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Modern Business Opportunities in Africa
Over the next 10 years, Africa’s total populace could surpass 1.5 billion. Moreover, only 20% of the continent’s predicted population growth will transpire in rural areas. Therefore, an industrial transformation is occurring. International markets now have multiple modern business opportunities in Africa.

Online Finance Services

The demand for financial consulting is immense. Estimates have determined that 80% of Africa’s population does not have access to banking or financial services. Therefore, the evolution of the FinTech industry is underway. FinTech utilizes modern technology to improve the affordability and accessibility of financial services. Approximately 88% of sub-Saharan African countries now implement FinTech policies. Companies such as M-Pesa and Branch have successfully established their business strategies in these regions.

Branch is a digital financial service provider that capitalizes on the worldwide growth of smartphone usage to deliver financial consultation to those in need. The company operates in Tanzania, Kenya and Nigeria. Branch currently serves 3 million customers. Recently, Branch acquired over $150 million in funding to further pursue its initiative. The company hopes that providing small loans will stimulate economic development in low-income areas.

Virtual Healthcare

Providing equal access to affordable healthcare is an objective modern technology can accomplish. In sub-Saharan Africa, only one physician is available for every 5,000 people. In the U.S., there is one physician per 384 citizens. Generating digital platforms to further distribute healthcare in Africa is an under-crowded market. Companies such as Redbank and Lafiya Telehealth App now operate in this sector.

Lafiya Telehealth App incorporates smartphone application technology to provide healthcare to citizens of Nigeria. Lafiya focuses specifically on individuals living in isolated areas, who tend to be poorer. Lafiya’s programs aim to replace in-person medical examinations with voice calls, video calls and instant messaging. With wide and accessible reach, Lafiya is serving an enormous market.

United States Government Initiatives Promoting Commerce with Africa

The African Growth and Opportunity Act (AGOA) is a U.S. government initiative that provides African countries with access to thousands of American commodities. In order for countries to participate, they must launch programs to decrease poverty, protect individual rights, institute a criminal justice system and more. Currently, 38 African countries are eligible to engage in trade and investment with the U.S. AGOA has directly created over 100,000 American jobs, connected U.S. businesses with buyers and suppliers in Africa and generated over $1 billion in exports. Trade between the U.S. and African nations has grown by 300% since the Act came into effect. The U.S. government has extended this program to 2025.

The success of AGOA has prompted the creation of Prosper Africa. Prosper Africa is a U.S. policy with a design to further increase opportunities for trade between the United States and Africa. Prosper Africa increases Africa’s availability to U.S. digital and in-person services, supports commerce by advancing profit-making contracts and enhancing cooperation with African institutions to create healthy business environments. The completion of these objectives will produce profits for employees, businesses and stakeholders among both regions.

The U.N. Conference on Trade and Development recognized Africa as one of the most profitable regions in the world. The continent’s growing urban population, increase in consumer spending and largely untapped markets provide ample scenarios for international corporations. Modern business opportunities in Africa will continue to grow with the implementation of U.S. government initiatives to improve local economies, promote stable growth and persuade future business investments. These modern business opportunities in Africa will expand as wealthy nations share resources and generate economic growth in regions across the continent.

John Brinkman
Photo: pxfuel

Secondhand Clothing
Prior to 1980, the domestic clothing and textile industry within the East African Community (EAC) was booming and employed thousands of people. Certain liberalization policies caused the industry to fail, creating a reliance on imported products. Used clothing imports reached $151 billion in East Africa during 2015. Secondhand clothing offers a cheap and quality source of garments for the people within the EAC.

Imports of used clothing are estimated at around 540 million pieces per year versus the 20 million pieces of clothing created domestically each year in East Africa.  Primarily, the United States and Europe, places where people discard large sums of used clothing, sent these imports. These areas donate 70 percent of donated garments to Africa. The EAC initiated the start of a secondhand clothing import ban in 2016 with the goal of accomplishing a complete ban by 2019. The hope is to create a self-sustaining and reliable textile industry that provides jobs for many people.

Taxation in the EAC

The plan was to expand local textile industries prior to the ban, however certain countries within the EAC, such as Rwanda, have already begun raising taxes on imported secondhand clothing. Taxes went from $0.2 to $2.5 from 2016 to 2017, at a 12 percent increase. People who oppose the ban fear that this will disproportionately affect people with lower incomes, rather than support positive industrialization. The opposition also fears that seeing the ban to completion will violate portions of the African Growth and Opportunity Act (AGOA) where many African countries agreed to lift barriers restricting trade and investment with the United States.

However, the East African Community seems concerned with positive domestic growth and industrialization with the hopes of sustaining its economy. Rwanda, Tanzania and Uganda plan to continue to raise taxes on clothing imports, while Kenya has said it cannot economically support the 2019 ban deadline because it is unable to meet domestic demands with local markets.

Creating a Textile Industry

Supporters of the ban have recognized that wearers of secondhand clothing might have a risk of obtaining skin candidiasis, scabies, ringworm, body lice and other health risks. To avoid added health risks and to maximize use of domestic commodities, the East African Business Council (EABC) has expressed the need to use the large production of cotton in the EAC domestically to create textiles, rather than exporting it for low costs. The countries within East Africa continue to work towards an improved domestic clothing and textile industry by creating facilities and advancing technology available towards textile production. Tanzania’s Minister of State, Jenista Mhagama, announced a training program in 2016 that would encourage and assist young people to become tailors.

Despite push back from European countries and the United States, the EAC continues its push towards growing its domestic textile industry and implementing the secondhand clothing import ban. As the EAC fulfills the ban, the impact of this on its economy will become clear.

– Claire Bryan
Photo: Flickr

U.S. Benefits from Foreign Aid to Côte d’IvoireCôte d’Ivoire, located in West Africa, is also known as the Ivory Coast. Agriculture dominates its economy, with oil and natural gases improving economic growth, too. Another aspect helping the economy is foreign aid, and the U.S. benefits from foreign aid to Côte d’Ivoire as well.

A Strong Partnership

The U.S. has been building diplomatic relations with Côte d’Ivoire since 1960 when it became independent from France. The U.S. mainly focuses on four areas to assist Côte d’Ivoire:

  1. Upgrading the health care system
  2. Facilitating democracy and governance
  3. Exploring economic potentials
  4. Improving security reform

In 1999, a coup in Côte d’Ivoire disputed elections and spurred rebellion. The U.S. assisted Côte d’Ivoire in moving beyond its decade-long crisis by restoring peace, offering more than 25 percent of the funding for U.N. operations in Côte d’Ivoire. Later on, the U.S. Agency for International Development promoted the African Growth and Opportunity Act (AGOA), which is a U.S. Trade Act issued on May 18, 2000.

U.S. Benefits from Foreign Aid to Côte d’Ivoire in Trade

Since then, the U.S. and Côte d’Ivoire have shared bilateral economic relations, and the amount of U.S imports from Côte d’Ivoire grew from $384 million in 2000 to $1,163 million in 2016. This is just one of the ways the U.S. benefits from foreign aid to Côte d’Ivoire.

Côte d’Ivoire is viewed as one of Africa’s fastest economic growing countries. From 2006 to 2016, Côte d’Ivoire’s gross domestic product has grown from $17.8 billion to $36.3 billion. In 2015, Côte d’Ivoire exported $12.7 billion in products and 29 percent was cocoa beans. Another noticeable product was refined petroleum, which composed 8.8 percent of the country’s exportation.

AGOA created duty-free imports for certain products from several sub-Saharan African countries. This act further stimulates the U.S. and sub-Saharan African trade and investment and integrates sub-Saharan African economy into the global picture.

Côte d’Ivoire’s economy is heavily based on the agricultural sector, especially cocoa beans. The U.S. is one of the biggest cocoa beans consumers and has easier and cheaper access to import cocoa beans from Côte d’Ivoire. In 2016, the U.S. had imported $834 million of cocoa beans from Côte d’Ivoire. AGOA eliminates extra costs for the U.S. on daily necessities. In this way, the U.S. benefits from foreign aid to Côte d’Ivoire.

A Boost for the Future

In Nov. 2017, Côte d’Ivoire signed $525 million compacts from the U.S. Millennium Challenge Corporation. The money will be spent in a five-year period to stimulate economic growth and eliminate poverty.

The government of Côte d’Ivoire will contribute another $22 million to various projects, such as the Abidjan Transport Project, which can maintain and improve transportation conditions. Another project receiving funding will be the Skills for Employability and Productivity Project, which will facilitate education systems and provide more opportunities to access secondary education.

Côte d’Ivoire is becoming an even stronger country with U.S. support. Its economic development is accelerating, and its social system is improving as well. Now, Côte d’Ivoire is trying to move its economic anchor from agriculture to other aspects. The U.S. benefits from foreign aid to Côte d’Ivoire will increase if Côte d’Ivoire can develop into a more integrated economic model.

– Judy Lu

Photo: Flickr

Poverty in MauritiusOff the coast of Madagascar lies the island nation of Mauritius, teeming with pristine beaches, lush forests and ethnic diversity. Poverty in Mauritius has been reduced to just eight percent of the population since the country has flourished economically after winning independence from the United Kingdom in 1968.

Mauritius is an upper middle-income country with sugar, tourism, textiles and financial services mainly driving the economy. Many international entities, especially those interested in doing business with India, South Africa and China, are attracted to Mauritius.

While most Mauritians were employed in the agriculture or fishing industries at the time of independence, these industries now make up less than 10 percent of the labor force. The majority of Mauritians are now employed in construction and industry or restaurants and hotels. Other services also make up a large part of the labor force.

Mauritius has benefited greatly from the African Growth and Opportunity Act (AGOA) passed by U.S. Congress in 2000. The AGOA allows duty-free exports to the U.S. market. Mauritius has increased exports to the U.S. by 40 percent from 2000-2014.

Like other developing nations, income inequality increased in Mauritius during the rapid industrialization. However, the government has established social welfare programs to eradicate poverty in Mauritius. This includes food stamps, social services, micro-financing to small businesses, female empowerment in the labor market and the ZEP program that seeks to raise primary school exam scores in underperforming schools. The government of Mauritius also provides Social Security for those over 60, free primary and secondary education and free healthcare.

Creoles of African descent are especially vulnerable to poverty in Mauritius. Mauritian creoles are descendants of slaves brought from Africa to Mauritius in the 18th and 19th centuries. Creoles have the weakest sense of identity out of all the Mauritian ethnic groups, as plantation owners intentionally mixed slaves from various ethnic groups together to eliminate any family ties, shared languages or any other forms of social organization.

Studies show that poverty occurs more often in households with a large number of dependent children, female-headed households, single-parent households and single person households.

In 2015 the government began developing the Marshall Plan to eradicate poverty in Mauritius. The plan will focus on:

  • Social protection
  • Housing
  • Social inclusion and community development
  • Access to education
  • Employment for sustainable livelihood, especially for vulnerable groups
  • Youth economic empowerment
  • Access to electricity, sanitation, water, transportation, and ICT (information, communications and technology) services
  • Environmental protection

Cassie Lipp

Photo: Flickr

AGOAIn 2000, the United States Congress approved legislation entitled the African Growth and Opportunity Act, or AGOA, in hopes to better economic relations between the United States and sub-Saharan Africa. The legislation highlights key factors in trade between the U.S. and sub-Saharan Africa while providing many benefits.

The act was initially set to expire in 2008, but President George W. Bush signed the AGOA Acceleration Act of 2004, which extended AGOA to 2015. The Act’s apparel special provision, which permits lesser-developed countries to use foreign fabric for their garment exports, was to expire in September 2007.

However, legislation passed by Congress in December 2006 extended it through 2012.

The legislation authorized the President of the United States to determine which sub-Saharan African countries would be eligible for AGOA on an annual basis. The eligibility criteria was to improve labor rights and movement toward a market-based economy. Each year, the president evaluates the sub-Saharan African countries and determines which countries should remain eligible.

Currently, there are 44 African countries eligible with AGOA.

 

What are the benefits of AGOA for African countries?

AGOA provides trade preferences for quota and duty-free entry into the United States for certain goods, expanding the benefits under the Generalized System of Preferences, or GSP, program.

AGOA expanded market access for textile and apparel goods into the United States for eligible countries, though many other goods are also included. This resulted in the growth of an apparel industry in southern Africa, and created hundreds of thousands of jobs.

In addition to growth in the textile and apparel industry, some AGOA countries have begun to export new products to the United States, such as cut flowers, horticultural products, automotives and steel.

;Agricultural products is a promising area for AGOA trade; however, much work needs to be done to assist African countries in meeting U.S. sanitary and phytosanitary standards.

 

What are the benefits of AGOA for US firms?

By creating tangible incentives for African countries to implement economic and commercial reform policies, AGOA contributes to better market opportunities and stronger commercial partners in Africa for U.S. companies. The Act strengthens commercial ties between Africa and the United States, while it helps to integrate Africa into the global economy.

U.S. firms may find new opportunities in privatizations of African state-owned enterprises or in partnership with African companies in infrastructure projects.

– Alaina Grote

Sources: AGOA, International Trade Administration
Photo: Financial Mail

african_economic_growth
The Economist once labeled Africa “The Hopeless Continent.” The magazine determined that the widespread effects of disease, poverty, conflict and corruption rendered the continent economically unfavorable. That was in 2000, the same year that President Clinton signed into law the African Growth and Opportunity Act (“AGOA”). Today, the continent—and particularly sub-Saharan Africa—is home to several of the world’s fastest growing economies. In 2011, The Economist revised its moniker, referring to Africa as the “The Rising Continent.”

Many economists view AGOA as an integral element of growth in sub-Saharan Africa. The primary objective of AGOA is to expand the volume and variety of trade and investment between the United States and sub-Saharan Africa. According to government sources, AGOA’s trade provisions are responsible for 350,000 direct and 1 million indirect jobs in Africa as well as 100,000 jobs in the United States. Since the program’s inception, exports from AGOA nations to the U.S. have risen more than 300 percent.

AGOA is scheduled to expire in 2015, but President Obama has initiated an early campaign to extend the trade agreement. While praising the success of the program the President explained that, “The economies of sub-Saharan Africa are among the world’s fastest-growing, and this economic expansion, partly a result of our long-standing investment in Africa, provides an opportunity to lift millions out of poverty and foster long-term stability.”

Though oil and gas exports comprise more than 90 percent of African exports under the program, leaders hope to expand investment in other industries such as textile and apparel exports. Economists have stressed the importance of diversifying exports in trying to achieve long-term development and sustainable growth.

This month, leaders from the United States and participating African nations will meet in Ethiopia for the AGOA Forum. The theme of the event is Sustainable Transformation Through Trade and Technology. African representatives are hoping for a long-term extension of the trade agreement. Jas Bedi, chairman of the African Cotton and Textile Industries Federation, explained it simply, “You can’t do a $200 million deal if you don’t know what’s going to happen in three year’s time.”

Renewal of AGOA is crucial if the United States hopes to keep pace with China, which has recently overtaken the United States as sub-Saharan Africa’s largest trading partner. A recent report from the Brookings Institute criticizes the American business community for failing to capitalize on the continent’s emerging markets. As the region continues to grow, the United States hopes to accelerate trade and investment with its African partners. The renewal of AGOA will certainly be a good start.

– Daniel Bonasso

Sources: Financial Times, AGOA, Brookings Institute
Photo: It News Africa