President's Message - September/October 2018 Africa eJournal
By Florizelle Liser
I’m writing this at the conclusion of a great event in New York city to celebrate the inauguration of Kenya Airways' first direct flight from Nairobi to New York City. CCA was delighted to host an event October 30 to commemorate the startup of this service between two iconic cities that are critical commercial gateways – and use it as a backdrop to bring together American and Kenyan companies for a Doing Business in Kenya event in New York. This visual image of companies literally on the move is an apt way to capture the busy set of events in Washington and New York in September and October that showcased opportunities in a number of countries, and also continued CCA’s iconic series bringing senior representatives of U.S. and international financial institutions to meet with CCA members on project financing and procurement opportunities in Africa.
One of the countries CCA focused on over this period is South Africa. CCA was pleased to co-host President Cyril Ramaphosa on September 26 in New York as he met with a large gathering of CEOs. He outlined his campaign to attract $100 billion (1.4 trillion Rand) over the next five years. He explained the various steps South Africa is taking to address issues that concern companies, including cleaning up corruption, improving infrastructure and stabilizing government finances. Since his appearance in New York, President Ramaphosa hosted a Jobs Summit in early October, at which companies pledged to invest 100 billion rand over five years and to create 275,000 new jobs a year through 70 initiatives in various sectors. South Africa followed that up with its October 25-27 Investment Summit, at which companies announced plans to invest 290 billion Rand ($20 billion) over the next several years in food, energy, autos, mining and banking projects. Well-known companies made specific commitments, including Anglogold, Vodacom, Sappi and Mondi, Nestle, Ford and Aspen.
South Africa is well aware that it faces a number of serious challenges – first and foremost of which is creating sustainable jobs to reduce the country’s national 27.5% unemployment rate (which is now over 53% for black South Africans). The South African government has also made it clear that it is at the limit of what it can responsibly borrow, and that the government will have to incentivize private sector investment. South Africa is taking difficult steps to reduce the ‘concentration of power’ in key sectors of its economy, which translates in several sectors into reducing the role of State Owned Enterprises. The government is also creating incentives/removing barriers to increase employment and looking to adopt the right regulatory and other reforms to open new sectors. One small, but important, step has been to roll back some of the intrusive visa requirements that stifled tourism over the last several years.
Given the sheer scope of the challenges South Africa faces, it’s clear that the progress announced to date isn’t sufficient. But in many ways, scoring exactly where the government stands on its $100 billion target isn’t the main point. The $20 billion in new investments announced at the Investment Summit is roughly 30% of the country’s annual capital investment. If, as expected, these projects will take 5-6 years to complete, they would add about 5% to the country’s annual capital formation budget -- a good indicator of how well a country is investing in the long-term engines of growth and employment and one in which South Africa’s has long fallen behind its Emerging Market counterparts, trailing at 19% of GDP compared to an average of 25%. Critics have long complained that private companies in South Africa were on an “investment strike,” mainly because they didn’t have sufficient confidence in the direction of the country that they would get their money back with a reasonable return. The early results suggest that Ramaphosa’s actions are beginning to change company attitudes. I expect South Africa will continue to court companies, and I’m delighted that its next outreach effort will be in New York on November 1 with Standard Bank’s “Invest in Tomorrow” conference.
CCA hosted another country looking to reverse negative perceptions and trends at an event on October 16th with CEOs and other private sector executives from Zimbabwe. They emphasized that Zimbabwe is “open for business: and highlighted key sectors including agribusiness, mining, and ICT that are ripe for U.S. and other foreign direct investment. Kenya is also making good progress on its Big Four agenda of providing affordable healthcare, affordable housing, food security, and boosting manufacturing, while Ethiopia’s Prime Minister Abiy Ahmed continues to enact reforms to privatize key sectors including aviation, telecom and banking as well as make it easier to do business.
Opportunities for U.S. companies to invest in these and other fast growing and reforming African countries was the highlight of several CCA events in October – one with the World Bank’s Multilateral Investment Guarantee Agency (MIGA) and another with the new OPIC Director for Africa who highlighted what a significantly beefed up OPIC will be able to do as the new U.S. International Development Finance Corporation established under the BUILD Act signed into law on October 5th.
South Africa, Kenya, Zimbabwe, Ethiopia, and many other African nations have targeted new investments in infrastructure as a critical driver to unlock growth in other sectors. On November 5-6, CCA will host our U.S.-Africa Infrastructure Conference in Johannesburg, which will cover innovative technologies and platforms supporting infrastructure development and financing in key sectors such as transportation, aviation, energy, health and ICT. Infrastructure has been a critical enabler of the significant growth that many African countries experienced over the last decade.
Investments in infrastructure have grown as exponentially as African economies, which is to say multiples higher than in the rest of the world. Despite this, the gap between what’s available and what’s needed remains wide. The African Development Bank estimates $130-170 billion a year is needed in infrastructure spending across the continent just to keep pace with current demands for trade and services. This means that there is a need for smarter, better ways to establish win-win partnerships with U.S. companies. Taken together, it also means there is a bright future for CCA members to explore how they can work together to address the challenges today and build the partnerships of tomorrow.