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US tries to secure foothold in Africa’s upcoming boom

Barack Obama will land to not much fanfare from the South African public for his first trip to the country as US president. He comes at a time when South Africans are preoccupied with the health of Nelson Mandela, who remains in critical condition in hospital.

But even without Mandela’s illness, positive interest in such presidential visits would depend on people being assured that the United States is making a firm commitment to Africa’s future.

Obama’s first term in office was largely disengaged from the continent. He visited Ghana for less than a day in 2009.

His second term looked set to be more of the same, until the US realised it was ceding its position to the Chinese, who were making deeper inroads in the continent.

Beijing has surpassed Washington as Africa’s largest trading partner.

The pressure increased when Chinese President Xi Jinping decided to visit Africa as part of his first trip abroad in March, shortly after becoming the leader of the world’s second-largest economy.

While Western nations remain the lifeblood of African development, through aid programmes and trade, the Chinese have been pouring in foreign investment with no political conditions. Even the new African Union headquarters in Addis Ababa is Chinese built.

Most of the world’s fastest-growing economies have a presence on the continent. With many American businesses believing Africa’s boom is just around the corner, there is increased pressure on the US administration to have a policy conducive to commerce.

“Africa has come to a point in its development where it is beginning to be viewed by key partners as an important trade, investment and economic partner,” South African Trade Minister Rob Davies told reporters this week. “We are moving away from the old relationship.”

“South Africa is a very pivotal country. We are the most industrialised country in Africa,” said Davies, stressing his country’s role as a “gateway” to the rest of the continent.

Jeffery Nemeth, the head of the US Chamber of Commerce in South Africa, believes Obama’s visit is vital to building up a stronger, more-committed relationship to Africa.

According to the International Monetary Fund, gross domestic product growth is forecast at 5.4 per cent for sub-Saharan Africa in 2013, and 5.7 per cent in 2014.

“The president’s visit is a very key visit. Africa is the next global economic success story and South Africa plays a key role in Africa fulfilling that vision,” said Nemeth.

More than 120 billion rand (12 billion dollars) in trade takes place each year between the US and South Africa, and the trade balance is fairly even, with Pretoria suffering a small deficit of about 400 million rand. However, South Africa’s dominant position is not secure. The country needs to strengthen infrastructure – electricity supply is one major area – so foreign industrialists can be assured the basics are in place for business to work.

South Africa has struggled to lift many of its poor out of deprivation, after centuries of colonialism and Apartheid. While the economy has grown by 83 per cent since 1994, the unemployment rate is stuck at 25 per cent.

In part, the slow progress is owing to a lack of skills among the workforce. Nemeth, from the Chamber of Commerce, said many US companies struggle to find qualified employees.

Though the AU tries to unite the continent, trade links between African nations are weak at best. Many African nations do more trade with countries in Europe and further abroad than with each other. “As we move forward, two things will assist South African business, not only US business, and those are more open trade and market access and the second is a more efficient logistic system across Africa,” said Nemeth.

For South Africa, a key aspect of this trip is getting Obama to extend the current African Growth and Opportunity Act (AGOA), as it allows some key products from the continent – such as car parts and agricultural produce – to enter the US market duty free.

AGOA expires in 2015. While the programme has enjoyed only limited success, African governments believe the deal is better than no agreement at all with the world’s largest economy.

Shabtai Gold, "US tries to secure foothold in Africa’s upcoming boom," Business recorder. 2013-06-29.