Economic success refers to the high GDP growth rates, declining inflation, growing middle class with greater purchasing power and development of industries such as the banking and retail sectors.
Unfortunately, common stereotypes surrounding African countries—disease, war, corruption, poverty, and poor infrastructure—continue to prevent many business owners, especially small business owners, from taking advantage of the opportunities in different African countries.
It is imperative that U.S. business owners let go of these anxieties and fears and engage the growing African market through exports and imports to increase their sales and competitiveness. When I discuss the opportunities in Africa with small business owners, the responses touch on similar themes—corruption, red tape and exploitation. However, there are programs and policies put in place to address these concerns.
Corruption is not unique to the continent of Africa. Many business owners are mainly concerned about buyers failing to pay for goods and services. Non-payment can also take place right here in the United States and throughout other regions. Notably, options exist to reduce the risks associated with international trade.
The Export-Import (Ex-Im) Bank is one such option. (The U.S. Congress will determine whether or not to reauthorize the Ex-Im Bank before it expires on Sept. 30, 2014.) The 80 year Ex-Im Bank backs loans offered by commercial lenders to exporters to reduce the lenders’ risk and allow exporters to increase their revenue through export sales. The same institution also offers an export credit insurance program to exporters to cover any losses due to non-payment or political instability.
Although there is still room for improvement, a number of African countries have made significant enhancements in terms of ease of access to their markets. The number one destination for U.S. exports, South Africa, has reduced the amount of time and documents required to export to the country through its Customs Modernization Program, according the International Finance Corporation (IFC) and World Bank Doing Business survey. More than half of the Sub-Saharan countries have implemented at least one reform measure to facilitate smoother international trade, according to the same IFC/World Bank survey.
A number of trade facilitation projects funded by the U.S. Agency for International Development (USAID) have helped to streamline documents, improve customs procedures, and enhance transport corridors. These projects, one of which I worked on for the Southern African region, operate out of the trade hubs in the Western, Eastern and Southern African regions.
Outsourcing and Worker Exploitation
Outsourcing is one component of international trade, in which a company moves its production facilities and labor source to take advantage of cheaper labor. Exporting allows U.S. business owners to sell a good or service in a foreign market so that they can boost their bottom lines. Also, purchasing goods from African countries helps African business owners to increase their sales and possibly have the ability to invest back into their own economies.
In addition to the efforts of the African countries themselves, policy measures exist that extend opportunities for U.S.-Africa trade such as AGOA.
African Growth and Opportunities Act (AGOA)
AGOA is a U.S. law signed by former President Bill Clinton in May 2000. This law encourages Sub-Saharan African countries to become more involved in the global economy by giving its exporters special access to the U.S. market. For example, eligible African apparel exports enjoy duty and quota-free access to the U.S. market.
At the same time, the U.S. textile producers benefit, because the law requires that the fabric, yarn and thread used in African apparel originate in the United States in order receive that special access. In other words, AGOA provides U.S. fabric, yarn and thread producers guaranteed access to the Sub-Saharan African market.
Africa’s growing economic strength continues to present opportunities for U.S. business owners. U.S. business owners must take notice of the growing potential of the many countries throughout the Sub-Saharan African region and engage the region to increase their sales, lower costs and expand their presence around the world. To gain a competitive foothold in the region, U.S. business owners should invest the time and finances to avoid costly mistakes that occur regardless of geographic location.
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