Africa yet a top investment choice for U.S. corporations

…As Obama visits Ghana

Story by Samuel Kofi Ampah

A qualitative survey conducted by Baird’s CMC in partnership with the U.S. Chamber of Commerce has been released and copied theghanaianjournal.com. The report contained damning reasons why US companies are reluctant investing in Africa.

The survey results showed several reasons like a promised return from Africa was not commensurate with the risks other continents, countries, and regions offer, and U.S. executives view Africa as needing excessive work to be an attractive investment choice.

African governments have indicated a willingness to create investment-friendly environments for FDI, and U.S. multinational corporations would typically be expected to take advantage of such environments to invest and grow their businesses in Africa. So why has Africa not attracted more interest from the U.S. business community?

Corporate America stated categorically that Africa must invest in the health and education of the African people to create a large pool of skilled and productive human resources, invest in and maintain infrastructure—transportation, communications, electricity, and security—so that there will be a reliable society in which to operate, build a functioning legal system to ensure the rule of law, transparency, and fair play, create a positive climate for foreign investments by reducing bureaucratic processes, eliminating corruption, and reforming tax systems, irrespective of country of origin and ensure stable political environments that may or may not be based on Western democratic principles.

“In addition, countries and regions in Africa need to sell themselves more aggressively to corporate America. But even if Africa learns to better market itself to U.S. businesses, investors will hesitate because Africa is regularly portrayed in the media as unstable and violent”.

The report stated that until the overall picture stabilizes, most African nations will find it tough to attract FDI. Corporate America named countries like Morocco and Egypt and sub-Saharan countries like South Africa and Nigeria, with proven business potential that can attract some investment.

“However, the investment jury is still out even for these countries, therefore, African government and business leaders should decide how best to overcome the impediments—both real and perceived—to U.S. corporate investment”.

Reacting to factors that influences U.S. corporations to invest in Africa, respondents classified Rule of law, a strong point since according to them does not prevail to the degree required to make Africa an attractive investment. They mentioned destination which they applied to corporate, societal, and criminal law.

According to respondents, Africa does not offer a sufficiently large middle class of consumers or show consistent economic growth that could promise a future market. Most African countries are small and have poor markets, and there are barriers to regional markets—such as taxes and the freedom of movement of people and goods. However, Africa does offer enormous natural resources and that is an attraction.

Risks versus rewards was another factor U.S. corporations looked at. Given the currently perceived risks in Africa, the rewards have to be very high to make it worthwhile to invest. Presently, U.S. corporations say that there are very few visible promises of high future returns to justify significant interest in investing.

Overall, U.S. businesses do not view Africa as an attractive place to invest. The image of lawlessness, corruption, unstable governments, an inadequate infrastructure, uneducated or untrained people, and an unwelcoming government attitude toward business serve as major deterrents.

The survey dubbed the Conversation behind Closed Doors was in two-part, the first, Corporate Conversation, was an inside-the-boardroom survey of attitudes toward corporate investment in Africa among leading U.S. corporations. The information was gathered during a series of behind closed door interviews. All interviews took place from January to November 2008 and were conducted in person by senior associates of Baird’s CMC.

The Second part will be the Public Sector Conversation, to be conducted over the next several months. It is an inside-the-government survey of the responses set forth in part one.

Africa is the world’s second largest and second most populous continent after Asia, with a population nearing 1 billion. It accounts for 14% of the world’s population. More than 1,000 languages are spoken across its 53 countries. In addition, Africa covers 20% of the world’s total land area and contains about 30% of its mineral reserves.

ABOUT BAIRD’s CMC
Baird’s CMC is an international communication management consulting firm, operating in 11 countries with 28 partners employing over 400 people. Baird’s CMC is represented in Washington, D.C., New York, Johannesburg, Gaborone, Harare, New Delhi, Mumbai, São Paulo, London, Newport (Wales), Paris, Berlin, Moscow and Warsaw. Its global research practice has interview panel members in 42 countries.