African timber, hydrocarbons and minerals, but the relationship is about more than resource extraction. China has been ramping up investments in Africa across a variety of diverse sectors including manufacturing and services. It also sees Africa as an expanding consumer market, and demand there is indeed growing for high-capital goods like manufacturing machinery and telecommunications equipment.
That’s where the U.S. could be more involved. Its efforts to spur development in Africa have so far been centered on aid money; foreign assistance from the U.S. to Africa totaled $68.3 million last year. But there are plenty of opportunities to expand on business partnerships that would help African economies in a more sustainable, mutually beneficial way.
Niane Abdoulaye, manager of the Senegalese agricultural development firm AgroServ, hopes Obama will encourage U.S. businesses to help African countries improve their output and self-sufficiency, especially in agriculture and energy. “Senegal has 3,000 hours of sunshine throughout the year and the possibility of producing biofuels, the engine of development,” Abdoulaye said. “All economic questions should focus on these issues.”
If aid has so far been unable to effect progress in some of Africa's most-promising sectors, a strong and well-regulated business relationship might do the trick.
At the heart of the president’s challenge this week is a problem of perception; for decades, Africa has been known for famine, plague, poverty and conflict. Those problems are still serious, but countries across the continent are increasingly converting their own ample natural resources into broad-based development.
GDP growth in sub-Saharan Africa is forecast to hit an average of 6.1 percent in 2014, according to the IMF, exceeding the expected global average rate of 4 percent. The African Development Bank reports that the number of middle-class consumers has grown to about 313 million, up 60 percent from just 10 years ago.
Slowly but surely, U.S. business leaders and government officials are learning to see Africa’s 1 billion people as consumers and producers, not just charity beneficiaries.
“A few industries, hedge funds and private equity groups have already caught on to the opportunities presented by Africa, but the U.S. hasn’t really fully grasped this reality,” Pham said. “We need some messaging from the top-down, and that’s what Obama’s trip could help to realize.”