Why US Companies are Investing in Africa

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SEATTLE, Washington — Within the next 10 years, consumer spending in Africa is expected to reach 2.5 trillion U.S. dollars. In fact, over 20% of this spending will occur in Sub-Saharan Africa. This excludes Africa’s largest markets such as Nigeria, countries in South Africa and East Africa. The continent is also experiencing mass urbanization. Experts have linked urbanization to further increases in consumer spending. Therefore, Africa has the potential to become the next big international market and source of investment. Although, international companies often avoid investing in Africa due to reports of corruption, unsafe business environments and poor government policies. Several organizations and government initiatives have now implemented strategies to eliminate these concerns, reduce poverty and promote investments, which is why U.S. companies are investing in Africa.

The African Center for Economic Transformation

The African Center for Economic Transformation (ACET) is a policy-formation organization. The ACET’s goal is to transform Africa’s economy into a sustainable, long-term market. The organization does so by conducting research, developing policies and providing advice to African governments. Fortunately, ACET’s board of directors, management and senior staff consist of a diverse set of employees with decades of experience in this field. Several employees once operated as executives for the World Bank, United Nations and other government institutions. ACET strives not only for economic growth but DEPTH.

  • D: diversification
  • E: export competitiveness
  • P: productivity increases
  • T: technological upgrading
  • H: improved human well-being

ACET would like each African country to strive to accomplish these goals. The organization would also like African countries to expand manufacturing, agricultural and retail sectors. This would generate more reliable jobs and reduce poverty. ACET has also successfully operated in Rwanda with the creation of the African Transformation Forum (ATF). ATF was designed for specialists to exchange information to effectively develop policies and procedures to transform Africa economically. Organizations such as ACET, create and promote safe, reliable and sustainable economies that will attract international investors, create jobs and reduce global poverty. This is another reason why U.S. companies are investing in Africa.

The US African Growth and Opportunity Act

The U.S. Government has also enacted several policies that promote the development and transformation of economies in Africa. One of these policies is the African Growth and Opportunity Act (AGOA). AGOA provides African countries with the ability to participate in business transactions with the U.S. Although, in order for a Sub-Saharan African to be granted access to this opportunity, countries must institute or be in the process of establishing a:

  1. Free-enterprise Economy: This economy must enforce property laws, limit the abilities of the government to manage the economy and utilize an open trading structure.
  2. Rule of Law: The law must treat all citizens equally. All citizens must have a right to a judicial hearing as well as a fair trial. African countries must also allow for the diversity of political opinions, interests and lifestyles to coincide.
  3. Remove Limitations on U.S. Commerce: African governments must safeguard intellectual property, conclude trade debates and support foreign ventures.
  4. Reduce Poverty: Countries must pass legislation to eliminate poverty in respective regions. This includes improving healthcare, developing education systems, upgrading infrastructure and more.
  5. Eliminate Corruption: African officials must pass policies or implement task forces to eradicate corruption and bribery.
  6. Establish Rights for Workers: Countries must limit the hours of work per day, establish a minimum wage and standardize safe working conditions.

This list of requirements incentivizes African countries to transform African economies into a reliable and business-friendly environment. This will generate more business opportunities for international companies, reduce poverty in Africa and stimulate economic growth for the continent. Currently, 38 of the 54 countries in Africa are eligible for opportunities produced by AGOA. The U.S. goal is to increase the number of countries eligible for these services and further promote the transformation of African countries. Many U.S. companies are investing in Africa due to AGOA.

UPS Africa Matters Program

In 2018, UPS announced that they would be working with the U.S. Department of Commerce to develop business and investment strategies in Africa. The corporation acknowledged that various African countries were experiencing immense economic growth. UPS also supported its investment proposal using statistics regarding Africa’s growing middle-class, improvement in infrastructure and policies that stimulate trade. More specifically, UPS applauded the African countries that are actively eliminating corruption. Some of these countries include Kenya, Ghana and Ethiopia. UPS is determined to negotiate a mutually beneficial deal where jobs and opportunities would be created for local citizens. UPS is also confident that as more anti-corrupt policies are passed in Africa, more U.S. companies will invest abroad.

IBM in Africa

International Business Machines (IBM) has a history of investing in Africa. IBM believes that Africa is a viable market for its services. Similar to UPS, IBM supports its investments in Africa due to its mass urbanization, growing middle-class and demand for upgraded services in several sectors. More recently, the U.S. company built two research facilities in Africa. These facilities are located in Nairobi, Kenya and South Africa. IBM built these locations to aid in the research and discovery of solutions to some of Africa’s most troubling issues. Currently, these labs are conducting research for the transportation, education, healthcare, security, water and agriculture sectors. U.S. companies are investing in Africa as more and more solutions are discovered.

Transforming Africa’s economy into a more reliable, sustainable and corruption-free environment will attract international investors. As more investors financially support development in Africa, more jobs will be created, services will be improved and the standard of living will increase. Organizations such as ACET will also assess the policy framework of African governments to ensure that the citizens of each nation are prioritized. U.S. companies are investing in Africa as more organizations, governments and corporations begin to influence Africa for the better.

John Brinkman
Photo: Flickr

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