Africa offers US firms a compelling trade and investment opportunity - Standard Bank
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Monday, August 4, 2014
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danielmjema.blogspot.com
PRESS RELEASE
US firms are increasingly interested in the commercial opportunities in Africa
JOHANNESBURG, South-Africa, August 4, 2014/ -- Africa
offers US multinationals a compelling trade and investment opportunity
thanks to the rapid economic growth rates being experienced across the
continent along with burgeoning population growth and increasing
urbanisation, according to Standard Bank
Economic
growth in sub-Saharan Africa has exceeded 5% a year for more than a
decade now giving the continent a 4.1% share of global gross domestic
product (GDP), up from 3.4% in 2000. By 2050 one in four of the world’s
population will reside in Africa with at least 60% 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 Mr Sim Tshabalala, Chief Executive of Standard Bank
Group, Africa’s largest bank by assets and market valuation. “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 and 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 the 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.
Nevertheless,
the US still has some catching up to do. While the US is a major
investor in Africa - particularly in information technology,
manufacturing, resources, power, and financial services - trade flows
have advanced on a much gentler trajectory.
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.
Foreign
direct investment into Africa has increased dramatically in the last
decade and a half, and continues to grow. In 2013, FDI to Africa
increased by 9.6% to an estimated $56.6 billion, representing 5.7% 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.
Emerging
economies - and the BRICS in particular – are seizing the African
opportunity. In 1992 China, India and Brazil accounted for just 3% of
Africa’s global trade compared to 25% today. A wide range of firms from
India, Brazil and South Africa are also expanding quickly in Africa,
often with strong support from their governments.
Yet,
while the US may be arriving late to this party, the world’s biggest
economy still offers unrivalled commercial and industrial excellence in
many key fields. The vibrancy of US multinationals, with their proven
track records, industrial processes, established retail networks and
brands, are of immense attraction to the ongoing consumer revolution
taking place across Africa.
US
firms are also increasingly interested in the commercial opportunities
in Africa. Major private equity firms, including the Carlyle Group, have
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,
and Google is working on delivering broadband to remote communities.
“Africa
has come a very long way from its era of aid-dependence,” said Mr
Tshabalala. “The rapidly emerging middle class in Africa is driving
large-scale diversification of Africa’s economies which offers immense
opportunities for companies willing to invest.”
In
Nigeria the middle class has swelled by 600% since 2000. Today,
Nigeria is home to 4.1 million middle-class households, containing 11%
of the total population. Other economies doing particularly well on
this measure include Angola, where 21% of households are considered
middle class followed by Sudan (14%) and Zambia (10%).
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% 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 Mr 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.”
Habari Zingine
Mjulishe Mwenzako
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