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Can Africa keep its economic winning streak alive?

First Published Aug 05 2014 10:44AM      Last Updated Aug 05 2014 10:45 am

FILE - In this file photo taken Wednesday, Sept. 29, 2010, commuters exit and board a train bound for New York during the morning rush hour in Mt. Vernon, N.Y. Economists have long argued that rising economic inequality has held back the U.S. rebound from the Great Recession. Now, an analysis by the ratings agency Standard & Poor’s confirms it: The widening gap between the wealthiest Americans and everyone else has made the economy more prone to boom-bust cycles and held back the rebound from the Great Recession. (AP Photo/Seth Wenig, File)
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Indeed, this week’s summit is seen as an American effort to regain some of the influence lost in the region to China over the past decade. Next year, the United States hopes to expand a 14-year-old free-trade deal with Africa.

On Tuesday, the Obama administration announced $14 billion in commitments from U.S. businesses to invest in Africa — money to be plowed into construction, clean energy, banking, information technology and other sectors. The money includes a $2 billion investment by General Electric by 2018, $200 million by Marriott and a $66 million commitment by IBM to provide technology services to Ghana’s Fidelity Bank.



In addition, Coca-Cola and its African bottling partners announced an investment of $5 billion, raising to $17 billion Coca-Cola’s investment in Africa from 2010 to 2020.

Before Africa’s continued ascendance can be assured, though, analysts say its countries must resolve some thorny questions. Among them:

— Can it build the roads, railways and power plants needed to sustain its pace of growth?

Rosa Whitaker, a former U.S. trade official and now a consultant specializing in Africa, says sub-Saharan countries need to spend more than $90 billion on infrastructure. Electricity is a big obstacle. Two-thirds of people in sub-Saharan Africa have no access to it. "You can’t do much without power," notes Stephen Hayes, president of The Corporate Council on Africa, which promotes U.S.-Africa commercial ties.

— Can sub-Saharan nations do more business with each other, as nations in more advanced parts of the world have done?

African countries typically conduct only about 10 percent of their trade with their neighbors. By contrast, countries in the Europe Union do about 70 percent of their trade with each other, Southeast Asian countries 30 percent, Whitaker says. Among the reasons for weak intraregional trade: Poor roads and other infrastructure; conflicts and troubled ties among countries; and corruption at customs posts that can delay shipments at the border.

— Can they transition from supplying other countries with materials to generating their own finished products?

Africa traditionally has supplied raw materials — oil, coal, diamonds — and let other countries turn them into valuable goods.

"We have been exporting crude oil and importing petroleum products," notes Nigerian Trade Minister Olusegun Aganga, a former Goldman Sachs executive. "No nation has managed to go from a poor to a rich nation by relying entirely on export of raw materials."

Nigeria’s government has an ambitious plan to industrialize its economy and add value to its natural resources — to turn crude oil into chemicals and other petroleum products and sugar cane into the sugar that Nigeria now imports from South America.

— Can they avoid the so-called resource curse?

Abundant resources have failed to build widespread wealth or stable growth across Africa. Many economists say natural riches have tended to promote corruption and conflict and to stunt development in poor countries. Analysts are studying the East African countries of Mozambique, Tanzania, Uganda and Kenya as they develop newly found reserves of oil and natural gas.

In the past, analysts say, African countries have been out-negotiated and exploited by foreign companies. This time, Cullen Hendrix, a University of Denver specialist in global conflict, wonders, "How can host countries get the best possible deal?"

One encouraging sign, Hendrix says, is that ordinary Africans have grown more assertive about holding their governments accountable for deals they cut.

Assessing Africa’s prospects after a decade of solid growth, Jennifer Cooke, director of the Africa program at the Center for Strategic and International Studies, thinks the region’s nations have "an opportunity right now. But it’s not a guarantee."

"Do they use this moment for economic transformation?"

 

 

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