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The Case For Africa as the U.S. Top Trade Priority
How to engage Africa and create critical economic fuel
Wednesday, May 29, 2019
The global view of Africa is that it is the future economic engine of the world due to arable land, natural resources, workforce and market buying power. The current reality is African imports/exports are only about 1% of US trade. What is the impact on the US Economy if this engagement does not increase and what are the support mechanisms that can enable greater trade and investment.
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Here are the presentation from presenter's topic.
Engaging DEC’s and Other Resources in Support of Africa Trade
Presented by: Melissa Sanderson
Digital Access as a Pathway to Greater African Trade and Investment
Presented by: Philip Thigo
Disastrous Impacts of Status Quo on the US Economy
Presented by: Dr. Gbadebo Odularu
A Vision of Economic Change for US and African SMEs
Presented by: Quinton Scholes
You Had Questions, We Have Answers
The views and opinions expressed in this presentation are solely those of the presenter and do not reflect those of Africa Business Portal, Commerce Ghana LLC, or its officers, directors, or employees (“Africa Business Portal”). Africa Business Portal does not guarantee that the information shared is accurate or complete and does not endorse any opinion that may be presented. The information shared in this presentation is not intended to be advice provided to any specific individual to invest any particular investment opportunity. Africa Business Portal is not responsible for any actions resulting from the use of the information shared herein.
How is it possible for African countries to have access to commodity market in the US which will boost the economic success of SMEs in Africa?
I am assuming that by commodity markets you mean the US stock market. There are many foreign companies listed on the New York Stock Exchange, but a listing there requires large capitalization, a membership fee starting at $50k and (depending on the industry segment) sometimes a physical US presence.
However, the requirements are somewhat less stringent for so-called penny stocks, which is how most SMEs are listed, at least initially. There is still a membership fee but last time I checked this was $5k, capitalization requirements can be as low as $500k (many companies raise this via initial private bond offerings or Angel Investors). There are trading caps not only on volume but value – so if your stocks passes the cap value you could either have to do a stock split or move up to the full market.
How do I find trusted professionals on the Africa side?
Well, African members of Africa Business Portal (ABP) are trustworthy, as they belong to reputable organizations on the Continent, such as Chambers of Commerce or regional trading blocs. However, you always can check also with US Embassies in the country in which you are interested: the Economic Officers and/or Commercial Officers are usually very well briefed on local companies and their track records and if not already aware often are willing to check them out.
The African Continental Free Trade Area (AFCTA) - How does this benefit African countries?
The AFCTA is a major accomplishment for the Continent because it provides for reducing bottlenecks at border crossings. For instance, if someone is shipping from S Africa to Ethiopia, any member States of AFCTA will (once fully implemented and in-place) recognize one shipping certificate for sealed contained and will not (except in case of suspicious activity) hold that container up by subjecting it to further Customs inspection at each border. This naturally reduces cost, improves transport times, improves customer service and reduces corruption. However, it still will take some time to have the enabling legislation enacted in some remaining countries, and additional time for all countries to purchase, install and train Customs officials in the new procedures and equipment.
What are the new approaches to improve trade and investment from the USA into Africa?
The Administration has established a new program called Prosper Africa, and as part of that will be consolidating some of the existing USAID funding and functions into more commercial aspects.
What can attract investors to the Agribusiness sector in Africa given its advantage of arable land and young workforce?
Basically there are two issues holding US investors back from this otherwise enticing sector. First (seemingly as always), lack of infrastructure connecting arable zones to ports; related, lack of processing and storage facilities at ports to help ensure freshness while shipping to foreign markets. The second is the complexity of land laws/rights in Africa generally. Investors are rightly concerned that although they might have a contract with the central government of a country, local tribes will assert tribal prerogatives to demand “lease” payments in addition to whatever contractual payments have been made already to the central government.
What about AGOA ? Is it part of the councils policy framework?
NDEC is Washington based and it places huge efforts on U.S’ exports which U.S. – Africa business via AGOA could leverage upon, especially within the agrifood landscape!
As you no doubt know, the AGOA is a separate program from the NDEC organizational structure. At this time NDEC is not actively lobbying on AGOA issues, although at some point the program renewal may become a focus.
As we move to the use of lithium-ion batteries, how can we ensure that cobalt is produce sustainability in Congo? And coltan in the production of smartphones and laptops?
There is an increasing need for U.S. and African businesses to create an innovative policy and business framework around coltan value chain development as it relates to the global production of smartphones, laptops, and similar ICT products. This also ties with the strategic role of the ongoing AfCFTA negotiations and how Africa could leverage on its growing regional value chains towards harvesting the low hanging fruits in the global value chains for coltan.
Several monitoring and certification mechanisms already exist at the international level, and companies such as Apple are active participants. Unfortunately, these programs have relatively little impact in the Congo, as only three international companies are producing the product for export. Two of these are participants in the “clean cobalt” verification process – but a great deal of the cobalt of Congo is being mined by artesinal miners outside of any of these structures and sold illegally to brokers in neighboring countries. It would be incumbent on the Congolese government to stop this traffic.
Slated to expire in 2025, is AGOA at risk based on the current administration's tendency to favor two-way deals instead of regional pacts?
Absolutely I think there could be a risk in a second Trump administration, not only because of the preference for bilateral agreements but also because of limited understanding by the Administration of African opportunities and this Administration’s desire to remake everything – thus Prosper Africa might be seen by them as a successor to AGOA.
What strategies and advice would you offer to African countries based on your understanding of the Chinese and Indian push into Africa?
It’s always best to pursue diverse partners, and I think many countries are already trying to do so. There are efforts underway by African countries to impose performance standards on Chinese and Indian investors – and I think that if US companies were to more broadly ended the fray they could quickly discover they are preferred vendors.
The strategies is for African countries to leverage on our skills set, capacities and strengths, while innovatively learning from Chinese and Indian business strategies. Certainly, we cannot wish away the Chinese and Indian push strategies but to learn good business lessons from these.
European countries have had tremendous success leveraging the EU front in trade relations with the US. Is the 2018 African Continental Free Trade Agreement (AfCFTA) at the forefront of your thoughts as a tool in the US-Africa trade relationship?
AfCFTA should be an opportunity for US-Africa trade relationships as for the first time, the US will be able to access the continent as a single market.
Countries are also seeking to invest and look inward in terms of developing infrastructure for intra-africa trade. Currently as you well know, all roads, rails lead outwards. My sense is that we are going to see an opening up countries that have not traditionally been a US trade partners, including a variety of products.
Is the African Continental Free Trade Act going to increase ease of trade between the US and African countries?
In the long run, if successfully and fully implemented, it might help to increase US foreign direct investment into the African continent by reducing barriers for interstate trade between African States. It will not directly affect exports, at least as currently focused, since it is designed to reduce/eliminate Customs bottlenecks between States, rather than develop infrastructure to facilitate exports.
Will US IDFC Africa fund be used for export financing or other trade related initiatives international Development Finance Corporation (the new US development finance agency) that pledge $60 billion for Africa?
Yes. The intention of the program is to supplement/increase activities already available through OPIC and ExIm Bank.
Beyond agriculture, natural resources and minerals, Africa is considered as a great "Service" source. What will it take to turn the page towards a technology mindset where R&D, engineering and innovation attract US participation?
I think this change would begin by fostering cooperation between the US and African Universities. In the US, with the decline of government financing for R&D, universities have emerged as the private sector’s partners. We see this in Arizona with ASU for instance. So that’s why I see partnerships between US and African Universities as a key factor.
How do we address the human resources capacity building, which is also kept for productivity?
As discussed, AfCFTA is going to be the biggest market of its kind in the world, and generating about $3trillion. In addition to the U.S IDFC Africa, innovative financing mechanisms are provided by the AfDB to enhancing Africa’s capacity to trade and do business with the U.S. and other countries in the world!
I think that building cooperation between African and international businesses and African Universities will be key in this regard. Already there are plenty of educated young people – but not necessarily educated in the skills that companies are seeking. This problem also exists in the US and Europe, and both of these are fostering deeper cooperation between the private sector and academia to address the shortcomings. The same could work for African nations.
I've heard a lot about countries like Ghana, Nigeria and Ivory Coast. What are the plans for the other port cities like Sierra Leone , Liberia and Guinea. And are there any Portal member from those areas?
In general, the countries you mention need substantial investment in their port and road infrastructure to be more attractive or competitive. I suggest you check out Namibia, which has a great facility at Walvis Bay.
How do you encourage intra-trade within the 54 African countries?
The new African trade agreement is a great start, as it eliminates barriers, reduces opportunities for corruption, and improves infrastructure.
Trade with Africa revolves around Agriculture, natural resources, minerals, consumer products and services. Deeper integration comes when we consider Africa as an R&D and engineering resource. What will it take to get US companies involved at this lower and more value-creating levels?
There is little doubt that there is a deep creative well in Africa that most Americans are unaware of. My most pragmatic suggestion would be to encourage African government delegations to feature these sectors when they make official visits to various US States and also to Washington, in order to better education American businesses. Another option would be to work with local US Chambers of Commerce based in African countries to get them to encourage companies contacting them to consider these areas. Finally, I would work with the US Commercial service offices, and State Department Economic officers at our Embassies overseas to ensure that they are well informed of these capacities in the countries where they are based.
What laws can African countries implement to attract greater investment in tech and energy financing?
Intellectual Property Rights and copyright laws are extremely important for tech investors. Generally speaking, few African nations have strong laws – and rigorous enforcement – in place to protect investors. For energy – many African countries still insist that investors must partner with state-owned energy companies, ostensibly to ensure that these companies develop new and better technologies. However, such forced partnerships are not enticing to US investors.
Changing laws to do away with such provisions would be helpful. In the energy sector, however, a larger problem exists, namely that few people actually pay for electricity – they regard it as a free service to which they are entitled. In fact, in many countries, government Ministries also do not pay. This makes investment in the energy sector extremely unattractive to US companies, who will not be able to recover their investment much less make a profit.
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