At the U.S.-Africa Leaders Summit this summer, Tony Elumelu, one of Africa’s most successful entrepreneurs and philanthropists, called for a change in the perception of business in Africa.
“Drugs should not define U.S.-Latin American relations. Religious conflict should not define U.S.-Middle East relations. And natural resources and humanitarian assistance alone should not define U.S.-Africa relations.”
At the invitation of President Obama, African heads of state and business leaders from across the United States and Africa gathered in Washington, D.C. for the first U.S.-Africa Leaders Summit, seeking to advance a new paradigm for U.S.-Africa relations.
The first day of the landmark event was dedicated to the U.S.-Africa Business Forum which sought to strengthen financial and trade ties between Africa and the United States. During the Forum, leading U.S. corporations announced commercial partnerships with African entities, and African political and business leaders articulated ways in which they believe the future of the continent’s business sector will be fundamentally different from in the past.
“In many ways, it was an enormous ‘know your customer’ investment that’s sure to pay dividends in the coming years,” said Aubry Hruby, Visiting Fellow at Africa Center at The Atlantic Council. Less than three months later, the latest Ebola outbreak threatens to delay this outcome.
Forging a Pathway to Progress
In the blink of an eye, the Summit has become a distant memory, but one whose implications are potentially significant. Since then, others, including The Council on Foreign Relations and the World Affairs Council, have weighed in on the progress achieved by the Summit, celebrating the way it successfully stimulated a cross-sector dialogue on U.S.-Africa relations at the highest levels of government and business, brokered new commercial deals, and shed a national spotlight on sustainable development issues like the youth bulge, infrastructure development, and access to power in sub-Saharan Africa.
Most notably, perhaps, this Summit marked a deliberate shift away from models of engagement with Africa that have traditionally been focused on foreign aid; “trade, not aid” was among the Summit’s most common refrains. In 2014, Africa is home to approximately 1.1 billion people, a population expected to reach 2.5 billion over the next fifty years. Its rising middle class is the fastest growing in the world.
“This Summit marked a deliberate shift away from models of engagement with Africa that have traditionally been focused on foreign aid; ‘trade, not aid’ was among the Summit’s most common refrains.”
The Obama administration, taking advantage of the U.S.-Africa spotlight, seized the opportunity to roll out the Doing Business in Africa campaign, announcing a $33 billion funding commitment from the public and private sectors. This included Coca Cola’s plans to spend $5 billion in Africa over the next six years, General Electric’s commitment of $2 billion dollars in investment by 2018 to boost infrastructure, access to energy, and worker skills, and Fidelity Bank’s award of a $66 million five-year contract with IBM to build up the bank’s technology infrastructure in Ghana.
Such appetite for investment is a sign of change. Yet, the realities of doing business in Africa are complex and opaque to many, a gap that a week of active bilateral engagement could not bridge. A tapestry of fifty-four countries with distinct histories, governments, and languages is as diverse as it is nuanced; cultures and countries within Africa are often viewed as “homogeneous” by people with little experience on the continent. Worse, an outbreak of the particularly virulent Ebola virus in Guinea, Liberia, Sierra Leone, Nigeria (now contained), and Mali and Senegal (one case) has captured nearly all the media attention, once more shrouding the entire African continent in a foggy haze of risk rather than opportunity.
Ensuring employee health and safety remains a critical consideration; however, given an understanding of the vastness of the continent, there really is no substitute for being present, with a willingness to learn. Multinational corporations like The Dow Chemical Company and General Electric have recognized that to successfully enter African markets, a certain degree of trial and error is necessary. Learning how development challenges influence the business climate and building a foundation of trust with local leaders took time. During the Forum, Andrew Liveris, the President, Chairman, and CEO of The Dow Chemical Company, admitted to building the company’s understanding from the ground up.
“We’ve been in Africa for sixty years and we cut our teeth learning there.”
Liveris shared another key insight: “Big companies that bring their supply chain into an Africa market have to face the issue of how to approach a country’s philosophy and its culture, and they have to address poverty.”
In other words, successful intervention, value co-creation, and sharing in a way that is appropriate and sustainable for all players requires understanding the whole system, first.
Economic Growth Requires Better Systems and Stability
Following the Summit, many pundits pointed to the fact that, though African leaders might be eager for foreign investment, many countries on the continent pose too high a risk to American corporations. Some weeks later, The World Affairs Council convened, “Aftermath of the Summit: What’s Next?” a conversation with Herman Cohen, Former Ambassador to Gambia and Senegal, Dr. Raymond Gilpin, a senior economist at The African Development Bank and Dr. Daniel Silke, a known expert on Africa’s political economy. The panel examined the conditions within African nations that need to be addressed to increase the number of international and domestic private investors.
Several key deficits—energy, food, security, and political stability—must be addressed by both individual country leaders and by those trying to assist or invest in African countries, in order to enable true sustainable development.
“To grow, African nations must find a way to address their economies internally,” said Ambassador Cohen. “Their leaders have to address all of these deficits to ensure the entrepreneurial spirit can flourish within each country.”
Cohen, Gilpin, and Silke unanimously agreed that establishing a foundation of good governance is critical to achieving this. Effective government administration and transparency is fundamental to solving underlying issues of food security, energy, and the establishment of peace. Gilpin suggested one approach to establishing good governance: incentivize coordinating mechanism such as central national banks that interface with local finance institutions and neighboring countries, allowing African nations to become more responsive to their citizens and international investors alike.
Perception Influences Investment
While private investors agree that addressing development challenges like food security, governance, and energy is a critical foundation for investment, social impact is not the only priority. Investors must also believe in the opportunity. In comparison with the tremendous commitments of financial capital, perception shifts—changes in how investors perceive value—are a subtler form of transformation.
During the Summit, African and U.S. leaders acknowledged outdated stereotypes of Africa as a place of only aid, poverty, and corruption, and ways in which these misperceptions have historically discouraged U.S. private sector engagement on the continent. A recent EY study acknowledged the distortion caused by this perception gap. According to this study, nearly 90 percent of companies with business operations in Africa view it as the most attractive region for expansion. Strikingly, over half of the companies not currently operating in sub-Saharan Africa view it as the least attractive place to do business worldwide. Unfortunately, the Ebola crisis likely only contributes to this perception.
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However, what may appear from the outside to be a barrier can, in actuality, present a shared value market opportunity, if a company has the cultural mind-set to embrace it. Strive Masiyiwa, Founder and Chairman of Econet Wireless, emphasized the business opportunities of market failures, pointing to how lack of education infrastructure offers new opportunities to companies willing to go the distance.
“Fifty percent of African children aren’t in school,” Masiyiwa said. “There is no time to wait for the brick and mortar. We have to invest in the technology we have today to provide education for our children.”
This kind of need—and market demand—is a remarkable opportunity for technology and network companies like IBM and Intel, both of whom have significant business investments and social initiatives to help address these issues, with shared value at their core. To fully make the most of these opportunities, companies must embrace a change in mind-set, abandoning outdated assumptions and historical contexts in order to adopt a more realistic view of what constitutes an opportunity—from both a realistic assessment of threats and opportunities.
Change Requires Capital Investment and Human Resolve
During the Summit, many remarked at the apparent delay in the Administration realizing the need for greater U.S. engagement with Africa. “Too little too late?” some wondered, but most African leaders agreed: “Better late than never.” As growth accelerates in many countries in Africa, opportunities for investment only continue to multiply, and most are excited by the willingness of American corporations to commit to future investment. Foreign investment in African economies is forecasted to reach a record $80 billion in 2014, with many American companies leading the way.
Financial capital alone, however, is insufficient. This fact has been all too evident in the repeated failure of foreign assistance to translate into its intended benefits for communities. Progress requires capital investment and human resolve on the part of private sector investors and African governments alike. It requires financial capital coupled with a willingness to stretch beyond the barriers that exist today. A new paradigm requires that investors adjust their approach to market entry and reframe the notion of “development deficits.” It also demands a deep commitment from African governments to address the deficits that create barriers to greater economic alignment and partnership.
“Financial capital alone, however, is insufficient. This fact has been all too evident in the repeated failure of foreign assistance to translate into its intended benefits for communities. Progress requires capital investment and human resolve on the part of private sector investors and African governments.”
Three months since the Summit overtook Washington, the conversation has all but disappeared from view and the public discourse on Africa has been entirely overshadowed by the threat of Ebola. Who now is responsible for advancing the commitments made during the Summit? The conversation on doing business in Africa has diminished, but the need is greater than ever. And with great need comes great potential for opportunity and growth.