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US has lost trade ground in Africa – Kelly

US deputy commerce secretary Karen Dunn Kelley says America has lost its trade ground with Africa to the increasingly sophisticated but too often opaque business practices of foreign competitors.

During the Corporate Council on Africa’s US-Africa Business Summit in Maputo, Mozambique on Wednesday, Kelly noted that Africa had continued to rise and the continent’s gross domestic product growth forecast was projected at four per cent this year, up from 3.5 per cent in 2018.

The US has since 2017 highlighted Africa’s spectacular rise, noting the explosive economic growth, the rapid urbanisation, and the massive expansion of Africa’s consumer class.

She said, according to the African Development Bank, Africa was the fastest growing region in the world after Asia.

“In addition, the International Monetary Fund forecasts that, this year, six of the top 10 fastest-growing economies in the world will be in Africa. I’m confident that, in the next five years, Mozambique will be on that list,” Kelly said.  “In that spirit, yesterday [Tuesday], I had the privilege of experiencing the signing of the Final Investment Decision for a 20-billion-dollar investment, the largest in Africa’s history, by the US company Anadarko. This is a transformational investment for Mozambique and for the African continent at large.”

She said in 2017 the US raised a critical question that decision makers in Africa, would have to grapple with in the coming years, that’s: “As these upward growth trends continue, with what types of partners do you want to collaborate?”

Kelly said the US government had sustained its commitment to the African continent, by continuing to serve as the world’s largest donor of foreign aid, providing over $9 billion dollars a year to support Sub-Saharan Africa.

 

“When it comes to trade, however, there is room for great progress and opportunity. US exports into Africa have decreased by 32 per cent from their 2014 high. And we want to work with you to better understand how to reverse this trend,” she said. “We know that American companies offer an unrivaled value proposition. Yet, we have lost ground to the increasingly-sophisticated, but too often opaque business practices of foreign competitors.”

Kelly said there were many reasons for the decline in US trade.

“Within the United States, the US government’s export credit and other financing tools were sidelined or not optimised for current challenges. Many US small and medium sized enterprises have been unaware of the US government’s export, investment, and risk-mitigation tools. And, the US government’s personnel in Africa too often worked in silos,” she said. “Obstacles for US companies within Africa are also substantial. The President’s Advisory Council on Doing Business in Africa or PAC-DBIA noted in their 2018 report, “one of the main reasons US firms are not winning projects in Africa is because they are not competing.” The PAC-DBIA Council also identified a number of constraints US companies face in doing business on the continent, including structural issues such as, developing infrastructure, actual and perceived risks and lack of data to calculate risks; financial issues for example, underdeveloped capital markets, currency volatility and lack of access to US dollars, limits on foreign banking and high costs of foreign and local borrowing; regulatory and rule of law issues, complicated laws and regulations, lack of transparency, and trade barrier issues such as, costly and time-consuming delays in customs practices and local content requirements.”

Kelly said to address those challenges, the Donald Trump administration launched a series of important trade and investment initiatives between the United States and Africa.

In October 2018, President Trump signed the “Better Utilization of Investments Leading to Development” or BUILD Act into law. This established the new US International Development Finance Corporation (DFC), which doubled the cap on their financing opportunities; and strengthened the focus on new frontier markets, including those in Africa. Congress recently reinstated the US Export-Import Bank (EXIM) Board quorum in May 2019. She said the Trump administration was also expanding efforts in Africa to promote procurement practices focused on best value.

Kelly said the United States Department of Commerce had also signed Memoranda of Understandings (MOU) with the governments of Cȏte d’Ivoire, Ethiopia, Ghana, and Kenya to increase bilateral trade and investment.

 

On Thursday, Mozambique also signed a Memorandum of Understanding with the US designed to collectively identify priority projects in key sectors.

“The United States will then share that information with US companies to pursue the identified projects, as well as identify US government resources,” said Kelly. “The MOUs also establish a forum for the governments to address and resolve business climate issues. We know that the US government can and must do more to capitalise on the competitive advantage of US companies and the entrepreneurial spirit of the African people.”

She also explained the Trump administration’s new signature initiative, Prosper Africa.

“The goal of Prosper Africa is quite simple: We seek to substantially increase two-way trade and investment between the United States and Africa,” Kelly said.

She said Prosper Africa would synchronise the capabilities and initiatives of the 15 plus US government agencies.

“We will ensure that our efforts to facilitate company deals are coordinated with technical assistance and capacity building and facilitated by timely policy engagement. This will provide an easy-to-use, one stop shop,” Kelly said. “Second, Prosper Africa will help facilitate transactions. We will modernise and coordinate the resources of US agencies to help US companies better identify commercial opportunities in Africa, taking advantage of the Commerce Department’s professionals in over 100 US cities.

“Prosper Africa will build African capacity to encourage private-sector led economic growth and work to remove trade barriers that inhibit US companies from taking advantage of business opportunities in African markets, and often impeded the growth of African companies as well.”

Kelly said Prosper Africa was not a traditional aid programme, but rather an ambitious new programme squarely focused on expanding trade and investment relationships between the US and Africa.

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