Bank chief says US wants to be ‘full partner’ for investment in Africa

Out-Law News | 27 Jun 2014 | 10:19 am | 3 min. read

The US government is stepping up efforts to increase trade with Africa and encourage US firms and institutions to invest in the continent’s infrastructure.

Next month, US energy secretary Ernest Moniz will lead a delegation of US business leaders to Ethiopia for a ministerial-level meeting on energy and to discuss investment opportunities and financing for sustainable energy projects on the continent.

Moniz will be joined in Ethiopia by the chairman and president of the Export-Import Bank of the US, Fred Hochberg, who said the bank intends to be a “full partner” in Africa. In April, the bank announced the appointment of 11 members to its 2014 sub-Saharan Africa advisory committee, to advise on the development and implementation of policies and programmes to support the bank’s activities in the region and boost US exports.

Hochberg said: “In the last fiscal year alone, we authorised $604 million to support the export of US products and services to 35 of the 49 countries in sub-Saharan Africa. But we are looking to expand our engagement in order to keep up with economic growth in Africa and support jobs here at home.”

According to Hochberg, growth across Africa translates to “enormous infrastructure needs like reliable energy, railroads, airports, seaports, highways and other sectors that play to America's manufacturing strengths”. Hochberg said US exports have climbed along with Africa’s growth, with exports to sub-Saharan Africa up from $17 billion in 2010 to $21.3bn in 2011, a rise of 24%.

The bank’s authorisations for fiscal 2011 in sub-Saharan Africa were a record $1.4bn, nearly twice the previous year's $812m. In fiscal 2012, the bank’s authorisations for the region were $1.5bn.

South African electric utility Eskom received a $805.6m loan from the bank in 2011 to build the Kusile coal-fired power plant in Mpumalanga province. Hochberg said the bank also provided a $100m loan guarantee in 2011 for South Africa’s purchase of 100 locomotives from General Electric of the US.

However, Hochberg said Africa’s business landscape was increasingly competitive. “We have a lot of competition. Brazil, India and, of course, China are competing like never before in Africa. So are Canada, Germany, France and other members of the European Union,” Hochberg said. “They are investing in African infrastructure and providing concessional financing and tied aid throughout sub-Saharan Africa. They aim not only to gain access to energy and mineral resources. They also see the opportunity to develop major new markets for their goods and services.”

Hochberg said the bank had a “huge wake-up call” in 2012 when China announced loans to African countries worth $20bn up to 2015 to support infrastructure, agriculture, manufacturing and development of small and medium-sized businesses. “These loans include the unspoken understanding that Chinese businesses will get preferential trade terms and investment opportunities,” Hochberg said.

According to the US Department of Commerce (DOC) Ethiopia, where gross domestic product has grown by an average of 9.1% over the past 10 years, is increasingly attractive to US investors. The DOC said it is also increasing its foreign commercial service representation in Africa, by opening offices in Ethiopia, Angola, Tanzania, and Mozambique, to help US firms find new partners and customers.

At the end of May, US commerce secretary Penny Pritzker concluded a trade mission to Africa to increase bilateral trade and investment in the energy sectors of Ghana, Nigeria and Ethiopia.

Twenty US businesses took part in the DOC trade mission, which focused on investment opportunities in the energy sector. US renewable energy company SEWW Energy was selected by the Electricity Company of Ghana to lead a $25m per year upgrade and expansion project in the Greater Accra Region. The project will span seven years and include improvements to the transmission and distribution of electricity in Ghana. SEWW Energy will train Ghanaians to operate and maintain the new infrastructure.

In addition, Baltimore-based Ellicott Dredges “signed multiple deals in Nigeria to provide dredges in-country”, the DOC said.

In August, the DOC and Bloomberg Philanthropies will co-host the inaugural US-Africa Business Forum on the first day of a summit of US-Africa leaders in Washington DC. The DOC said the forum will focus on “private sector engagement in Africa in the areas of finance and capital investment, infrastructure, power and energy, agriculture, consumer goods, and information and communications technology”.

The African Growth and Opportunity Act (AGOA) allows 6,400 products from eligible sub-Saharan African countries to enter the US duty free. According to the DOC, US imports under AGOA in 2013 totalled $26.8bn, and the Obama Administration has pledged to renew the legislation before it expires in 2015.