US-African relations were a highlight of the Summer Forum agenda. Today, Africa’s economic growth rates approximate those of Asia, and Africa is likely to become the world’s fastest growing economy of any continent over the next 5 years. Pascal Agboyibor, a leading authority on African projects and financings relating to energy, infrastructure, mining and agriculture, reported on how Africa is evolving, examining issues related to economics, trade, and immigration, and how these trends affect and are affected by US policies. The Forum discussed African economic opportunities and the potential for US-African partnerships.
Mr. Agboyibor noted that usually the world hears about the challenges Africa faces, its diseases, conflicts, and economic problems. In contrast, he reported that there is a movement of transformation at every level in Africa. As an expert on African affairs, he is well-placed to report on the positive changes occurring on the continent.
He reminded the Forum that Africa comprises 54 countries (55 with Western Sahara) whose differences are extreme. Africa’s total population is 1 billion people, ranging from Nigeria with 190 million people to tiny São Tomé and Príncipe with 200,000. The rate of population growth also differs by country, doubling in 12 years in South Sudan while Tunisia will take 67 years to double its population. Infrastructure development varies dramatically, with South Africa having a sophisticated infrastructure, while other countries suffer in extreme poverty.
Africa has a high economic growth rate: 45 countries show 4%-5% GDP growth and some countries manage a 10% GDP growth rate, despite serial wars and terrorism. He contrasted this with France’s GDP growth of ~1%. Projections for the next 30 years see Africa’s GDP growth steadily rising.
Attracted by this growth economy, companies and countries are working to gain market share in Africa. In countries like Kenya and Uganda, structural reforms have been made, leading to significant economic growth and opportunity.
Growth may be a constant, Mr. Agboyibor noted, but events such as terrorism, the Ebola crisis, and immigration can impede that growth. North Africa, for example, is currently experiencing slower growth as political issues and terrorism interfere. The 10,000 deaths caused by Ebola also had a devastating economic impact, costing the 4 small countries that were hardest hit more than $1.4 billion, and Ebola eradication is still a challenge in Guinea and Liberia. Immigration is another drain on the economy as people seek to escape terror and poverty.
“The journey to freedom is challenging. But Africa has 1 billion people working to change the situation on the ground,” Mr. Agboyibor reported.
One of the factors contributing to Africa’s healthy economic growth rate and making it a more attractive trading and investment partner is the emergence of OHADA⎯a uniform code of business laws and implementing institutions now adopted by 17 West and Central African states. Mr. Agboyibor played a key role in the development of OHADA, a French acronym that translates into English as "Organisation for the Harmonization of Business Law in Africa.” It was created on October 17, 1993 and is open to all states, whether they are members of the Organisation of African Unity or not.
OHADA includes exclusively business-related laws (or Uniform Acts) that are legally binding without transposition in the member states and that take precedence over national laws. It implements a dispute resolution system through the creation of a supranational court: the CCJA, the French acronym for “Cour Commune de Justice et d’Arbitrage.”
In addition to OHADA, a variety of risk mitigation policies has improved the investment climate in Africa, including the development of the Multilateral Investment Guarantee Agency (MIGA) and the International Development Agency (IDA), and emergence of and bilateral investment treaties. Anti-money laundering legislation is asserting the rule of law and regularizing business practices.
In the last 20 years, the emergence of African companies as significant players globally, across the continent, and regionally, has been key to the transformation of Africa, exerting pressure to develop infrastructure that would enable integration of trade inside Africa.
The Programme for Infrastructure Development (PIDA) includes major continent-wide and regional projects in energy, transportation, water management, and information and communications technologies are transforming the face of Africa, forging physical and economic links among countries.
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The face of Africa is changing daily, and Mr. Agboyibor updated the Forum with a brief review of the dramatic changes wrought by the 6 regional economic and monetary unions that are shaping the new Africa.
The West African Economic and Monetary Union (known as UEMOA from its French acronym), with 8 member states and more than 80 million inhabitants, 60% of whom are under 25 years of age, holds one-third of the GDP of West Africa. Its member states share the CFA franc (BCEAO) as a common currency. This union has liberalized financial services, regulating banking and financial activities, adopting common legislative provisions and uniform laws, creating a banking commission and a regional public savings and capital markets council, and enacting uniform foreign exchange regulations.
The Economic Community of West African States (CEDEAO), the other western regional alliance, is a 15-member regional group established in 1975 to promote economic integration in all fields of activity of the constituting countries. This is an integrated and borderless region where people have freedom of movement, and macroeconomic policies and private sector have been harmonized toward achieving economic integration.
The Central Africa Economic and Monetary Community (known as CEMAC from its French acronym) also promotes economic integration among countries that share the CFA franc (BEAC) as a common currency and has implemented financial and banking conventions. Foreign exchange regulation is similar in each member state, but differences remain because they are determined at the national level, and these regulations are still being harmonized.
The East African Community (known as EAC) seeks to deepen co-operation among its 5 member states in political, economic and social fields for their mutual benefit. They participate in a customs union and a common market.
The Southern Africa Development Community (known as SADC), with 14 member states, promotes socio-economic cooperation and integration as well as political and security cooperation through 26 legally binding protocols dealing with issues such as trade, energy, mining, defense, health, and the establishment of a free trade area.
The Common Market for Eastern and Southern Africa (known as COMESA) is a free trade area stretching from Libya to Zimbabwe, including 15 member states. It plans to become a customs union in the future and, to date, has eliminated tariff and non-tariff barriers and created a free trade area.
In 2008, after negotiations with the SADC and the COMESA, the EAC agreed to an expanded free trade area, including the member states of all 3 unions.
Trade from the European Union (EU) to Africa has decreased in recent years, while China’s trade is increasing, and the US holds steady. China has a $200-billion market share in Africa compared with America at $70 billion.
Mr. Agboyibor discussed 4 sectors that offer robust opportunities for the US and global investment: energy, extractive industries, agribusiness, and communications. In the energy sector, 500 million Africans have no access to electricity, and power plants are being built to meet this need.
Africa is rich in natural resources and improvements in extractive technology make this a prime target for foreign direct investment (FDI). Today, African agriculture is the domain of small farmers but there are vast stretches of open space that would be ideal for organized industrial agribusinesses.
Africa’s current population is 1 billion; in 30 years, that number will double. This represents a huge market for telecommunications and Internet opportunities. “There is more telecommunications development in Africa than in the EU,” Mr. Agboyibor said. “People may not know how to read, but they make payments using mobile phones.”
Numerous US federal initiatives and public-private partnerships are working to increase trade and develop more commercial relationships with Africa.
Since 2000, the African Growth and Opportunity Act (AGOA) has created a duty-free market for African goods and offered incentives for African countries to continue their efforts to open their economies and build free markets.
Trade Africa is a partnership between the US and sub-Saharan Africa to increase internal and regional trade within Africa and expand trade and economic ties among Africa, the US, and other global markets. American support for the development of Africa’s economic growth is a strategic decision. For both the US and Africa, the teaming generates new export markets for goods and services, allows for new job opportunities for unemployed and disaffected youth, and improves the overall business environment, making conditions more appealing for private investment.
The Overseas Private Investment Corporation (OPIC) is the US government’s development finance institution, which mobilizes private capital to help solve critical development challenges and, in doing so, advances American foreign policy. Sub-Saharan Africa has been a priority region for OPIC with 22% of funds invested there in 2013. During the past decade, OPIC has supported over $1 billion in power projects across Africa and currently has more than $4 billion in investments there with conventional, solar, and geothermal power-generation projects in Kenya, South Africa, and Togo.
The Power Africa Initiative is an OPIC-led initiative with 6 African countries, including Ethiopia, Ghana, Kenya, Liberia, Nigeria, and Tanzania, designed to double access to power in sub-Saharan Africa. More than two-thirds of the population of sub-Saharan Africa is without electricity, and over 85% of those living in rural areas lack access.
According to the International Energy Agency, sub-Saharan Africa will require more than $300 billion in investments to achieve universal electricity access by 2030. Power Africa will add more than 10,000 megawatts of cleaner, more efficient electricity-generation capacity, which will increase electricity access by at least 20 million new households and commercial entities with on-grid, mini-grid, and off-grid solutions.
The Millennium Challenge Corporation (MCC) is an independent US foreign assistance agency that has the goal of reducing poverty in developing countries through supporting economic growth. Of the MCC’s 29 signed compacts, 16 are with African countries, spanning the continent and totaling $6.4 billion—about 55% of the MCC’s total compact portfolio, plus a $375-million, power-sector-focused compact with Benin. The compact includes the corporation’s largest power-generation project, its largest investment in solar power and its largest off-grid electrification project.
Mr. Tom Finneran (Moderator): How are Africa’s ambitious infrastructure plans being financed? Are funds coming from China or the US or from the countries themselves?
Mr. Agboyibor: Funding requires a combination of sources. The main source is the traditional route, borrowing from the World Bank at a low rate of interest to be repaid over a long period. A second source is through concessions to private companies that are allowed to extract resources in exchange for building roads and other infrastructure. The third source is private individuals whose investments are driven by market forces.
Sen. Wayne Neiderhauser (UT): Cooperation is essential among African countries to create infrastructure that allows cross-border integration and trade. Are the African countries moving toward an EU-like model for an African union?
Mr. Agboyibor: Yes, the African Union (AU) is a continental union consisting of 54 countries in Africa (Morocco is the exception), which was established in 2001-2002, replacing the former Organisation of African Unity (OAU). However, the reality on the ground is that most initiatives, especially large projects such as the gap pipeline from Nigeria to the Cote d’Ivoire or the West Africa Power Pool, are undertaken by regional and sub-regional entities. Some countries, such as Senegal, Mali, Togo, and Cote d’Ivoire have integrated into a single financial market and stock exchange.
Sen. Ginny Burdick (OR): There are 500 million people in Africa without access to electricity. What sources are being used to meet this need?
Mr. Agboyibor: The need is for energy NOW, not only for the population but also for industry. Africa wants clean energy, but it must also be cheap. Therefore, there is adaptive timing that will impact the choice of source. Today, conventional hydroelectric is the priority, with gas being a second source because Africa wants to reduce its use of coal. Renewables are currently a small percentage, but the World Bank is supporting renewables.
Sen. Eduardo Bhatia (PR): Europe and China have aging populations and no population growth in contrast to the situation in Africa.
Mr. Agboyibor: Two-thirds of Africa’s population are under 25 years of age, posing many challenges for governments, such as providing housing and jobs. However, with education and training, Africa could be a source of human capital to meet future global needs for workers.
Sen. Ulysses Currie (MD): What has been the impact on the African community of the kidnapping of the Nigerian women by terrorists? [Referring to the April 14, 2014, kidnapping of 276 teenaged girls from their boarding school in Chibok, in Nigeria’s northeastern Borno state by Boko Haram militants. Despite pleas from the international community, a year later, most are still missing.]
Mr. Agboyibor: The whole world responded with impressive solidarity, expressing shock and horror at this outrage. While some abducted women and children have been freed, most are still missing while terrorism in Nigeria has increased, making for a serious threat to that country’s stability. However, Africa and its global partners are determined not to let terrorists win the battle.
Sen. Martin Looney (CT): How many of Africa’s 54 nations have stable governments that would encourage foreign direct investment? Are there political differences among the former French and British colonies that foster differing investment climates?
Mr. Agboyibor: Today, many African countries are stable, in particular Senegal, Cote d’Ivoire, Botswana, and Swaziland. However, stability in other countries is unpredictable. Ten years ago, for example, Mali was a mostly stable country with a constitution and regular elections. But in 2012, a coup d’état disrupted Mali and now, the government is facing terrorist threats.
But African nations understand that the rule and practice of law must be respected to create an environment that attracts tourists and investors.
Pascal Agboyibor is a leading authority on African projects and financings relating to energy, infrastructure, mining and agriculture. Mr. Agboyibor is advising on the financing of the Grand Inga, a planned hydroelectric dam on the Congo River that is expected to increase the continent’s energy output by 50 percent. He advised the Republic of Guinea on a number of integrated mining projects.
Other Foreign Relations articles:
Africa has a high economic growth rate: 45 countries show 4%-5% GDP growth and some countries manage a 10% GDP growth rate, despite serial wars and terrorism.
“The journey to freedom is challenging. But Africa has 1 billion people working to change the situation on the ground.”
– Mr. Agboyibor
OHADA or the Organisation for the Harmonization of Business Law in Africa is making that continent a more attractive trading and investment partner. OHADA is a uniform code of business laws and implementing institutions now adopted by 17 West and Central African states.
“African countries are working to improve the climate for investment. They are building confidence among investors as they embrace and abide by the rules and practices of law.”
– Mr. Agboyibor
Africa: US federal initiatives and
• African Growth and Opportunity Act (AGOA)
• Trade Africa
• Overseas Private Investment Corporation
• Power Africa Initiative
• Millennium Challenge Corporation (MCC)
Sen. Tom Finneran
Sen. Wayne Neiderhauser
Sen. Eduardo Bhatia
Sen. Ginny Burdick
Sen. Martin Looney
Sen. Ulysses Currie
African nations understand that the rule and practice of law must be respected to create an environment that attracts tourists and investors.
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