Posted at 1:54 PM
Guest blog post by Jack Leslie, Chairman of Weber Shandwick, Chairman of the U.S. African Development Foundation, and a member of the President’s Advisory Council on Doing Business in Africa
The integration of the African continent in the global economy is one of the most significant — and, to me, energizing — trends of our time. Companies looking for the next great business market to invest in or sell goods and services are flocking to Africa — and for good reason.
Important underlying factors are in place to support long-term sustainable growth, rising incomes and economic diversity. In an aging world, Africa has the advantage of a young population and will soon have the world’s fastest rate of urbanization. Africa’s young workers are highly entrepreneurial and increasingly skilled and educated. Within two decades, Africa’s workforce will be larger than either that of China or India.
Technology is also creating transformative change across the continent. Smartphones and the software and apps to support them, e-commerce, electronic payments and e-learning are sweeping across Africa and changing the business landscape.
While Africa’s GDP and labor force are today highly dependent on agriculture, the manufacturing sector is also growing and holds tremendous potential. Manufacturing is expected to double from $500 billion in economic output today to $930 billion by 2025. A decade of strong economic growth is driving both business and consumer spending. Africa’s middle class has expanded to 350 million people. Between now and 2025, Africans are expected to spend an estimated $4 trillion — equal to the size of Japan’s economy today.
However, in order for Africa to realize its potential, the U.S. private sector must step up its engagement and investment. Africa receives only three percent of the world’s foreign direct investment (FDI). It accounts for only three percent of the world’s total trade. African governments must work with U.S. and multinational companies from around the world to put in place the rules and incentives necessary for the continent to improve in both these areas.
Africa today has more than 700 companies with annual revenues of $500 million. These companies are growing faster and are more profitable than their peers, but they lag behind similarly-sized companies in other emerging markets such as Brazil, Mexico and India. No African-based company is among the world’s 500 largest firms. The best opportunities for multinational companies to invest in Africa will be in wholesale and retail trade, food and beverage processing, infrastructure development, financial services, light manufacturing and construction.
The U.S. government is supporting Africa’s development in new and innovative ways that involve the private sector. While in the past much of America’s focus has been on development aid, today there is priority to encourage U.S. companies to establish a foothold on the continent. Last week on the side of the UN meetings in New York, President Obama announced new private sector deals by U.S. companies, and new initiatives for the U.S. Department of Commerce to encourage private sector investment.
These initiatives include accelerating U.S. investment in Africa’s electricity sector and energy infrastructure; investing in skills and vocational training, and improving air transportation links between Africa, the U.S. and Europe. There is also a need to negotiate harmonized tax treaties that promote foreign investment. Earlier this year, the U.S. Congress renewed the African Growth & Opportunity Act (AGOA) to expand U.S. trade with Africa.
Africa is a complex market of 53 countries with different political, economic and cultural systems. There is no single strategy that will drive economic growth everywhere. But investing in Africa is considerably less risky than in years past. Governments are more responsive, accountable and transparent. Economies are diversifying.
In my capacity as Chairman of the U.S. African Development Foundation, I have seen first-hand the power of African entrepreneurship, and the eagerness of the continent’s young workforce to partner with investors from the U.S. and around the world. As Chairman of global communications and engagement firm Weber Shandwick, I know many of our multinational clients are already engaging Africa in ways that benefit both their business and local economies. And as I join the President’s Advisory Council on Doing Business in Africa, I look forward to doing my part to bridge the private and public sectors around Africa’s growth.
Africa is the continent of the future. I would encourage U.S. companies to update their global business strategies today to ensure they are positioned to take advantage of Africa’s rising.