Africa, US need to work together to create employment

An article by U.S. Ambassador Donald Gips

Published in Business Report, March 27, 2012 at 06:14am  

Africa is on the move. According to the International Monetary Fund, seven of the top 10 fastest-growing economies over the next five years will be on the continent.

Sub-Saharan Africa’s real gross domestic product growth rate has risen to an annual average of 5.7 percent over the past ten years and private forecasts indicate that African economies will grow at 7 percent a year over the next 20 years, making sub-Saharan Africa the second-fastest growing region in the world after Asia.

Africa’s middle class has tripled in size over the past two decades and could include 1.1 billion people by 2060, according to the African Development Bank. The economic boom is here, and those countries that invest in governance, infrastructure, education and economic development will be the success stories over the next 15 years.

Many African governments, led by their citizens’ entrepreneurship and innovation, are raising the bar to make it easier to do business and are welcoming economic investment. Huge strides have been made across the continent, from the large-scale efforts such as regional trade zones to country-specific efforts to streamline bureaucracy and improve access to small and medium business resources.

Sub-Saharan Africa is rapidly re-inventing itself from an aid recipient to a trade and investment destination, and an increasingly important trading partner for the US.

By playing an important role in Africa’s growing economic dynamism, US businesses can create more jobs both on the continent and in America. It’s simple: free trade builds jobs and bolsters economic growth for both partners.

Many US companies are already believers in the opportunities in Africa; here in South Africa, the American Chamber of Commerce represents more than 600 US companies. In 2011, the US was the third-largest trading partner for South Africa, after China and Germany. South African exports to the US increased by 20.5 percent, to $9.5 billion (R72.5bn).

The US is the largest portfolio investor in South Africa with a total of over R400bn, and the largest source of foreign direct investment. American companies in South Africa directly employ 125 000 workers.

These numbers reflect an enormous investment here in South Africa, but we are committed to doing more.

We constantly look for ways to advance development and economic goals, including increasing regional integration, developing and financing new infrastructure projects, and helping small enterprises get connected with global supply chains.

At the same time, the US seeks to support the institutions that we know are preconditions to solid, sustainable growth and an attractive investment climate: fair regulatory systems, an impartial and independent judiciary, a free press and transparent and efficient government processes that provide a level playing field for all. Governance matters; US companies study indicators as they decide where to invest.

Education also is critically important. Attracting the kind of sustained private sector investment that grows economies and generates good jobs requires having an educated workforce that’s prepared for the jobs of the future.

The US supports these efforts through primary and secondary education enrichment, English language programmes and libraries, and university partnerships.

One of the most critical needs, and an issue that lies at the heart of not just economic development but also human development, is access to reliable, affordable energy. This month, the US State Department, working in partnership with the Corporate Council on Africa, led a trade mission to Mozambique, Tanzania, Nigeria and Ghana with ten US energy companies ready to do business in Africa.

During the mission, these US companies concluded partnership agreements with African companies to jointly develop power projects. Other participants signed letters of intent to provide US technical assistance to meet country-specific priorities.

One American firm offered to establish a pilot off-grid generating facility using local biomass material, effectively addressing the needs of both rural electricity supply and employment generation. Five of the US firms are already planning follow-up trips to capitalise on the opportunities identified and personal contacts made.

These are long-term relationships, trade and partnerships based on a local vision and local priorities, not one-way development hand-outs. They aren’t simply business deals, but true partnerships to harness the expertise and relentless energy of business and direct it towards solving broader problems, from climate change to human development.

The perception of Africa is changing, but we think that governments and business people can do more. As Ambassador, i’ve made it a personal priority to promote Africa to the American business community. While many US business understand – and have embraced – the opportunities, there are others for whom the perception of the difficulties of doing business on the continent outweigh what they see as the benefits.

For some US businesses, the path to investing is as simple as getting past stereotypical and alarmist headlines.

For others, specific support will be required – for example, in South Africa, while American businesses understand and support the goals of black economic empowerment requirements, the complexities and lack of clarity around how the rules work scares off many potential investors.

Working together with governments and business associations like the American Chamber of Commerce, we need to address these concerns and both change the perceptions and clarify the rules so that investment and job creation increase dramatically.

This rising prosperity in Africa will open new markets for American goods and create jobs in both regions. More and more people understand that the 21st century will be the African Century.

It’s Africa’s time – and as we all said during the World Cup: “Ke Nako.”