Foreign Investment Through the Prosper Africa CampaignForeign assistance helps people living in poverty while also benefiting the donor nations. Foreign aid helps domestic business interests because investment abroad in emerging markets opens the doors for more consumers. Furthermore, it stimulates demand for those domestic goods and services.

A new U.S. government initiative, called the Prosper Africa Build Together Campaign, is aiming to do just that by encouraging investment in Africa. The campaign promises development for recipients and new opportunities in key emerging markets for donors.

Africa’s Emerging Markets

Across the continent, income levels are rising. Some predict that by 2030 global household consumption will reach well over $2 trillion. Opportunities abound with urbanization in countries such as Nigeria, which holds seven cities with populations of more than a million people. By 2030, a fifth of the world’s consumers will live in Africa — with an increasing number of people breaking into the middle class. As GDP per capita continues to rise, so will the buying power for consumers across the continent. Additionally, Africa’s citizens will look to purchase more goods, including luxury goods. Already, Africa is the fastest-growing market for telecommunications and the second biggest market for mobile phones.

Prosper Africa Build Together Campaign

The Biden Administration promises to “elevate and energize” trade and investment across Africa. The Prosper Africa Build Together Campaign is the vehicle to accomplish that task. The goal is to get U.S. government agencies, African governments and the private sector to coordinate together in order to invest in development projects.

USAID states priorities for projects include “clean energy and climate smart solutions, health, and digital technology.” The private sector is key in this campaign as U.S. relationships with African countries start to shift while these nations continue to develop. More and more, relationships will evolve from being focused on aid to relationships focused on trade and investment.

The Prosper Africa Build Together Campaign is one mechanism of the Build Back Better World Initiative. The campaign encourages private sector investment which can help “on a scale that could never be matched on foreign aid alone.”

Prosper Africa Early Results

So far, the two-pronged approach of facilitating transactions and shaping future opportunities seems to be working. Prosper Africa fostered 800 deals, spurring more than $50 billion in exports and investments in over 40 countries across Africa.

For example, one success story comes from Ghana. An investment saved Global Mamas, a small firm that sells unique handcrafted products. Because of the economic hardship associated with COVID-19, Global Mamas saw its domestic revenue decline by 90% and lost almost 50% of its global revenue. USAID’s West Africa Trade and Investment Hub helped to secure $2 million of private funding to save the company. Furthermore, it set Global Mamas up for a sustainable future post-pandemic with projections of over $1 million in exports. The investment will save more than 250 jobs and establish 85 new jobs within one year. Additionally, the jobs go primarily to women who will be the primary earners of their household.

Looking Forward

Fighting global poverty is not only the right thing to do, it has benefits for domestic interests. Investing in key emerging markets helps to grow new consumer bases and in the end, everyone can prosper together. The Prosper Africa Build Together Campaign imagines such a world where we can fight global poverty by encouraging sustainable growth. But, it also supports the investor’s economy at home and improves the domestic industry.

– Alex Muckenfuss
Photo: Flickr

Energy Projects in MozambiqueOn September 9, 2020, the United States International Development Finance Corporation (DFC) approved two energy projects in Mozambique. The recent decision resulted in a loan of $200 million to Centra Térmica de Temane for a power plant and $1.5 billion in risk assurance to support the commercialization of Mozambique’s natural gas reserves. The purpose of these projects is to create access to energy and an opportunity for economic growth fueled by Mozambique’s natural gas reserves. The DFC energy projects in Mozambique constitute a substantial investment by the U.S. that will make good on the Prosper Africa pledge which aims to increase U.S. investment in Africa.

Keeping its Promise to Africa

The Prosper Africa initiative serves to create business opportunities in Africa and increase two-way trade and investment with the intent to benefit companies, investors and workers in the U.S. and Africa. Dennis Hearne, U.S. Ambassador to Mozambique, spoke highly of the two projects stating, “These projects will have a significant development impact in Mozambique, improve lives and create a once-in-a-generation opportunity for the country to build a more prosperous future for all Mozambicans.”

Jumpstarting Economic Growth

Mozambique is one of the poorest countries in the world, with a GDP per capita of less than $500. It is the job of the DFC to prioritize projects in areas that are low income. DFC investment for energy projects in Mozambique could create a lot of private capital in the country and jumpstart economic growth.

The DFC will provide up to $1.5 billion in political risk insurance to advance the development, construction and operation of an onshore liquefaction plant that will commercialize Mozambique’s natural gas reserves in the Rovuma Basin. This project could turn the country into a major energy exporter and increase the GDP by an average of $15 billion per year, creating long-term economic growth. The development will envelop the entire country, boosting sectors aside from oil and gas.

Diversifying Power Resources

Those in Mozambique who are lucky enough to have electricity rely almost entirely on one colonial-era dam called Cahora Bassa. The dam provides more than 2,000 megawatts out of the approximate 2,800 megawatts installed capacity. Due to extreme weather conditions, the Zambezi River, which powers the dam, flows irregularly, “putting the country’s entire power system at great risk.” The DFC’s proposed power plant will be powered by Mozambique’s natural gas reserves, providing a different source of electricity that is also reliable.

Creating a Power Infrastructure

Only 29% of Mozambicans have electricity in their homes, making it an energy-poor country. Companies with a grid connection still rely on diesel 17% of the time and biomass (wood and charcoal) accounts for 60% of the country’s primary energy use.

In order to develop, construct and operate a 420-megawatt power plant with a 25-kilometer interconnection line and 560-kilometer transmission line, the DFC will loan Central Térmica de Temane up to $200 million. Not only will the power plant diversify the country’s power resources but will also reduce the cost of electricity. Furthermore, it will allow Mozambique to use its own natural gas supply to increase power generation and support the government’s plans to develop the national electricity system.

Balancing Exports and Domestic Use of Natural Gas

Mozambique’s natural gas reserves are abundant and will provide the country with an incredible income. However, Mozambique is uninterested in exporting all of its natural gas to Europe and Asia. The DFC will help Mozambique attain the generation infrastructure that will allow the country to use natural gas to power its homes and businesses and it will support large-scale liquified natural gas export facilities in order to bring revenue into Mozambique.

The completion of the DFC energy projects in Mozambique will take Mozambique from one of the poorest countries with regard to revenue and energy to a major energy exporter with long-term economic growth. These projects will help the economy grow, provide the country with a diverse power infrastructure and balance its natural gas usage. These investments will also fulfill the Prosper Africa pledge in which the U.S. vowed to increase investment in Africa. Overall, U.S.-Africa relations will benefit, and more importantly, a prosperous future will lie ahead for the people of Mozambique.

– Mary Qualls
Photo: Flickr

Uganda’s most obvious investment appeal is its location – bordered by Sudan in the north, Kenya in the east, the United Republic of Tanzania to the south, and the Democratic Public of Congo to the west – that offers the nation a powerful base for central trade partnerships as the country acts as a regional hub for investment.

Uganda is a nation that depends on agriculture for economic stimulation thanks to the country’s favorable climate and fertile soils. Investing in Ugandan farming expansion and sustainability efforts will help support the 80 percent of the population working in agriculture, feed the nation and will support economic growth.

According to the State House of Uganda, the country is among the leading producers of coffee and bananas, with exports of tea, cotton, tobacco, fruit, vegetables, and silk contributing to Uganda’s 2014 record GDP of $26.3 billion.

Agricultural opportunities for investors include commercial farming, value addition, fertilizer and pesticide manufacturing, machinery supply, packing materials, and cold storage facilities.

The Agriit Institute of Uganda, an agricultural development advocacy organization, states that growth in agriculture is up to 11 times more effective in reducing poverty within sub-Saharan Africa than development in any other divisions.Investing_in_Uganda

The international Food Policy Research Institute (IFPRI) finds that agricultural growth can reduce urban poverty levels as food prices go down. These prices are often lowered when crop sustainability measures are taken through investments in developmental farming technologies.

Uganda offers investment prospects due to the growth in natural resource discovery. According to the Petroleum Exploration and Production Department of Uganda, there have been 21 discoveries of oil and/or gas throughout the nation.

A total of 87 oil wells have been drilled from 21 fields in Uganda. There are currently 3.5 billion barrels of unprocessed oil, with 1.2 billion recoverable barrels in existence. The U.S. Department of State reports that only 40 percent of the oil-rich areas in the region have been explored, which leaves great investment opportunity.

The potential growth and discovery of these natural resources welcome investors into untapped markets licensing for petroleum production, crude oil pipeline construction and maintenance, environmental services, waste disposal and drilling services.

According to the U.S. Department of State, Uganda’s foreign direct investment doubled from 900 million to $1.7 billion from 2011 to 2012 due to investor interest in the oil sector. The Uganda Poverty Status Report of 2014 shows a direct link to these investments and poverty alleviation, stating that the national poverty rate dropped from 24.5 percent in the 2009-2010 fiscal year to 19.7 percent during 2012-2013.

Kelsey Lay

Sources: Agritt Institute, International Food Policy Research Institute, The State House of Uganda, Uganda Ministry of Finance, U.S. Department of State
Photo: Google Images, Flickr

Investment in AfricaRecently, international investors have turned their sights to Africa, whose expanding consumer class and abundant natural resources make it the next prime location for development and innovation. According to the Africa Attractiveness Survey, investment in Africa totaled $128 billion dollars in 2014, up 136 percent from the previous year. Investment reached $174 million per project, an increase from $67.8 million in 2013. This vast increase is largely spurred by several megadeals on the continent rather than many smaller ones. Although this “big money” form of investment may crowd out smaller investors, it paves the way for future funding from all types of businesses.

According to Charles Brewer, managing director for DHL Express Sub-Saharan Africa, an update in the way investors perceive the continent has been the source of increased funding. Economic growth, coupled with an improved business environment and strengthened infrastructure, has caused foreign investment to hit a historic high. Sufficient infrastructure is key to successful development because it lowers the expense of logistics. In the past, supply chain costs were nine times greater in Africa than in other continents. Deals, such as DHL Express’s, not only expands the frontier for international corporations but also lends to growth within Africa as well. Brewer predicts millions more in investment dollars from his company alone in 2015.

“With increased Foreign Development Investment and macroeconomic growth, I believe that Africa will become an economic powerhouse in the future. The region is abound with untapped opportunities and has much scope for growth,” says Brewer.

With more and more people benefiting from international aid and earning money, the consumer base in Africa has grown rapidly. This provides immense opportunities for companies to move into these countries and provide previously undeveloped services. Brewer lists 18 countries where his company has planned major projects. Such economic development will also provide more jobs to African workers and increase spending across the economy, leading to even more economic growth and future foreign investment. Companies such as DHL Express will help reinforce the business environment and create opportunities for African businesses all over the world. In this way, Africa is not a market to be cornered by the rest of the world; the world is a market soon to be cornered by Africa.

Jenny Wheeler

Sources: IT News Africa

Photo: Flickr

Coca-Cola has continued to be a responsible citizen in the global community through empowering women around the world along with aspiring to conserve the world’s natural resources. Coca-Cola has pushed for better agriculture over the past few years along with providing better agricultural principles and clean water for Africa.

Coca-Cola believes that women are the key to economic growth and reducing global poverty. In fact, The Food and Agriculture Organization (FAO) estimates that if women and girls have just as much access as men and boys do to agricultural resources like farming this could increase production by 20 to 30 percent. This could tremendously aid in farm production in developing countries.

In addition, Coca-Cola South Africa has teamed up with UN women to ensure growth in women entrepreneurship. Women in South Africa are receive training in areas of business and marketing to help prepare them for the current job market. In turn, many of these women will be opening small retail stores selling Coca-Cola products and with the help of Hand in Hand, the partner in the program, estimates predict to have over 25,000 South Africa women running their own businesses by 2015. This is not only expanding Coca-Cola, but the overall business in South Africa.

All the same, Coca-Cola is making use of new technology for their products and services to invest in these developing countries’ futures by creating new business models which can improve the lives of millions and reduce global poverty. Nevertheless, Coca-Cola strives to improve the quality of life for low-income families by providing opportunities which were among the least in these areas, while conserving the environment.

Coca-Cola demonstrates the qualities of a caring citizen for the world with the development of Ekocenters, which provide basic human needs such as clean water, vaccines, food and electricity in developing countries. The developing nation’s biggest issue is the need for basic human necessities in order to continue to develop and reduce global poverty. Therefore, these technological advancements can aid as well, by providing the necessary tools to move beyond poverty.

Coca-Cola is aiming to give back by creating a goal for the year 2020 to improve the company’s water-use efficiency. Also, Coca-Cola has created programs to help get water back to the communities through watershed efforts like the Coca-Cola Africa Foundation’s Replenish Africa Initiative and helping to bring safer water to communities around the globe. Accordingly, the Replenish Africa Initiative works by improving access to water and sanitation. This then promotes better hygiene and the reduction of illness and disease. In turn, this helps the community at large by improving health, the environment and helping to promote sustainable water for the environment.

Coca-Cola is transforming communities by empowering women and investing in the future of these small businesses. This will in turn bring more opportunities to the development of the community, along with improving the environment by conserving natural resources that are valuable to all countries, and bringing basic human needs to these areas’ doorsteps.

– Rachel Cannon 

Sources: Coca Cola, Harvard Kennedy School
Photo: Flickr

Why the US Should Invest in Africa?
USAID in Africa creates many new advantages for the US beyond humanitarian aid, such as fostering strategic national security partners and increasing US economic prospects. George Ingram and Steven Rocker recommend four strategies to better utilize and direct foreign assistance to the region.

In June 2012, President Obama established his development priorities in the region with the White House’s U.S. Strategy toward Sub-Saharan Africa, focusing on economic growth, food security, public health, women and children, humanitarian response, and climate change.

From 2002 to 2012, the total USAID money in sub-Saharan Africa nearly quadrupled, from roughly $1.94 billion to $7.08 billion. The assistance money was largely focused on global health spending, specifically the President’s Emergency Plan for AIDS Relief (PEPFAR). But even beyond global health, the U.S. is the leading donor of humanitarian aid to sub-Saharan Africa, particularly in the area of emergency food aid. The Obama administration also provides assistance in agriculture development through its Feed the Future program, a global hunger and food security initiative. Overall, USAID operates 27 different regional missions in 47 African countries – the top five being Kenya, Nigeria, Ethiopia, Tanzania and South Africa.

U.S. development assistance brings government agencies, American organizations and businesses into collaboration with Africans who are trying to put their own communities and countries onto a more prosperous social, political, and economic plane. There are three critical reasons why the US should invest in Africa:

1. Humanitarian interests – Through moral obligation the U.S. has historically been the leading donor of humanitarian assistance in the region. It is part of the American ethos to continue to respond compassionately to people in their most desperate times of need.

2. National security interests – There are continued terrorist concerns in Somalia and Mali, with the potential new threats in Nigeria (the U.S.’s largest trading partner in sub-Saharan Africa). USAID must continue to be very active in these regions particularly to prevent any terrorist strongholds from cementing and to maintain stability.

3. Economic interests – From 2001 to 2010, six of the fastest-growing economies in the world were in Africa. In 2011, foreign investment to sub-Saharan Africa amounted to more than all the development assistance funding for the whole world. Many countries are recognizing and acting on increasing commercial opportunities in Africa.

Four ways to make U.S. aid to Africa more effective:

1. Sustainable health systems – The majority of health assistance to Africa is used to finance the delivery of health services, which is not sustainable. Greater focus needs to be directed to building health practices that Africans can carry out on their own.

2. Disaster preparedness – For all the humanitarian aid delivered, very little is allocated toward disaster prevention and preparedness. By focusing more resources and expertise toward these areas, the U.S. could reduce the need for large international disaster relief, and save lives.

3. Economic growth – The U.S. should leverage its assistance to stimulate economic growth. Congress and U.S. officials should engage the Export-Import Bank, Department of Commerce, Overseas Private Investment Corporation, U.S. Trade and Development Agency and the U.S. Trade Representative to ensure that a range of government policies and programs are encouraging equitable economic growth for all, and commercial opportunities for U.S. businesses.

4. Democratization and good governance – The U.S. needs to give greater attention and support toward governance policies and oversight; including improving the governmental collection of revenues, transparent budgeting, and building the capacity of civil society and legislative systems.

– Mary Purcell

Source: Brookings