THERE was something telling in the way some African heads of state scrambled to put their houses in order ahead of the US-Africa Leader’s Summit which gets underway today.
In Uganda, a constitutional court overturned a much-criticised “anti-gays” law that prescribed life imprisonment for homosexuals, ruling that it had been wrongly passed in parliament. That allows the country’s President Yoweri Museveni to deflect some of the criticism he has endured from gay rights group in the US, and possibly to overcome the cloud cast by Washington’s aid cuts over the bill.
In Kenya, President Uhuru Kenyatta announced the repossession of over 2,000 square kilometres of “grabbed” land around a proposed multi-billion infrastructure project in Lamu, a coastal county that came to global attention following the killing of nearly 100 people.
Shot in arm for LAPSSET
Kenyatta’s move could go some way in reassuring would-be American investors that the security concern can be mitigated, as he seeks more funding for the $24 billion Lamu Port and South Sudan Ethiopia Transport (LAPSSET) Corridor project.
Since it was formally launched in March 2012, little activity had taken place around the project, which would also serve South Sudan, Ethiopia and Uganda, but last week Kenyatta approved a $480 million deal with a Chinese company for the first phase of construction, offering him something tangible to dangle at American investors.
These two seemingly unrelated events will converge at the US-Africa Leaders Summit, the first time US president Barack Obama will be bringing so many African leaders together at one conference on American soil. Rights concerns have for years affected Africa investment decisions by American firms make, but opportunities are increasing too sweet to pass up.
Expected to be attended by nearly 50 African leaders, the conference will simultaneously try to address the two issues in addition to security, as US officials noted last week in pre-event interviews.
Inevitably, China’s activities in Africa have not been too far off from in informing the event but perhaps not as much as analysts think. Though China overtook the US as Africa’s largest trading partners just over two years ago, America remains the single largest investor country in the continent, and even the EU bloc does twice the bilateral trade China does with Africa. It seems that some in America, considering comparing US, European business with Africa with China’s is like comparing apples and oranges.
As a former US State Department official noted, each of the countries brings something different to the table. “We build airplanes and the Chinese do road construction,” Todd Moss told Bloomberg News.
A major survey by Pew Research recently found that many Africans still perceive the US as the world’s leading global economy, and by a slight margin—74% to 70%—had a more favourable view of Washington compared to that of Beijing.
But a majority in Africa also felt that China would eventually replace America as the dominant world power.
Africa is rich pickings
Despite this, analysts point out that African leaders will be in Washington because they recognise the deep opportunities that doing business with America presents.
The economic case for Africa continues to strike a positive chord for many American investors. The Emerging Markets Centre in its 2014 attractiveness survey noted that just four years ago, Africa ranked eighth of the 10 most attractive FDI destinations.
This year it is up to second, with flows up nearly 5% even as the number of greenfield and major brownfield expansions in North Africa declined significantly.
But only 1% of this new investment was from American firms according to 2012 data, even as researchers found that African private equity funds outstripped US venture capital. Allowing even for the major global economic bumps, pro-Africa money returned an annualised 11.2% yield.
Therefore opportunities abound: consulting firm McKinsey says the continent will require up to $50 billion in total investment in Africa over the next decade, and that the existing supply of capital does not meet the current annual demand of about 8%.
Africa’s population is also expected to double to 2.2 billion by 2050. Most of these new Africans will be astonishingly young at under 25, allowing an opportunity for American firms to begin to build brand loyalty and to use their comparative advantage in tapping emerging trends, such as those around technological adaptation.
This population bulge creates major import demand, especially in the emerging middle class. Technology—for example needs electricity to go with it. President Barack Obama’s 7-Gigawatt Power Africa plan is intended to meet this on a continent where 600 million have no grid power, and private firms have been lining up to join the initiative, which enjoys rare bipartisan congressional support.
“That represents a phenomenal opportunity for US companies that have poured billions into developing energy efficient technology and clean energy technology in recent years,” Elizabeth Littlefield, the president and chief executive of the Overseas Private Investment Corporation - the US government’s Development Finance Institution - said in a commentary.
Headed for $2.6 trillion GDP
The continent’s collective Gross Domestic Product (GDP) is expected to touch $2.6 trillion in the next six years, presenting a $1.4 trillion opportunity in consumer spending from a market of 1.5 billion people by 2020, according to UN data. The appeal for US companies has been evident over this.
African leaders see these kinds of possibilities as hugely desirable despite the frequent rhetoric of China as an alternative. In Washington the US Chamber of Commerce will honour Nigeria President Goodluck Jonathan at a banquet.
It will not be just public relations. McKinsey calculates that should Nigeria—Africa’s largest economy—reach its full potential, it would in 2030 have an annual GDP exceeding $1.6 trillion, making it one of the world’s top 20 economies. It also noted that despite the West African country’s much documented problems with security and governance, Nigeria has still clocked up 8.6% annual growth under civilian rule since 1999.
These are the kind of numbers that appeal to the capitalist investor, and Africa knows it. It also helps that Afro-American relations are not tinged with colonialism, bribery or the “resource grab” headlines that China increasingly has to contend with.
Obama has been at pains to play up this American advantage.
“...My advice to African leaders is to make sure that if, in fact, China is putting in roads and bridges, number one, that they’re hiring African workers; number two, that the roads don’t just lead from the mine, to the port, to Shanghai,” Obama, who is setting out his African legacy, told The Economist in a recent interview.
The US has taken a middle line on this “new scramble” narrative—the “more the merrier” to the activities of China and other powers on the African content. It is a view that is striking the right chords on the continent.
South Africa will for example be pushing for an extension of the African Growth and Opportunity Act (AGOA), Bill Clinton’s signature Africa law, that is up for renewal or otherwise next year. In terms of helping individual Africans this law leaders feel it has had more impact than China’s mega infrastructure projects, even in Beijing would protest.
After Gaza, no US rights lectures
African leaders have also wished America would play a bigger role in security stabilisation on the continent —ironical given past sentiment about outside intervention—but Washington has remained reticent over this since its 1993 Somalia disaster, and has preferred to offer intelligence and training, while urging to be more insular in looking for lasting solutions to its challenges.
This time too, Africans leaders will probably not be irritated by lecturers on their human rights records. As Zimbabwe President Robert Mugabe said recently, America’s tacit support for Israel as it bombs schools and hospitals and kills children and women in its current war with Hamas in Gaza, shows a troubling double standard given that Washington helped overthrow Libya strongman Muammar Gaddafi, whose sins Mugabe sees as being far less than Israel’s in Gaza.
Internally, then – for both good and bad reasons – Africa’s big men go to into the Summit with a better hand than at any time in the past.