Until recently, most U.S. companies concentrated investment in Africa’s biggest economies such as South Africa and Nigeria, or those with mineral wealth, like Angola. But as they seek new consumers, U.S. companies are branching out across the continent, according to a Wall Street Journal report.
U.S. President Barack Obama’s visit to Senegal, South Africa and Tanzania starting Wednesday is expected to boost efforts to tap into the continent’s smaller, more fragmented markets, the report says.
Year after year, growth in Africa has been stronger than almost anywhere else and people are finding opportunities beyond the biggest markets in Africa, says Clay Lowery, a vice president at Rock Creek Global Advisors, an economic-policy consulting firm in Washington, who was interviewed in the Wall Street Journal.
Companies that may have plied the Asian markets are now plying Africa, considered a neglected frontier market, in search of new customers.
General Electric Co., General Motors Co. and Proctor & Gamble Co. are three such companies. Others that have been on the continent such as Coca-Cola Co. and Exxon Mobil Corp. are expanding, the report says.
The U.S. African Growth and Opportunity Act has supported African manufacturers, allowing them to export clothing to the U.S. duty free since 2000.
General Electric on Friday agreed to build a 400-megawatt gas-fired power plant in Tanzania, which, like many African countries, needs more electricity to meet growing demand from businesses and consumers, according to the Wall Street Journal report.
Proctor & Gamble is investing more than $150 million in its South African factories so it can sell more diapers and other products in southern and eastern Africa. And General Motors plans to start selling newly licensed Isuzu trucks in Kenya, Nigeria and Angola in October, the report says.
On a trip to Senegal in August, then-Secretary of State Hillary Clinton said U.S. businesses provided “sustainable partnerships in Africa that add value rather than extract it,” a thinly veiled reference to Chinese companies, which, the report says, are “largely focused on resource-related investments to support China’s economy.”
American corporations have long been encouraged to to keep pace in Africa with Chinese, Indian and Brazilian companies already here. But many U.S. companies are just now waking up to Africa’s middle class, estimated by African Development Bank to already be 300 million strong, according to Wall Street Journal.
Some analysts say stronger commercial relationships could strengthen diplomatic ties with African countries, as happened in China, India and elsewhere in Asia.
“We were never focused on Africa in any way,” says Witney Schneidman, a former U.S. diplomat now working as senior adviser for Africa for the law firm Covington & Burling LLP. “Are corporates the agents of change?” she asks in the Wall Street Journal report.
Car sales are growing faster in Africa than in China but Africa accounts for just 1.8 percent of global sales, according to the International Organization of Motor Vehicle Manufacturers, the report says.
General Motors recently licensed Japan’s Isuzu pickup trucks for sale in Sub-Saharan Africa, and Ford Motor Co. is giving managers more say in developing small, inexpensive vehicles attractive to African consumers, the report says.
The International Monetary Fund says by 2018, five of the world’s fastest-growing economies will be in sub-Saharan Africa.
U.S. companies invested $48.5 billion in Africa in the decade through 2011, according to the United Nations Conference on Trade and Development. That was more than companies from any other nation did, according to the Wall Street Journal report. But China and India are catching up, the report says, each pumping billions of dollars into Africa the past few years.