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International Trade in Africa Provides Diverse Opportunities for U.S. Businesses

By Megan Doyle

With many African countries experiencing GDP growth, a rising middle class, urbanization, and an influx of public and private investment, the continent is becoming increasingly attractive for international trade development.1 Consequently, African markets might provide robust opportunities for U.S.-based enterprises of all sizes.

In fact, the majority the country’s 28 million small- and medium-sized enterprises (SMEs) – which provide the bulk of U.S. jobs – can grow by pursuing international trade with Africa, according to a Newsweek article.2 What’s more, efforts to enhance trade relationships have been undertaken by both U.S. and African governments and officials. The idea is to establish mutually beneficial international trade relationships that provide each with opportunities for growth.

 

Africa’s Economic Growth

 

Despite recent worries of an impending debt crisis in sub-Saharan Africa, GDP growth in the region is on the rise.3 Historically, economic growth and recovery for many African countries has been closely linked to the fluctuation of commodity prices – especially that of oil.4 But experts suggest that African regional governments can accelerate growth and establish economic resilience independent of commodity prices, thus increasing the region’s attractiveness on the international trade landscape.

 

By modernizing technology, embracing innovation, and working to diversify international trade strategies, observers say that Africa is likely to increase its own GDP while supplying other countries with diverse new trade opportunities.5

 

The African Growth and Opportunity Act

 

The African Growth and Opportunity Act (AGOA) has been the foundation of the U.S. and Africa’s trade relationship since its introduction in 2000.6 This agreement provides eligible sub-Saharan African countries duty-free access to U.S. markets, promoting opportunity and jobs for both Africa and the U.S.7 Currently, 38 of the 49 sub-Saharan African countries participate in AGOA.8

 

In the decade after AGOA was enacted, exports to the U.S. from AGOA countries rose by $39 billion.9 Since 2000, according to the Office of the U.S. Trade Representative, AGOA has provided new opportunities for African exports, led to a reduction in poverty, and boosted economic growth in Africa overall.10

 

But all is not rosy: African exports have since fallen to below their 2000 levels. Some experts say U.S.-Africa trade relations remain underdeveloped, most likely because of oil’s domination and the region’s lack of trade diversity.11 Some work on mutual international trade agreements must be done, therefore, if import-export diversification strategies are to help both the U.S. and Africa see economic growth. But exactly how is that to be done?

 

Building the U.S.-Africa Trade Relationship

 

According to the U.S. International Trade Commission (USITC), though the value of trade between the U.S. and Africa decreased between 2005 and 2015, it has since risen by 6 percent, to $39 billion in 2017.12 Considering, however, that Chinese-African trade recently jumped up to $220 billion, there remains significant room for growth for U.S. businesses.13 Consequently, the USITC says the administration is working to encourage fair and reciprocal trade between the U.S. and Africa.14 SMEs, for example, are often disproportionately affected by market-access barriers due to their small size and limited resources.15 But the President’s Advisory Council on Doing Business in Africa (PAC-DBIA) is exploring commercial growth opportunities there, while working to overcome market-access barriers – like corruption and lack of infrastructure – for businesses of all sizes.16

 

Parts of Africa are also working to increase bilateral-trade relationships. Kenya, Ethiopia, Ghana, and Cote d’Ivoire, for example, are all working to create more business-friendly environments by promoting business development; investing in infrastructure and manufacturing centers; developing rail, road, mining, and manufacturing sectors; and seeking U.S. companies to engage in transportation and energy sectors as a means of market diversification.17

 

What International Trade in Africa Means for Import-Export Businesses

 

Though the U.S. is already a major force in international trade, experts suggest there are still opportunities for growth and diversification. Despite the potential risks, conducting business in new markets, like Africa, can provide new streams of revenue that can support geographic diversification and help ensure long-term growth for importers and exporters alike.18

 

It may be worth noting that SMEs that export tend to grow faster, create more jobs, and pay higher wages than similar businesses that do not, says the U.S. Trade Representative (USTR). As such, the USTR recommends SMEs begin to take advantage of overseas markets like Africa to boost business.19

 

African markets, in particular, offer extensive headroom for success, according to analysts, and are becoming “a target for global powers looking for more influence in new markets.”20 While doing business in Africa can be intimidating for U.S. enterprises, observers say that U.S.-based import-export businesses still have a chance to gain footing there.

 

According to a Newsweek article, U.S. firms are likely to remain competitive if they focus on areas where they have the competitive edge, such as agriculture, renewable energy solutions, technology, and financing, rather than competing in areas where China already has an advantage (manufacturing and building transportation infrastructure, for instance).21

 

U.S. agricultural technology, for instance, can help address food-security issues in Africa, while renewable energy solutions, such as high-tech batteries, can help reduce energy poverty.22 And, as African businesses grow more robust, U.S. enterprises with knowledge in data analytics, finance, and professional services can help African businesses deal with the growing pains and newfound complexities of international trade.23

 

For SMEs looking to begin trading with Africa, government outreach and assistance resources are available. The Small Business Administration’s (SBA’s) Office of International Trade offers assistance to help small businesses compete in the global marketplace.24 And the Department of Commerce’s International Trade Administration (ITA) offers targeted trade missions, buyer programs, and other trade promotion programs to facilitate business relationships between U.S. and African businesses.25

 

The

Takeaway:

Despite Africa’s past economic woes – including debt, corruption, and lagging infrastructure – the region is working to create a more business-friendly environment to diversify global business and catalyze international trade. U.S.-based enterprises willing to tap into Africa’s less-developed markets might discover diverse opportunities for growth and a new avenue to long-term business success.

Megan Doyle - The Author

The Author

Megan Doyle

Megan Doyle is a business technology writer and researcher based in Wantagh, NY, whose work focuses primarily on financial services technology.

Sources

1. Africa Is Now: The Opportunity for Mid-Sized US Companies, The Chicago Council on Global Affairs; https://www.lw.com/mediaCoverage/africa-is-now-the-opportunity-for-mid-sized-US-companies
2. “Business Advice For U.S. Companies In Africa: Do What You Do Best,” Newsweek; https://www.newsweek.com/business-advice-us-africa-business-china-africa-628320
3. “African nations slipping into new debt crisis,” Financial Times; https://www.ft.com/content/baf01b06-4329-11e8-803a-295c97e6fd0b
4. “Economic Growth in Africa Rebounds But Not Fast Enough,” The World Bank; http://www.worldbank.org/en/news/press-release/2018/04/18/economic-growth-in-africa-rebounds-but-not-fast-enough
5. Ibid.
6. “AGOA: The U.S.-Africa Trade Program,” Council on Foreign Relations; https://www.cfr.org/backgrounder/agoa-us-africa-trade-program
7. “Trump Administration Looks Toward the Future U.S.-African Trade and Investment Relationship.” U.S. Trade Representative; https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/june/trump-administration-looks-toward-0
8. “AGOA: The U.S.-Africa Trade Program,” Council on Foreign Relations; https://www.cfr.org/backgrounder/agoa-us-africa-trade-program
9. Ibid.
10. “Trump Administration Looks Toward the Future U.S.-African Trade and Investment Relationship.” U.S. Trade Representative; https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/june/trump-administration-looks-toward-0
11. “AGOA: The U.S.-Africa Trade Program,” Council on Foreign Relations; https://www.cfr.org/backgrounder/agoa-us-africa-trade-program
12. “Trump Administration Looks Toward the Future U.S.-African Trade and Investment Relationship.” U.S. Trade Representative; https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/june/trump-administration-looks-toward-0
13. “Business Advice For U.S. Companies In Africa: Do What You Do Best,” Newsweek; https://www.newsweek.com/business-advice-us-africa-business-china-africa-628320
14. “U.S. Trade and Investment with Sub-Saharan Africa in Certain Sectors Has Grown and Continues to Have Potential, Says USITC,” U.S. International Trade Commission; https://www.usitc.gov/press_room/news_release/2018/er0530ll955.htm
15. “Small Business,” Office of the United States Trade Representative; https://ustr.gov/issue-areas/small-business
16. “Africa Matters: Why the U.S. Should Bolster its Trading Relationships with African Countries,” Trade.Gov Blog; https://blog.trade.gov/2018/07/05/africa-matters-why-the-u-s-should-bolster-its-trading-relationships-with-african-countries/
17. Ibid.
18. Africa Is Now: The Opportunity for Mid-Sized US Companies, The Chicago Council on Global Affairs; https://www.lw.com/mediaCoverage/africa-is-now-the-opportunity-for-mid-sized-US-companies
19. “Small- and Medium-Sized Enterprises (SMEs),” Office of the U.S. Trade Representative; https://ustr.gov/trade-agreements/free-trade-agreements/transatlantic-trade-and-investment-partnership-t-tip/t-tip-12
20. “Business Advice For U.S. Companies In Africa: Do What You Do Best,” Newsweek; https://www.newsweek.com/business-advice-us-africa-business-china-africa-628320
21. Ibid.
22. Ibid.
23. Ibid.
24. “Office of International Trade,” U.S. Small Business Administration; https://www.sba.gov/offices/headquarters/oit
25. “Resources - Doing Business in Africa,” International Trade Administration; https://www.trade.gov/dbia/resources.asp

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