One of the major initiatives announced during last summer’s U.S.-Africa Leaders Summit was the establishment of the President’s Advisory Council on Doing Business in Africa, a private sector-led body tasked with assisting the President in the development and dissemination of U.S. private sector strategies for taking advantage of trade and investment opportunities on the continent. This week, the Advisory Council, which consists of 15 private sector corporate members representing a range of industries, met with Commerce Secretary Pritzker and other government officials to present its recommendations report. The recommendations focus on three key areas: capital; supply chain efficiency; and infrastructure.
- Increase support for capacity building activities for “African financial regulators, exchanges, and financial market participants.” By drawing investment and increasing access to capital, strong capital markets will play a critical role in ensuring robust and sustainable development on the continent. Africa’s capital markets have undergone “slow but steady” progress over the past few years and performed particularly well in 2014. African sovereigns “went to market with around $15 [billion] worth of bonds.” Equity capital market activity “increased by 40%” in terms of transactions volume and doubled in terms of raised capital. Initial public offerings by African domiciled companies accounted for approximately 20% of the equity capital raised. The Advisory Council has proposed that support of these efforts “could be enhanced through funding of the existing [Technical Assistance Program of the U.S. Securities and Exchange Commission].”
- Equip institutional investors with tools to overcome real and perceived barriers to investment. 2014 was an active year for private investment in Africa. “Driven by several large deals with ties to U.S. investors,” the $8.1 billion in private equity investments was the second highest total ever. However, the Advisory Council has expressed concern that “perceptions and knowledge gaps,” governance risks, insufficient capital to fund large-scale infrastructure projects, and inadequate infrastructure to support economic activity continue to exert an adverse impact on access to capital. The Advisory Council has called for toolkits, outreach events and other assistance in identifying opportunities and navigating challenges.
- Improve regional integration. The Advisory Council is joining a chorus of key stakeholders — the U.S. government, the African Development Bank and the United Nations Economic Commission for Africa — who recognize that improving regional integration in Africa is a high priority. The Council commended the Obama Administration for the U.S.-EAC Cooperation Agreement and has identified the World Trade Organization Trade Facilitation Agreement (“TFA”) as another key instrument for advancing this issue. Although only four WTO members have secured domestic acceptance of the TFA, one of those countries is Mauritius. Furthermore, at the end of this year, Kenya will host the WTO Ministerial Conference, marking the first time that the event is being held on the continent. Believing that these developments present a chance for Africa “to show global leadership on trade facilitation,” the Advisory Council has recommended that the U.S. government “foster support and adoption” for the TFA across the region.
- Focus on obstacles to trade in the agricultural, manufacturing and services sectors. The Advisory Council also has expressed specific concern about the significant post-harvest losses experienced by the African agricultural sector. It has called on the Department of Commerce’s Commercial Law and Development Program, the Department of Agriculture, the Trade and Development Agency, and other agencies to remove supply chain inefficiencies and introduce cold chain best practices and standards. In addition, the Advisory Council has recommended “government-to-government dialogues, including with Regional Economic Communities to address localization barriers” that inhibit market access in the manufacturing and service sectors and industrialization more generally.
- Seize the “enormous opportunity” that Africa’s infrastructure gap presents for partnership between U.S. and African public and private sectors. Although “closing the infrastructure gap is vital for Africa’s economic prosperity and sustainable development,” the costs of achieving this goal are estimated to be in the trillions. Recognizing the opportunity for the U.S. private and public sectors to work with their African counterparts to address this sizeable deficit, the Advisory Council believes that it is “critical” that the government support “a focused mechanism for driving action and ensuring broad U.S. company participation.” Chief amongst its recommendations in this regard is the creation of a U.S.-Africa Infrastructure Center that brings together public and private sector resources “to identify, vet, prioritize, and develop a unified approach to compete for critical projects.” Such a body has the potential to vastly increase the competitiveness of U.S. companies pursuing infrastructure project opportunities in the region. The Advisory Council has identified healthcare infrastructure as “a key area with significant opportunities.”
Throughout the report, the Advisory Council stresses that increasing U.S. commercial engagement with Africa will require not only interagency coordination but also ongoing collaboration with the private sector. From Secretary Pritzker’s highly positive reaction to the recommendations, it is clear that U.S. companies will play a central role in what President Obama has called “a new chapter in U.S.-African relations.”
This post can also be found on Cov Africa, the firm’s blog on legal, regulatory, political and economic developments in Africa.