Tag Archives: investment

Who Will Reap the Benefits of China’s Growing Presence in Africa?

By Brian Jackson

Recently, there have been many articles in the media outlining both the positive and negative implications of China’s growing investment in Africa. On one hand, many accuse China of promoting another period of colonization and exploitation on the continent and preventing Africa from becoming economically independent. Yet on the other hand, some praise the investments for rejuvenating African industries and infrastructure.

With such conflicting interpretations, many are left wondering how to view all of this. Is Chinese involvement in Africa a good thing, or bad thing? Will it lead to more economic and democratic opportunities for the continent and people, or the opposite?

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Harnessing Markets to Reduce Extreme Poverty

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When “3 billion people on the planet making less than $3 a day, [are] effectively cut out of society, we are missing the opportunity of all those people to be our musicians, our Einsteins, and our professors- it is really all of us that lose.”

In an event on harnessing the power of markets to tackle global poverty, American Enterprise Institute President Arthur Brooks and Acumen founder and CEO Jacqueline Novogratz highlighted the role markets can play in enabling the poor to participate fully in society.

By treating the poor “as assets to society,” rather than liabilities, “we’re going to enliven their capital and that will also give them earned success and dignity,” said Brooks. Novogratz’s philosophy is to do just that – by investing in the poor through so-called “patient capital.”

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The Future of the U.S.-Africa Economic Relationship

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Last week Washington hosted nearly 50 African heads of state at the first-ever U.S.-Africa Leaders Summit. Countless meetings and conversations that took place not just among government officials but businesses, international organizations, and non-profits (including CIPE and Freedom House) brought Africa into the spotlight. Yet the most important aspect of the Summit is still ahead: what did we learn and how can this knowledge guide the way forward?

One of the most informative outcomes of the Summit to me was the launch of a report Africa and the United States: A defining relationship of the 21st century at the U.S. Chamber of Commerce’s Presidential Plenary. The report was jointly produces by the U.S. Chamber and Investec Asset Management (IAM), a global investment management firm founded in 1991 in South Africa. Hendrik du Toit, Investec’s CEO, unveiled the report and discussed its findings with a panel of corporate leaders.

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The Role of Business in Advancing Political and Economic Freedom in Africa

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This week nearly 50 heads of state will attend President Obama’s U.S.-Africa Leaders Summit in Washington, DC to discuss trade and investment, security, democratic development, and how to achieve a better quality of life for all Africans. The summit will bring together government representatives, business people from the U.S. and Africa, and leaders of civil society groups.

In many ways this summit will be the beginning of a hopefully much larger conversation on how the United States and 54 African countries can increase economic ties, strengthen democratic development, and create new economic opportunities and freedoms for Africans.

To help start this conversation, CIPE and Freedom House brought together several U.S. and African thought leaders to offer their insights on how to advance political and economic freedom in Africa at an event August 1. The purpose of the event was to reinforce the case that good governance and democratic values are closely linked to sustained economic growth, and to offer some actionable ideas on how to strengthen the U.S.-Africa partnership.

The panelists included: Kim Davis, Managing Director and Co-Chairman at Charlesbank, Hon. Donald Gips, Co-Chairman of the U.S. Chamber of Commerce Africa Business Initiative, Betty Maina, Chief Executive of the Kenya Association of Manufacturers (KAM), and Aniket Shah, Global Investment Strategist from Investec.

As Hon. Gips mentioned, many American firms are not even at the “starting line” with regards to expanding their business into Africa. There is no doubt that there are plenty of opportunities and that different countries on the continent are experiencing economic growth and a growing middle class of consumers that offer both African and international companies new opportunities to expand their markets. But for many reasons, few U.S. firms outside of the extractive industries are investing in Africa.

At the same time, Freedom House’s Freedom in the World Index shows that many African countries are not advancing political and economic freedoms, and in some parts of Africa are reversing previous gains. As Betty Maina from KAM pointed out, after the fall of the Berlin Wall there was a great promise “for a better life and democratic opportunity,” but Africans have not built the underlying institutions necessary for democracy to succeed – instead focusing almost solely on conducting elections.

“There is currently a despair about democracy and the fundamental ingredient to change this is the building of proper institutions,” Maina said.  As former Ambassador to South Africa, Hon. Gips, put it: “the hard part is what comes after the elections.”

So what can the business community do about the current state of affairs? Kim Davis emphasized that business has a deep interest in the rule of law. African countries need judiciary systems that work and business climates where contracts can be enforced. Keeping the system accountable requires freedom of the press, and African businesses need to push for greater press freedoms.

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Moving Beyond the Bi-Polar View of Doing Business in Africa

New buildings in Gabarone, the capital of Botswana -- one of the most developed and fastest-growing economies in sub-Saharan Africa.

Gabarone is the capital of Botswana — one of the most developed and fastest-growing economies in sub-Saharan Africa.

By Naledi Modisaatsone

Economic improvements and a wealth of opportunities for business in Africa have led to an increased focus on the continent. Over the past three years Ernst & Young’s Africa attractiveness reports have highlighted the continent’s steady rise. Their research provides some quantitative substance to the growing perception that African markets offer an exciting growth and investment opportunity.

Africa’s growth prospects differ not only country by country but also sector by sector. For example, agriculture is Africa’s largest economic sector, representing 15 percent of the continent’s total GDP, or more than $100 billion annually. It is highly concentrated, with Egypt and Nigeria alone accounting for one-third of total agricultural output and the top ten countries generating 75 percent.

Africa’s banking sector has also grown rapidly in the last decade. Sub-Saharan Africa has become a substantial player in emerging-market banking, with total 2008 assets of $669 billion, while North Africa’s asset base has grown substantially, to $497 billion. Africa’s banking assets thus compare favorably with those in other emerging markets, such as Russia (with $995 billion).

However, the Ernst & Young reports also highlight a lingering perception gap between companies already doing business on the continent and those with no business presence there. The respondents with an established business presence in Africa are more positive about the continent’s prospects and rank Africa as the most attractive regional investment destination in the world today. They view it as an exciting, dynamic, high-growth market. In stark contrast, respondents that have not yet invested are negative and rank Africa as the least attractive regional investment destination in the world.

The African business community should spend some time on this issue at the US-Africa Business Forum. It is their responsibility to debunk the myths that some external investors have about operating a successful business in Africa. These business leaders are successfully embracing Africa’s uncertainty, complexity and volatility, understanding that these are common challenges across most emerging markets.

They are actively balancing the three tensions that all companies face in doing business in emerging markets: long-term versus short-term focus, profit-taking versus sustainable growth, and managing the whole versus optimizing the parts. Most importantly, their companies are establishing strong competitive positions in key markets and are poised to benefit from the continued growth anticipated over the next decade.

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U.S. Companies Should Not Overlook Opportunities in Sub-Saharan Africa

A growing textile industry is among the drivers of Ghana's rapid economic growth in recent years. (Photo: Wall Street Journal.)

A growing textile industry is among the drivers of Ghana’s rapid economic growth in recent years. (Photo: Wall Street Journal.)

By Chris Braddock

Next week the U.S.-Africa Leaders Summit will bring approximately 50 heads of state to Washington, DC, for the purpose of discussing trade and investment in Africa and highlighting America’s commitment to the continent. During a recent trip in the region, I spent quite a bit of time thinking about this topic.

Over the past four months I was busy traveling in sub-Saharan Africa (SSA), meeting with businesses and academics and researching the business opportunities in five different countries. As part of this trip I had the opportunity to meet with several CIPE partners and consultants who, as representatives of the private sector, were able to speak about the enabling environment and some of the challenges and opportunities of businesses working in SSA.

Most countries in SSA have historically been seen as too unstable, too small a market, or too risky for U.S. companies to explore opportunities, so there are few American companies operating in the region. The perception of SSA for many is based on the plethora of negative stories presented by the media, but this is merely a small and decreasingly significant part of the SSA story. Growth rates are high, people are optimistic with larger disposable incomes, and foreign direct investment is flowing in larger quantities, particularly from Asia. U.S. firms are starting to get left behind.

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Growing Pains or Insurmountable Odds?

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South Sudan just successfully hosted one of the largest events in the country’s short two-year history. On December 4 and 5 an impressively diverse crowd of potential investors and business owners from more than 60 countries came together in the capital Juba for the South Sudan Investment Conference, titled “Investment for Economic Diversification and Prosperity.” With more than 800 people registered to attend the two-day event, and at least 500 actually in attendance, observers and participants alike were relatively pleased that the event was carried out with only a few hiccups.

Logistically, it was just shy of a miracle. With only one major paved road in the entire country, a nascent hospitality and service industry, and a lack of local transportation options, it is noteworthy that an event of this magnitude even took place.

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