Doing Business with Africa, Part I

Every man lives by exchanging.”
                                               – Adam Smith[1]

University of Rochester’s economic historian, Joseph Inikori, appears to have successfully challenged the thesis that nations get rich by the power of [their] ideas.[2]  The theory that the wealth of nations results from the imaginative genius of its citizens has found platforms in history classes and textbooks all over the world.  It is usually more succinctly stated to students in senior elementary and freshman courses that it was the scientific inventions and the scholastic breakthroughs that propelled the industrial revolution in Britain in the 17th and 18th centuries.  In more modern times, this belief was popularized, in part, by the late Prime Minister Margaret Thatcher of Great Britain[3], and more recently it was turned into a seminal idea by University of Illinois Professor of economics, history, English and communication, Deirdre McCloskey.  Yet, at least in the case of the West, and in terms of the Industrial Revolution, Inikori has shown—in a monumental work with an overwhelming force of data and historical accuracy—that trading relationships within the Atlantic Basin brought England into its industrial age.

If current debates still show that the jury is out, we need only consider what is seemingly transforming modern Africa.  From at least the 15th to the 19th century, we know with certainty that commerce alone opened up modern relationships between Africa and the world, particularly Western Europe and America (but also between Africa and the Arabian Peninsula).  Therefore, one can only add to such trade, missionary activities or religious evangelism, both Islamic and Judeo Christian.  And that is what we find.  In a pleasant epilogue, we now have trade or commercial activities hand-in-hand with Christian and Islamic exports from Africa to the Western world.  In particular, some of the most vigorous and flourishing Christian denominations located in America and Europe today are African-founded congregations like the Metropolitan African Methodist Episcopal, the Redeemed Christian Church of God, The Anglican Missionary Church, The Apostolic Church, various Tabernacles and the Ethiopian Orthodox Church.  These congregations are in addition to what are called “black majority churches” in England, particularly in London.

And just as Christianity preceded trade in the coming of Europe to Africa—or at least came hand-in-hand with trade—so, too, are the strong elements of the arrival of African merchants and traders to the commercial and service centers in the West, as is so easily detected on television commercials all over American cities these days.  One such strong presence is the Dangote Group, an African-grown global conglomerate doing business in more than half of Africa’s 54 countries, in addition to major cities in the United States and Europe.

At the governmental level, President George W Bush, in a forward-thinking move, signed into law the African Growth and Opportunity Act (AGOA)[4] in 2000, which the Obama administration and Congress just renewed until 2025.  The AGOA provides tangible incentives to American and African merchants and entrepreneurs to ease trade with each other by breaking down the barriers of tariffs and policy restrictions on African exports to the United States.  Accordingly, the AGOA has enhanced market access to the US:

  • The top five U.S. exports to Africa now go to South Africa, Nigeria, Angola, Ethiopia, and Kenya.
  • Of the nearly $38b US imports from Africa, approximately 50% are from South Africa, Nigeria, Angola, Cote d’Ivoire and Chad.
  • Opportunities for American businesses are found in imports of raw materials, fuel products, minerals and metals, agricultural products, textiles and apparels.
  • Beneficiary countries with which American companies have opportunities to do business now include Angola, Nigeria, South Africa, Chad and Gabon.

The United States government has also focused on electricity generation by bringing public and private partnerships together to enable access for US companies to build infrastructures in Africa.  Many of the efforts are coordinated by the Commerce Department through its Office of Africa.

In conclusion to this first of a two-part discussion, the assertion claimed is that it still makes enormous business sense to trade with Africa.  It has always been so.  And, moreover, the commerce that has certainly benefitted outside traders is projected to continue into the foreseeable future.  Six of the top 10 fastest growing economies in the world are located on the continent.  In the past 10 to 15 years, discussions on worldwide development liberally refer to Africa as the growth pole of the world.  And after the era of BRIC countries [Brazil, Russia, India and China, with South Africa added later], now comes that of MINT [Mexico, Indonesia, Nigeria and Turkey].  The financial and capital markets of these economies are expected to propel the world into new investment horizons for decades to come, with burgeoning middle classes and rising incomes at all levels.


[1] Adam Smith Quotes. (n.d.). Retrieved from https://www.goodreads.com/author/quotes/14424.Adam_Smith

[2] Inikori J. E. (2002). Africans and the Industrial Revolution in England: A study in International Trade and Economic Development. Cambridge, U.K. University Press.

[3] For Margaret Thatcher’s Speech, see John Findley Green Foundation Lecture “New Threats for Old” at http://www.margaretthatcher.org/document/108357

[4] For African Growth and Opportunity Act, AGOA, see http://agoa.info/about-agoa.html

 

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