Business Law Articles
Njoroge Regeru & Co. Advocates
The recently concluded U.S.-Africa summit in Washington DC has raised lots of hope and expectation about the growth of investment opportunities in Africa. The summit was organized as a follow-up to U.S. President Barack Obama’s visit to Africa back in 2013. The main issues that were tabled for discussion at the summit were development, investing in Africa's future as well as peace and security. Over 50 heads of State and government from Africa attended the summit.
One of the major highlights and key achievements of the summit is the proposed extension of the African Growth and Opportunity Act (AGOA) for a further 15 years. Presently, many African countries base their trade with the U.S. on the AGOA initiative which lifts import duty on all eligible African products. The initiative also grants preferential market access to eligible African products upon compliance with rules of origin. The AGOA extension was welcomed with much enthusiasm and expectation by the African representatives at the summit.
Africa is indeed proving to be an ideal investment destination owing to its great potential arising from vast natural resources, a large population which could provide an ample market for goods and services, among other factors. Indeed, the United Nations Children's Emergency Fund (UNICEF) Generation 2030/Africa Report states that Africa will be home to two out of five children in the world by 2050, which will translate to 25 out of 100 people living in the world being Africans. Additionally, research data from the McKinsey Global Institute suggests that Africa is currently home to 60% of the world’s total uncultivated, arable land. Owing to the continent’s huge potential, it is little wonder, therefore, that many multinational corporations and retail chains such as Google, General Electric, IBM, General Motors, Subway Restaurants, Mariott International and Pepsi-Cola are making forays into African countries and markets.
The continued improvement of infrastructure in African countries has also served to encourage foreign investors to bring their business to Africa. Of particular note is Nairobi, the capital city of Kenya. The city has lately been earmarked by many global corporations such as the World Bank's International Finance Corporation (IFC), IBM, Google and General Electric as a hub for their operations in the sub-Saharan region and as an ideal investment destination. The marked increase of investor confidence in Africa signals a positive change in the economic fortunes of the continent. The recent oversubscription of Kenya’s 2 billion dollar debut sovereign Eurobond goes to show just how much investors are confident about the economic prospects of investing in Kenya and in Africa as a whole. It appears that time is ripe for an increase in foreign direct investment in African countries.
From discussions during the Business Forums at the summit, more than USD 33 billion in business deals were struck between African and U.S. government as well as business leaders. The same will be directed towards increasing Africa’s economic engagements with the U.S. Part of the promised funds is USD. 12 billion in additional funding to the Power Africa Initiative which is aimed at increasing Africa’s access to electricity. The U.S. has also pledged to establish four Regional Leadership Centers in Ghana, Kenya, Senegal and South Africa to provide training and professional development opportunities to young African leaders. This was under the summit theme of “Investing in the Next Generation”.
Moreover, the U.S. strengthened its commitment to the landmark Lake Turkana Wind Power Project in northern Kenya by signing two public letters of intent to support the project. When completed, the 310-megawatt project will be the largest wind power project in Africa. An additional USD. 10 million commitment to the U.S.-Africa Clean Energy Finance initiative was also announced at the summit.
On peace and security matters, the U.S. pledged to commit USD. 110 million annually over three to five years to help African militaries set up rapid response forces to support United Nations (UN) and African Union (AU) peacekeeping missions. The African partners in the initiative are Senegal, Ghana, Ethiopia, Rwanda, Tanzania and Uganda. Further, the US government pledged to provide equipment worth USD.70 million to African peacekeepers, including AU forces in Somalia and Central Africa. The US government also announced a USD. 65 million programme to help strengthen security institutions in six countries that face threats from extremist groups such as Boko Haram and Al-Shabaab as well as organized crime.
The US government also pledged to share its expertise in helping to create an African Center for Disease Control aimed at controlling the outbreak of diseases such as the deadly Ebola virus.
In summary, it is expected that as a result of the summit, increased investment opportunities and economic growth in Africa will be experienced in the foreseeable future. Whereas there is understandable skepticism from some quarters about the commitment of the U.S. government and other business entities towards increasing their investments in Africa, the majority remain hopeful that the same will be effectively implemented. This is partly informed by President Obama’s closing remarks where he reassured those in attendance that “..the U.S.-Africa Leaders Summit will be a recurring event to hold ourselves accountable for our commitments and to sustain our momentum”. One can only hope that those words will stand true with time.
For more information about Njoroge Regeru & Company, please visit the International Society of Primerus Law Firms.