Brookings Africa Policy Dialogue on the Hill: Improving Commercial Environment in Africa and Opportunities for U.S. Investors

In light of the review of  House Bill HR1777 (S718), “Increasing U.S. Jobs through Greater Exports to Africa Act of 2013” by the House Subcommittee on Africa, Global Health, Global Human Rights, and International Organizations,  the Africa Growth Initiative held an Africa Policy Dialogue on the Hill to discuss “Improving the Commercial Environment in Africa.” Sponsored by Representative Chris Smith (R-NJ) and Senator Richard Durbin (D-IL), House Bill HR1777 (S718), among other provisions, seeks to expand the number of commercial service officers in the Africa region and requires the president to appoint a Special Africa Export Strategy Coordinator.  Although growth, stability and macroeconomic indicators have improved in many sub-Saharan African (SSA) countries, the United States’ trade with Africa has hovered around only 1 to 2 percent of U.S. total global trade.

Since 2012, the Africa Growth Initiative at Brookings, together with members of Congressional African Staff Association (CASA), and other partners in both the House and Senate have collaborated to organize dialogues on relevant topics on Africa to decision-makers on the Hill.  Last week, the dialogue featured two seasoned members from the private sector. Speakers Stephanie Peters, director of federal government affairs for Microsoft, and Bobby Pittman, managing director of Kupanda Capital, highlighted the various positive developments in the business environment in the Africa region as well as the challenges. Introducing the session, Eric Williams, staff director of the Subcommittee on Africa, Global Health, Global Human Rights and International Organizations, noted that the topic of the African commercial environment is particularly important in informing U.S. companies seeking business opportunities on the continent.  Also participating in the event was Congresswoman Sheila Jackson Lee (D-TX) who reiterated the importance of AGOA and increasing additional congressional efforts to engage African governments on economic issues.  

Recent policy efforts have the potential to increase the U.S. investment and presence in Africa as well as U.S. jobs.  In the meantime, high-growth countries in Africa are already getting attention from companies like Microsoft.  Peters noted that the sheer number of personal computer shipments to countries like Senegal and Kenya, the growing workforce in the region, and the rising number of middle-class consumers is attractive to the highly competitive technology industry.

Pittman made observations about the mostly positive changes that have taken place over the past 15 years on the continent.  Among these improvements, Pittman cited the shift from centralized governments to more decentralized ones, decreased cross-border conflict, decreased inflation, reduced brain drain from Africa and increased return of migrants. Countries in Africa have a lot more domestic resources than in past decades, and, according to Pittman, increases in business investments will happen with or without the involvement of the United States.   

Pittman noted that companies like Microsoft and General Electric—some of the first U.S. movers into African markets—will reap considerable benefits.  They are connecting with the local and more highly skilled partners and are taking advantage of their partners’ established networks.  He noted that African consumers are excited about U.S. companies and brands.  In order to take advantage of these burgeoning markets, many U.S. companies seek assistance in expanding their reach in markets beyond South Africa because they currently lack knowledge and networks.

Despite the many positive developments, challenges for U.S. businesses seeking to enter African markets remain.  For technology companies in particular, the weak regulatory environments make companies feel trepidation in entering African markets:  They fear losing profits from intellectual property infringements.  Other challenges are the variation in political and security environments among countries in SSA.  Peters noted that, in order to address some of these obstacles, Microsoft is taking on some of these challenges in their Microsoft 4Afrika Initiative, which focuses on improving workforce skills, expanding access to technology and catalyzing innovation in the region.

Participants in the discussion brought up the importance of increased regional integration and improved infrastructure for building a good commercial environment—two areas in Africa that need large improvements.  China’s strong relationship with many African countries was discussed as well.  Pittman remarked that, although Chinese financing is sometimes the more costly option for African governments, it is preferred because it can be implemented quickly without bureaucratic impediments.  Pittman proposed that a streamlined approval process for U.S. companies to receive financing could help them compete with the Chinese in African markets. 

The dialogue made it clear that although some obstacles remain, there are numerous opportunities for U.S. companies in Africa.  Since first movers will gain access to large consumer markets and the most qualified local partners, it is a good strategy for American companies not to delay expansion into Africa, and the U.S. government should expedite efforts to support them.