In Africa, Investments Abound

There's a lot to like, including IT, agribusiness, consumer products, and power.

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A worker from Eskom, a South Africa public utility company, disconnects cables that were connected illegally by residents seeking free electricity in Soweto, South Africa, Thursday, Oct. 28.2010. Illegal connections, to avoid payment for power, or because it is unaffordable by some, is an ongoing problem faced by the company which loose millions annually to the illegal practice. The dangerous practice also comes with a high risk of injury and electrocution.

Stephen Hayes is president and CEO of the Corporate Council on Africa.

It is not difficult to understand why American market share in Africa has dropped significantly over the past five years. While real American investment in Africa is up slightly due to oil prices and increased exploration, as well as a more aggressive posture by some companies such as General Electric, other countries are now far more active in the world's largest developing marketplace.

The reason is more than only China, and for that reason alone, it is wrong to paint China as a villain in Africa. It is not. If anything, China has hastened the development of Africa.

China has become by far the world's largest investor on the African continent, having barely passed the United States in 2009, but since then far extending its lead. It is difficult to know by exactly how much, but some estimates are that Chinese investment in Africa is now more than three times that of the United States. Official China figures do not reflect investment from Hong Kong, from various off-shore accounts, nor from its own growing private sector, which was encouraged to invest abroad two decades ago.

Europeans, long invested in Africa as colonial powers, no longer take their dominance in some countries for granted and have begun many successful efforts over the last five years. France is no longer simply concentrating on its former colonies and Francophone Africa, but expanding its markets to other regions.

[See a collection of political cartoons on the European debt crisis.]

It has increased its investment in South Africa, especially through power generation plants, but is also competing in Lusaphone Africa as well, especially in Angola, one of the world's fastest growing nations economically. While the French government does not work with its private sector as closely as China, they nevertheless have a strong working relationship. Anytime a French leader goes to Africa, he is accompanied by a large trade delegation.

The Indian private sector invested in Africa works poorly with its own government. Private sector investment in Africa has come through India's long-term relationships with the continent, and through its expatriate community living there, especially in east and southern Africa. India's investment has notably been in communications technology, tourism including hotel construction, and general trading. However, it is noteworthy that the Indian government, following the Chinese lead, recently hosted an India-Africa Summit meeting with Heads of State.

[See a collection of political cartoons on the economy.]

Other major investors on the rise are Turkey, largely through construction projects throughout north, east and west Africa; the Gulf States through agriculture and construction; Brazil through investment in its fellow Portuguese-speaking countries, especially in Angola and Mozambique; Korea (construction); Israel (agriculture and technology); Libya (construction, agriculture, banking) and South Africa (consumer products, banking and mining).

Countries such as Malaysia are major investors in textiles and forest products. Russia has also returned to the continent in force for the first time since the collapse of the old Soviet Union with a broad range of investments including mining, forestry and agriculture. Japan, concerned about China's enormous investment in Africa and needing its own resources as an island nation, has begun to be far more active in Africa as well, especially in mining.

Given all this activity, it should not be alarming that U.S.  market share in Africa is significantly declining. What should be of great concern, however, is that U.S. investment is not increasing at a faster rate, failing to keep up with much of the rest of the world. Our lead investment remains in oil and gas, and this will be so for the foreseeable future.

However, there are many opportunities in IT, agribusiness, consumer products, and power, as there remains no country on the entire continent of Africa that is completely meeting its current power generation needs. Its power needs for the future are going to be far greater. Opportunity exists for America. Our government needs to work with the private sector far more closely if our long-term political interests in Africa are to be maintained and strengthened. Africa is rapidly changing. Our political attitude toward the continent isn't keeping pace.

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