Washington: As Barack Obama concluded the biggest ever meeting by a US President with African leaders, US businesses are searching for opportunities on the continent after a decade of entrenched Chinese investment.
Obama’s administration sought to use the US-Africa Leaders Summit that ended in Washington on Wednesday as a way to spur investment in a continent that holds some of the richest mineral deposits, fastest-growing economies and a burgeoning middle class. While China has stolen a march on the US, with its trade with Africa surpassing $200 billion last year—more than double that of the US—contrasting investment styles mean American businesses have the potential to profit.
“Does America want to invest in infrastructure in roads? Probably not,” Bob Collymore, chief executive officer of Safaricom Ltd, East Africa’s largest mobile-phone operator, said in an interview in Washington. “I don’t think there’s a question of competing.”
Leaders of more than 40 African countries, business executives and US officials pledged to renew efforts to boost investment.
“We made important progress in expanding our trade,” Obama said on Wednesday at a news conference at the close of the three-day summit. The agreements reached during the event will help spur African development and support tens of thousands of American jobs.
Obama said African leaders pledged to step up efforts to reduce trade barriers and promote regional integration.
The Carlyle Group Lp, Blackstone Group Lp, General Electric Co. and the Coca-Cola Co. are among companies that announced $14 billion worth of deals in Africa at the summit. Those investments and US government commitments are part of $33 billion announced this week to support development projects in Africa, according to the White House.
“This should have started much earlier,” Rwandan President Paul Kagame said in an 5 August interview in Washington. If things are done right, the relationship, the partnership between the US and Africa, has the potential to bypass that relationship between Africa and Europe. Also the relationship between Africa and China.
While China’s trade with the Africa surpasses that of the US, Chinese companies are focused on large infrastructure projects on the continent, such as building railways in Uganda and roads in Kenya. China’s Export-Import Bank often provides financing for the projects, with the condition that the construction contracts go to Chinese companies.
Martin Richenhagen, chief executive officer of farm equipment manufacturer AGCO Corp. said US companies in his industry can capitalize on missteps by China.
“Their business model to go to Africa is also not so good,” he said of Chinese competitors on Wednesday at a Bloomberg government breakfast in Washington.
Richenhagen said Duluth, Georgia-based AGCO finds local deals for its tractors in Africa, and it provides parts and training for African farmers.
American oil producers such as Exxon Mobil Corp., Chevron Corp. and Anadarko Petroleum Corp. have the technological edge when it comes to deepwater exploration, while retailers such as Wal-Mart Stores Inc. and YUM! Brands Inc. are seeking to tap a growing consumer class.
“There is a complementary role,” Collymore said on 5 August. “We see American private investors coming into the country, and we don’t see Chinese private investors coming into the country.”
China’s engagement in Africa has been more active than that of the US. Since 2000, China has held five conferences with ministers and leaders from Africa.
A potential hurdle for US engagement in Africa is uncertainty over whether the nation’s Export-Import Bank will be renewed. Some Republicans in Congress want to let the 80-year-old lender’s charter expire next month because it aids major companies like GE and Boeing Co., which they say don’t need the help.
In November, China said it would extend $1 trillion of loans to Africa by 2015, most of it via its own Export-Import Bank, the South China Morning Post reported, citing Zhao Changhui, the lender’s chief country risk analyst.
“American companies are really losing out on opportunities to grow and to create jobs, both here and in Africa as China is delving into Africa head first,” former New York Mayor Michael Bloomberg said on 4 August.
Bloomberg is the founder of Bloomberg LP, parent of Bloomberg News. Bloomberg Philanthropies co-sponsored the US-Africa Business Forum with the US commerce department on 5 August.
In some instances, US and Chinese companies compete for the same contracts. In March, South Africa split a $4.7 billion locomotive supply contract between GE, Chinese companies and Canada’s Bombardier Inc.
“There are going to be areas where US firms and Chinese firms are competing head to head,” Jennifer Cooke, director of the Africa Program at the Centre for Strategic and International Studies in Washington, said by phone. “The US is going to need to take a cue from China and step up that commercial engagement.”
“US and Chinese cooperation on investment projects in Africa is limited because the world’s two biggest economies take different approaches in dealing with issues such as political instability and government transparency,” said Yun Sun, a visiting fellow with the Brookings Institution in Washington.
“China’s investment in infrastructure projects has usually come with no strings attached, while the US is bound by more stringent investment requirements,” she said by phone.
“China’s approach is a big bang, and I don’t believe that Africa will transform because of a big bang,” Joshua Oigara, chief executive officer of Kenya Commercial Bank Ltd, said in an interview in Washington. “It will transform because of simultaneous, many businesses, partnerships across different sectors.” Bloomberg