Africa offers US multinationals compelling trade and investment opportunities due to the rapid economic growth rates, burgeoning population growth and increasing urbanization that currently characterises the continent, says Standard Bank report.
Economic growth in sub-Saharan Africa has exceeded 5 percent each year, for more than a decade now giving the continent a 4.1 percent share of global gross domestic product (GDP), up from 3.4 percent in 2000. By 2050, one in four of the world’s population will be living in Africa with at least 60 percent of the continent’s people living in urban centres.
“Trade with African economies and investment in Africa offer big rewards but it requires sound local knowledge, strong local partnerships, and a long term view,” said Sim Tshabalala, CEO of Standard Bank Group. “In that sense the US plan to revitalise its commercial and trade links with Africa couldn’t come at a more opportune time.”
The renewed US interest in Africa is embodied by President Barack Obama’s Power Africa Initiative, which was launched last year, that aims to double access to power in six partner countries in sub-Saharan Africa: Ethiopia, Ghana, Kenya, Liberia, Nigeria and Tanzania.
The US government has committed more than $7 billion in financial support and loan guarantees to the project over the next five years. That commitment has been doubled by almost 30 private sector partners, who have pledged $14.7 billion in project finance through direct loans, guarantee facilities, and equity investments for Power Africa.
Although US-Africa trade doubled from about $50bn in the early 2000s to $110bn in 2013 it still lags China whose trade with Africa exceeded $200 billion last year. Yet it is precisely China’s emergence as Africa’s largest trading partner which underscores the potential value on the continent for US firms.
In 2013, FDI to Africa increased by 9.6 percent to an estimated $56.6 billion, representing 5.7 percent of global FDI. FDI is forecast to exceed $60 billion in 2014. Total foreign inflows to the continent reached $186 billion in 2013, and are expected to top $200 billion in 2014.
US firms are also increasingly interested in the commercial opportunities in Africa. Major private equity firms, including the Carlyle Group, has launched Africa-focused funds valued in the hundreds of millions. Leading US technology companies are investing in new ventures and start-ups across the continent. IBM has invested at least $100 million, with new Innovation Centres in Lagos and Casablanca. Microsoft and Intel Capital are embarking on partnerships with African tech companies. Google is working on delivering broadband to remote communities.
The number of mobile phone users in Africa has multiplied 33 times since 2000 and in the next five years, it is likely that almost every adult African will have a mobile phone. Over 50 percent of urban Africans are already online, a figure that is likely to grow rapidly over the next decade.
“While there is still a lot to be done the overall direction that Africa is moving in is overwhelmingly positive,” said Tshabalala. “US companies can do very well in Africa provided they put in the effort to understand the continent’s markets in detail, rather than looking at the continent as a single, homogenous entity.”