WASHINGTON — The time is ripe for investment in the African continent.
This story first appeared in the August 6, 2014 issue of WWD. Subscribe Today.
The White House assembled a day-long U.S.-Africa business forum here on Tuesday to drive that point home, hosting U.S. and African government officials and executives, including Doug McMillon, president and chief executive officer of Wal-Mart Stores Inc., who reaffirmed the retail giant’s commitment to expanding in Africa.
“The time to do business in Africa is no longer five years away. The time do business there is now,” said U.S. Commerce Secretary Penny Pritzker. “Today, on both sides of the Atlantic, there is a clear, mutual desire to deepen our ties of trade and investment because doing so will spur growth across the United States and the countries of Africa.”
There were several big takeaways for U.S. and African private and public sector officials announced at the business forum, part of an historic three-day U.S.-Africa Leaders summit here hosting some 50 African heads of state.
• U.S. Trade Representative Michael Froman signed a new Trade and Investment Framework Agreement with the 15 West African countries that are part of the Economic Community of West African States. A TIFA is a mechanism used to facilitate trade and investment and can also serve as a blueprint for free-trade negotiations.
• President Obama announced $7 billion in new financing to promote U.S. exports to and investments in Africa under the “Doing Business in Africa” campaign, and U.S. companies unveiled deals worth more than $14 billion, ranging from clean energy to construction and banking. In addition, another $12 billion in commitments was announced under President Obama’s “Power Africa” initiative.
• President Obama also signed an executive order to create a President’s Advisory Council on Doing Business in Africa to be comprised of up to 15 private sector representatives.
• The Commerce Department launched a “one-stop-shop Web site at trade.gov/dbia to offer U.S. businesses crucial market information and financing tools, as well as key contacts. The agency also said it will double its presence in sub-Saharan Africa and host a “Discover Sub-Saharan Africa” conference in Atlanta Nov. 4 to 6.
“Since I took office…we have had more investments in Africa, more trade missions and more support for U.S. exports,” President Obama said at the close of the business forum. “But here’s the thing: our entire trade with all of Africa is still only about equal to our trade with Brazil — one country. Of all the goods we export to the world, only 1 percent goes to sub-Saharan Africa. We’ve got a lot of work to do. We have to do better, much better. I want Africans to buy more American products and I want Americans to buy more African products.”
Pritzker said there have been several new business investments in Africa, including one by Procter & Gamble Co., which she said has pledged a $300 million investment in a new manufacturing plant near Lagos, Nigeria. She said, “When P&G expand in Nigeria and elsewhere, it supports thousands of jobs at home.”
Former President Clinton, moderating a panel that included ceo’s from such companies as Wal-Mart, General Electric and The Dow Chemical Co., highlighted the growth potential of Africa and many specific countries, but said, “In spite of the $80 billion in foreign investment and $400 billion in exports we will see this year, three-quarters of those exports are still in oil, gas, metals and diamonds. So the potential for economic diversification is great.”
Clinton signed the African Growth & Opportunity Act in 2000, a trade preference program to boost economic development in sub-Saharan Africa, but he said its full potential has not been realized.
“It strikes me that we have only barely scratched the surface of what we could and should be doing there, and that we are missing the boat,” he said. “We should understand that this is a massive opportunity for American businesses.”
Clinton asked McMillon why Wal-Mart chose to acquire a company — South African retail chain Massmart — as a way of entering the African markets, and also asked him whether supply-chain issues are both an opportunity and obstacle to future investment on the African continent.
“For us, it is a long-term proposition,” McMillon said of Wal-Mart’s investment in Africa. “We invested $2.6 billion in 2011 and that is just the beginning. What we are expecting and the reason why we made the investment is that we think the whole region and not just South Africa, but also sub-Saharan Africa, including Nigeria and Kenya, and so many countries around the continent are going to do the right thing to create the right rules, the right transparency and [make] some of those infrastructure investments so that the whole thing works.”
McMillon said one of the “side benefits” of operating stores in Africa is the ability to tap into products made there that can then be sold in its U.S. and U.K. stores. He pointed to wine company Seven Sisters Wine, which was started by two sisters who reunited after Apartheid and established their own winery.
“We are selling it to 500 U.S. Supercenters and we have sold about 5,000 cases, so far,” McMillon said. “We never would have found them if we didn’t have a presence in Africa.”
Renewal of AGOA and the third-country fabric provision was also a priority in the discussions between U.S. and African leaders.
Froman said he met with 40 African trade ministers on Monday at a ministerial attended by eight members of Congress. AGOA expires on Sept. 30, 2015, and African businesses and governments are concerned that gridlock in Congress could delay its renewal and lead to a drop in orders and job losses.
President Obama said he is optimistic that he can work with Congress to renew and modernize AGOA before it expires and for the long term.