American corporations are becoming increasingly interested in investing in Africa, with some regarding it as the last big growth market, but they are often deterred by Africa’s negative image, a new study shows. US companies in some sectors, particularly technology companies, now regard Africa as “the last frontier for growth”. It has a market of one billion people, mobile telephone networks have been successful, and other countries, particularly China, are increasing their African investment thrust. Africa is the second largest and second most populous continent after Asia, with 20% of the world’s land area and 14% of global population.
The study, released Tuesday in Washington, identified the technology sector as an important US investment opportunity outside of Africa’s traditional natural resources and agricultural sectors. While Chinese and to a lesser extent European corporations are increasing their African investment, US executives often see other geographical areas as offering better returns or less risk.
The study was conducted by the Africa Business Initiative of the US Chamber of Commerce in Washington DC, and Baird’s CMC, an international communications management consultancy which conducted all of the interviews.
The conclusions and recommendations are based on in-depth interviews with top executives from some 30 US multinational corporations, of which half are Fortune 100 Companies. The objective was to identify the factors affecting US corporations’ investment decisions in Africa and what US executives believe would make Africa more attractive to them. A second part will study the response of African leaders to these American attitudes.
“We want to tap in to the ‘conversation behind closed doors’, both in US boardrooms and in African cabinet discussions. We hope that these frank viewpoints by US business leaders and African policy-makers will help increase American investment into Africa,” said Francois Baird, Baird’s CMC co-chairman.
The study concluded that the main reasons why Africa has not yet become a top investment priority for corporate America are that US executives do not believe the risks involved are commensurate with the promised return, that other countries and regions offer better investment options and that US executives see Africa as needing too much effort to be attractive at the moment.
Commenting that attracting US investment is “a long haul”, the study recommended that African countries and regions sell themselves aggressively to corporate America which needs “a strong and specific pull from Africa.”