Stimulating U.S. Trade and Investment

FROM THE 2009 U.S.-AFRICA BUSINESS SUMMIT

Three African countries not well-known for their non-oil trade and investment potential came to the Corporate Council on Africa Summit to acquaint an American audience with their commercial possibilities for U.S. business people. Before the CCA Summit, Tanzanian President Jakaya Kikwete encouraged foreign investors to focus on infrastructure, agriculture, natural resources, tourism and banking services. Angola, Namibia and Ethiopia gave presentations at the CCA Summit that almost mirrored his words.

Angola is the 2nd largest Africa trading partner of the United States, mostly involving oil and natural gas imports. Plagued by an almost 40-year on-and-off cycle of independence war and civil war, Angola has finally achieved peace since 2002. The long conflict decimated infrastructure, and oil futures deals during the war prevented the country from fully taking advantage of the spike in oil prices in recent years. However, Angola has experienced strong growth during the last few years, and according to the International Monetary Fund, its real Gross Domestic Product grew by 16% last year. Starting from a very low level, Angola’s business sector has grown by leaps and bounds, up as much as 21% at one point since 2002. Nearly 200 Angolan business people have come to the CCA Summit this year.

Angola is oil, natural gas and diamond rich, with almost untapped mineral wealth beyond that. The livestock sector is burgeoning, and a country with little infrastructure is expectedly seeing a boom in construction. Foreign direct investment led to US$228.5 million in contracts in 2007, but this was an anomaly from recent years. The 2009 level this far is only US$12.5 million. A complex visa system and an overly active bureaucracy help limit investment in many cases. The country is boosting its tourism now that peace has been sustained. The long conflict obscured the scenic waterfalls, mountains and beautiful beaches that practically beg to be visited.

While Namibia is America’s 9th leading African trading partner, it is not a name that often comes up when U.S. business people discuss possible trade and investment locations in Africa. That may be because of the long-ago disinvestment campaign created to force South Africa to loose its hold on this southwest African country during the apartheid times. Activists were admirably diligent in pressing for state-by-state bans on investment at the time, but after Namibian independence in 1990, no comparable effort was launched to undo the damage. This likely put Namibia out of the picture for many Americans who remembered why not to invest in Namibia with no new picture to replace the one they were quite rightly convinced to accept at an earlier time.

Still, Namibia has had an admirable record of sustained growth at 4-5% in recent years. The budget deficit has been kept to less than 3% of GDP and the last three years have seen a budget surplus. Namibia wants to transform its economy from being dominated by the extractive sector (led by diamonds, uranium and gold) and agriculture to one dominated by manufacturing. Not that they want to abandon agriculture. In fact, Namibians are looking forward to exporting beef, grapes, dates and other food products to America. Like the other two countries we’re looking at, Namibia also wants to promote tourism, promoting its scenery, wildlife and particularly its tourism infrastructure.
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Ethiopia is America’s 19th leading African trading partner on the strength of its coffee and other agricultural exports, as well as leather goods and other manufactured items. However, the Ethiopians hope to increase their cut flower exports to the United States, as well as minerals and energy products. Their foremost hope, according to their presentation at the CCA Summit, may well be an increase in American tourism and U.S. investment in the hospitality sector. Indeed, the country boasts impressive natural and man-made attractions, including the Church of St. Mary of Zion, where the Ark of the Covenant is believe to rest. In fact, there are 10 internationally-recognized historic sites in Ethiopia and several sites of specific attraction to the religiously-inclined tourist.

Unfortunately, the government believes the communist Dergue government discouraged foreign investment in tourism just as other African countries were receiving such funds. That likely is true, but at this point Ethiopia’s main concern for stimulation American tourism has to be convincing U.S. tourists that Ethiopia is safe and has accommodations outside Addis Ababa. Moreover, telecommunications coverage must be broadened so that tourists, who often are businesspeople investigating the terrain, feel comfortable with what they see and experience.

Because of its large and active Diaspora here in the United States, Ethiopia has a distinct and immediate trade advantage over Angola and Namibia. Many Ethiopians are reportedly returning home to start or expand businesses, especially in the hospitality sector. Their linkages here in America should stand them in good stead. Meanwhile, Angola and Namibia, though ahead of Ethiopia in terms of total trade with the U.S. at the moment, could be surpassed if Africa’s second largest population can stimulate its advantages on the ground – in Ethiopia and the United States.

Angola may not be immediately ready to break into the top echelons of African tourism destinations, but their potential in this area is astounding. At some point, foreign investors will tap into this previously neglected sector. As for Namibia, perhaps they need a road show in America to rebrand a country that is arguably one of the best managed – not only in Africa, but also in the world. For all three countries, there is hope for broadened trade with the U.S., even if it takes awhile to be manifested.