Africa Becoming Leading Foreign Investment For U.S. Businesses

In one of the toughest global economic downturns in decades, the African continent continues to be one of the leading foreign direct investment destinations for U.S. businesses, according to the Corporate Council on Africa (CCA). In fact, recent data released by the International Monetary Fund (IMF), reveals that while other regions of the world are experiencing economic decline, Africa has experienced significant economic growth over the past five years and is expected to maintain a positive growth rate of 3.5% for 2009.

“The reliable growth that we are seeing in Africa is due not only to the wealth of opportunities available in Africa, but also due to its continued efforts for greater political stability and an unprecedented level of government reform to attract foreign investment,” said CCA President and CEO Stephen Hayes. “Africa has proven itself to be an essential asset for companies across many business sectors.”
Industries that represent promising growth sectors in Africa include:

Financing – While global foreign direct investment inflows worldwide fell by an estimated 21% in 2008, FDI inflows to Africa grew by 15% to $61 billion in 2008.

Health - In the next few years, Africa will need 550,000-650,000 hospital beds, 90,000 physicians, 500,000 nurses, and 300,000 community health workers. The private sector has the potential to deliver between 45 and 70% of this needed increase in capacity. By 2016, the African healthcare market is projected to double, demanding an additional $25-$30 billion in new investments over the next 7 years.

Energy - Africa contributes more than 19% of U.S. crude oil imports and many analysts predict that it will provide more than 25% of U.S. imports by 2015. In 2008, Nigeria, Algeria, Angola, Chad, Libya, Equatorial Guinea and Gabon were respectively the top sources of U.S. oil and petroleum product imports from Africa.

Power – According to the U.S. Department of Energy, demand for electricity in Africa is expected to grow by more than 50% over the next 20 years. This growth will come not only from harnessing the large amount of natural gas that is currently being vented or flared by gas producing nations across the continent, but also from the implementation of new technologies and innovations being developed by the private sector.

Tourism - In 2007 the sector generated close to $90 billion in economic activity and is expected to exceed $185 billion within the next 7 years for the region, demonstrating positive growth and investment opportunities.

Agribusiness – With nearly 70% of Sub-Saharan Africans involved in agriculture or agriculture-related business and as much as a third of GDP being derived from agriculture, growth in Africa is founded upon growth in agriculture. Sub-Saharan Africa’s agricultural exports totaled $25.3 billion in 2006, an increase from $14.7 billion in 2000.

Natural Resources Development – Africa supplies half the world’s diamonds, a third of its gold, more than three-quarters of its platinum and palladium and accounts for about 12% of world oil supply.

Technology - Internet use in South Africa increased by 12.5% in 2008. The number of people in South Africa using internet is expected to double by 2014. In addition, mobile communication subscriber rates are expected to grow. In Kenya alone, subscriber numbers are expected to rise 95% by 2013. As for landlines, Africa accounts for 12% of the world’s populations but hosts only 3% of the world’s telephone lines.

To advance trade and investment flows between the U.S. and Africa, CCA is hosting its 7th Biennial U.S. – Africa Business Summit at the Walter E. Washington Convention Center in Washington, D.C. from September 29 – October 1, 2009, to which senior U.S. officials, including President Obama and Secretary of State Hillary Clinton, have been invited. In addition, United States Trade Representative (USTR), Ambassador Ron Kirk will be in attendance.

During Secretary Clinton’s trip to Africa last week, she applauded CCA’s efforts to forge new, mutually beneficial private sector partnerships between the U.S. and Africa. The three-day event will include more than 50 industry-specific sessions, with a focus on the most promising business sectors – agribusiness, financing, health, infrastructure, natural resources development, power and tourism. These sessions will include dialogue among U.S. and African business and government leaders worldwide.

“American businessmen and women don’t always think of Africa as an attractive and potentially lucrative market,” said Hayes. “Yet, we know that international trade between the U.S. and many African countries is increasingly becoming an important part of a company’s portfolio. The U.S. also benefits when we import goods from Africa, which leads to enhanced consumer choice and job creation here at home. The Summit will speak to these issues.”

Summit participants will hear about the latest financing options, meet African heads of state and key government officials, and learn about the U.S.-Africa policies of the Obama administration. They will also have the opportunity to network with African and U.S. private sector and government representatives and identify specific growth areas that are ripe for investment.

The United States And China Battle For Africa’s Oil Trade Market

The battle between China and the United States over Africa’s oil and gas resources is becoming more and more intense,” says Patrick Morris, President and CEO of Gold Star Resources Corp., a Canadian-based energy resource company targeting ‘onshore’ energy resource opportunities in Liberia, Cote d’Ivoire and Ghana. The company recently signed a Letter-of-Intent with Bengal Bight Ghana Ltd. to acquire 100% interest in the hydrocarbon rights of Bengal’s 1,000 sq. km. Tiampoum mining concession in Cote d’Ivoire, near the border of Ghana. Gold Star also recently disclosed that it acquired International Resource Strategies Liberia Energy, Inc.

According to Morris, “The International Energy Agency now projects that China’s net oil imports will soar from 3.5 million barrels per day in 2006 to over 13 million barrels per day by 2030. China already receives 60% of Sudan’s oil exports. While the U.S. today is still the number one importer of Africa oil, China is quickly closing the gap and has already sped past Great Britain and France to emerge as Africa’s second largest trading partner. China’s industrial growth has made that nation the second largest consumer of oil worldwide. There’s no question that China is winning more and more of African oil as each month passes.”

Morris also pointed out that trade between Africa and China has grown about 30% in the past ten years. “Based on substantive government reports, trade between Africa and China will exceed $100 billion by 2010,” the Canadian oil executive predicted. “The United States and China will now be in an intense competitive race for the lion’s share of this trade market. Both nations will be pouring billions of dollars into rebuilding Africa’s infrastructure including transportation, medical and educational projects. These projects go hand-in-hand with the African oil scramble and will ultimately benefit the African people and their economy over the next 20 years. China is using the African oil and gas markets to rapidly surpass the United States from a geopolitical and economic standpoint.”

Global Oil & Gas Exploration

According to industry research firm IBISWorld, Africa and the Middle East are expected to account for about 34% of global oil and gas production in 2009, up from about 32% in 2004.

The oil and gas industry’s main products are crude oil and natural gas. Crude oil is expected to account for 67% of global output by value in 2009 and natural gas for the remaining 33%. The share accounted for by oil peaked at about 78% in 2008, reflecting the relatively strong growth in oil prices compared with gas prices.

To view IBISWorld’s full report on Global Oil & Gas Exploration and Production, click here.