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Corporate Council of Africa (Washington, DC)

Africa: Testimony to Congress Given by CCA President Stephen Hayes Concerning Trade

24 June 2009

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(1)    Look at development as a regional process and not on a country-only basis.  The reality of Africa is that they are becoming more regionally linked.  Major infrastructure projects do not stop at borders but are regional in nature.  If infrastructure is to work in Africa that infrastructure must be compatible regionally and eventually continent-wide.  Work more directly with the regional economic communities to strengthen them as partners and decision makers in the development process.  It is quite possible that by working through regional structures, we might avoid the traditionally burgeoning bureaucracies of individual nations, and reduce the level of corruption as well.

(2)   Use US companies in the development process, from planning to implementation.  The US has some of the best infrastructure and agribusiness processes in the world, yet we are not using this expertise sufficiently in the development of infrastructure and agribusiness in Africa.   It can be argued that the Marshall Plan succeeded for Europe because the public and private sectors of America worked together to develop post-War Western Europe.  We believe that it takes a new public-private partnership to develop plans that support African development as well as helps to bring back the US economy from its current position.

(3)   Review and reorganize key financial institutions essential to the African development and American investment in Africa.  The financing provided by the Export-Import Bank of the United States for American companies wishing to invest in Africa is far too risk-averse to effectively compete with increasing investment from other nations such as China.  For instance, in 2007, the China’s Ex-Im Bank guaranteed loans of $13 Billion to Chinese companies investing in Africa compared to approximately $440 Million by the US Ex-Im Bank.  When you take away the five largest loans provided by Ex-Im, the amount is closer to $100 Million.  US companies will find it difficult to compete with anyone under such circumstances.

The Export-Import Bank of the United States is to be praised for its innovative $1 billion Special Delegated Authority Guarantee Facility for Nigeria and now Angola.  It needs to be just as innovative for the American business sector wishing to invest in Africa.

The Overseas Private Investment Corporation (OPIC) also merits considerable praise as a very  Significant mechanism for US private sector investment in Africa.  We recommend that OPIC be Strengthened as its efforts do provide jobs for Americans engaged in public-private partnership Projects.

Congress also needs to review how the US private banking sector can help American companies wishing to invest in Africa.  At present, it is difficult, at best, for any US company to secure financing for work in Africa.  However, at the same time, the largest bank in Africa, Standard Bank (20 percent Chinese owned) is moving into the American market to help finance American companies wishing to do business in Africa.  United Bank of Africa, out of Nigeria, is also doing the same thing.

We praise both banks, which are CCA members, for their understanding of the potential market in America, and hope that Congress will find ways to encourage US banks to do the same.

(4)   Recognize the potential value of AFRICOM to the economic security of Africa.  For instance, Africa’s fishing reserves are being plundered by the fishing fleets of Europe and Asia.  The drug trade is rampant in West Africa, due to lack of policing, poor security and training.  We need to engage regional and national entities to provide training and equipment.  There continues to be difficulties in the region that provides a growing percentage of US oil needs.  AFRICOM can assist African governments in meeting their own security capabilities through well targeted capacity-building and training programs.

(5)   Coordinate our approach to Africa with our allies and potential allies.  CCA is bringing together the business associations in Europe, Canada and Japan that are dedicated to Africa to discuss stronger partnerships and cooperation at the private sector level.  Governments should also be doing this.

We need to seek ways to partner more creatively with others around the world.

(6)   View AGOA as an investment tool for America and not simply as a development tool for Africa.  China has used AGOA for this purpose in selling textiles to America, as has Germany in selling cars manufactured in South Africa to America.  Very few American companies have benefitted from AGOA as have countries such as China, Malaysia, India and Germany.  By encouraging American companies to invest in Africa, we are gaining for the American economy access to Africa’s regional markets at lower tariffs and can develop products to be shipped to the American market.  Furthermore, by investing broadly in African markets we are insuring longer term mutually supportive partnerships with the countries of Africa.

(7)   Because Congress is currently addressing the issue of trade preferences globally as well as for Africa, I would be remiss in not stating that I think it is very important to protect the gains made for Africa under AGOA.  As noted earlier, AGOA legislation should be extended for at least ten years beyond 2015, and as egalitarian as it may sound, we would caution against extending preferences to all LDC countries.  Many countries, such as Bangladesh and Cambodia already have advantages, and preferences extended uniformly will undercut Africa’s ability to manufacture textiles and apparel, an important core of AGOA thus far.

In any consideration of trade preferences, Congress would be wise to examine the impact of the European Union’s Economic Partnership Agreements with African nations.  Unlike AGOA, these agreements are reciprocal trade agreements which open up African markets to EU exports at preferential terms to the detriment of US exporters and those in more developed African economies such as South Africa and Nigeria.  The EPAs will also certainly weaken the development of the regional economic communities in Africa.  The EPAs threaten to break down cooperation on Africa between Europe and the United States, as well as set back the move towards greater economic cooperation among Africans themselves.

Finally, allow me to express a concern over the issues related to climate change that threaten to set back economic advances of the last decade.  Africa may be facing significant environmental threats to its food and water supply.  Those issues need to be addressed and planned for now.  It is my understanding that the Obama Administration is planning to do so.  Again, I would encourage the Administration to insure that this is a public-private effort.  We have an opportunity to move beyond traditional methods of energy supply in Africa, and shift towards renewable energy, such as solar energy.  We should shift some of our investment into these fields.

If the predictions related to climate change are even somewhat accurate, Africa will also face serious food shortages in the near future.  We need to work with Africa now to plan for its food security so we do not react to food shortages but that we avoid them altogether.  The United States has the agribusiness resources to make a difference in Africa’s food security.  We need to find avenues for investment from the US agribusiness sector that provides greater economic opportunity, as well as food security for Africans throughout the continent.  Nearly every country on the continent is capable of feeding itself.  To do so will require significant investment and partnership between Africa and the United States.

I would recommend that the Obama Administration form a task force or task forces from both the public and private sectors to address the issues of trade policy, investment and food security.  I believe we will have none of these unless we all work together in their solutions.

Thank you.

Stephen Hayes

President & CEO

The Corporate Council on Africa

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