May 3rd, 2013
02:09 PM ET

Can U.S. companies ‘get’ Africa?

By Bhaskar Chakravorti, Special to CNN

Editor’s note: Bhaskar Chakravorti is Senior Associate Dean of International Business and Finance and founding executive director of the Institute for Business in the Global Context at The Fletcher School at Tufts University, host of the 2012 international “Africa’s Turn?” conference. The views expressed are his own.

The countries we most obsess about from the emerging world – the so-called BRICS – met recently in Africa. Many see this as more evidence of an international scramble for the world’s greatest growth opportunity. But here in the United States, you would hardly know it. Instead, when the continent does come up in conversation, it is often in the context of “help,” conflict, misused development aid and woeful political leadership.

But we are at a turning point.  The old story of Africa as the final frontier is being replaced by a new narrative: one of economic growth and opportunity.  Business, policy and civil society leaders who spoke at our “Africa’s Turn?” conference last October expressed enthusiasm and cautious optimism for its future.

The U.S. perspective of needing to “help” Africa may start to look very dated as the continent experiences self-propelled growth and development led by a growing urban consumer class, enabling technologies such as wireless communications, and an emerging entrepreneurial sector.

The Nigerian finance minister, Ngozi Okonjo-Iweala, offers a simple piece of advice: to help Africa, do business there.  It is time to take such advice to heart.

The U.S. business community ought to have a strong interest in doubling down on Africa. American businesses urgently need growth and a critical route to this is to penetrate the world’s fastest-growing markets. As it is, the U.S. is severely under-represented in such markets. According to a 2010 study by HSBC, only seven percent of the revenues of U.S. multinationals were generated in emerging markets. Africa’s contributions to this figure are significantly lower, even while it has been declared to be the world’s fastest-growing continent.

Measured in terms of trade, less than three percent of U.S. global trade volume is with Africa, and the trends have been downward since a peak in 2008. As a point of reference, consider that China-Africa trade was $127 billion last year, while U.S.-Africa trade was only $94 billion.

But we shouldn’t assume that it will be easy for U.S. firms to close the deal in Africa. One of the problems for American businesses leaders is that because of the absence of past relationships they have relatively little understanding of the markets, the consumers and the broader context of Africa. Many would be surprised to know that there are so many distinct markets and peoples across this vast continent. The generic business perspective of Africa is based on experience in a few “front door” countries, such as South Africa, Nigeria and to a lesser extent Kenya and Ghana.

Complicating U.S. efforts still further is the fact that it does not have the same ties dating back to colonial times like European countries; it can miss out on existing political, cultural and linguistic connections.

The continent appears even more forbidding because of the persistent reminders of worst-case scenarios from countries like Congo. Millions have died or are being displaced there.  While businesses crave access to the country’s abundant natural resources, the U.S. has little background on the socio-political context or even complicated geography of Congo – and our laws, rightly, prevent businesses from operating there. Without an understanding of the regional context, we cannot engage politically or commercially. For many executives, Congo is the predominant reminder of Africa’s inherent riskiness.

Some U.S. firms, though, have seen the potential and are making their move, but they have to learn to adapt to the African context and innovate. Take Yum! Brands and its hopes for a flourishing African KFC franchise. What the company reportedly didn’t plan for was that there was a lack of reliable supply of chickens in the first place! KFC cannot grow by following the traditional management mantra of focusing on core competencies; it has to figure out how to invest in filling the gaps and developing upstream institutions.

However, all is not lost – a small minority of American companies have been on the continent long enough to have developed sufficient “contextual intelligence” to innovate and show the way to others. Coca Cola, for example, has been in Africa since 1929 and has a footprint across the continent. In addition to adapting distribution techniques developed in other emerging markets, Coca Cola has actively invested in closing some of Africa’s many institutional gaps. For example: in collaboration with TechnoServe and the Gates Foundation, it supported Kenya and Uganda farmers in improving their cultivation practices for fruits used in the company’s fruit juices business.

Still, given the political uncertainties and the many institutional voids across the continent, American business will need guidance and leadership not just from successful enterprises, but also from Washington. Yet, with the exception of the White House’s new "strategy" toward Sub-Saharan Africa announced last June, the Obama administration has engaged in little systematic outreach toward Africa. The follow-up "Doing Business in Africa" program will help identify trade and commercial opportunities in Africa and facilitate trade promotion and financing through OPIC, the Ex-Im Bank and USTA. This is all well and good, but it is a modest start and we have plenty of catching-up to do.

Yet, despite all the challenges, U.S. firms’ democratic roots may give them a competitive edge relative to early-mover competitors from nations like China. The U.S. can work to ensure that Africa’s fast growth also results in a real middle-class that flourishes in economies that are diversified beyond purely extractive industries.  But this requires a coordinated strategy connecting American business and geopolitical interests that works together to close the many institutional gaps.  Given the socio-political nature of these gaps, businesses cannot accomplish this alone.

Sure, we can help Africa by doing business there. But as things stand now, American businesses may be in need of some help themselves.

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Topics: Africa • Business

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soundoff (10 Responses)
  1. JAL

    Double down on the Arab Spring, then together we triple down on Africa. We will need much help from China as well.

    May 3, 2013 at 3:55 pm | Reply
    • cbailey2

      The commentary is on the American business sector (read: private sector) not the federal government. If American capitalists have become too dumb to recognize growth opportunities when they see them and too risk averse to make the proper investments, then, yeah, America is in deep, deep trouble.

      May 8, 2013 at 10:42 am | Reply
  2. Karl

    There is an old French proverb saying, "the more things change, the more they remain the same". This is also true of Africa with it's extensive natural resources. 150 years ago, European countries were scrambling to carve out colonies there with Britain and France getting the lion's share of them. Today, led by the U.S., Great Britain and France, this practice goes on.

    May 3, 2013 at 7:37 pm | Reply
  3. rightospeak

    This article represents foundations with an agenda. Nigeria , for your info is a very rich country-more gas and oil that it knows what to do with. While floating in wealth its many former agricultural fields are overgrown with vegetation. They could help other nations in Africa.
    The push to Africa is based on illigal killing of Khadafi and taking over Libya. If you in doubt, read the former politician's book, Cynthia McKinney's book on Libya. She is one of the few who dares to tell the truth.
    Iit is an attempt to recolonize Africa . The French want the gold in Mali.

    May 3, 2013 at 9:56 pm | Reply
    • Quigley

      Thank you, rightospeak. How true that is!

      May 4, 2013 at 1:47 pm | Reply
  4. j. von hettlingen

    There has been robust growth in Africa's economies over the past decade, but that has not solved the continent's economic problems. Over 70% of growth has been driven by natural resources. Exploiting natural resources is capital intensive and doesn't create many jobs directly. Africa has weak manufacturing and agro-processing sectors and lacks value-added processing of those resources, to create jobs. Unfortunately much of the revenues generated end up in private pockets. Governments in many countries have no means to develop their economies.

    May 6, 2013 at 9:57 am | Reply
  5. Mario

    One thing that will enable US companies to become stronger in NATO and US friendly nations: 'limit Asian businesses in USA and NATO'. But to get Africa is not possible for USA, as even Italian companies are stronger.

    May 7, 2013 at 5:41 am | Reply
  6. abdussamad33

    Corporation: An ingenious device for obtaining profit without individual responsibility.

    May 9, 2013 at 1:44 pm | Reply
  7. Tariq Zahran

    Its possible, with given time it can happen, but odds are it wont.

    July 23, 2013 at 6:47 pm | Reply

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