After Obama's Ghana visit, would American investors come?

By Emmanuel K. Dogbevi

President Barack Obama left Ghana Saturday night July 11, 2009, but the ripples of his visit still reverberate throughout the country and indeed the entire world. But one question that lingers on our minds at ghanabusinessnews.com is: would the historic visit serve as an encouragement to American investors to come to Ghana?

Available data shows that US businesses are not investing as much as they should generally in Africa and in Ghana in particular. A study that was published on May 20, 2009 by the US Chamber of Commerce says American businesses are not encouraged to invest in Africa for reasons among which are corruption, lawlessness, unstable governments and inadequate infrastructure.

Indeed, in President Obama’s speech to Ghana’s Parliament Saturday July 11, 2009, he specifically touched on the issues of corruption as a bane to development not only in Ghana, but the entire continent. He said: “Repression takes many forms, and too many nations are plagued by problems that condemn their people to poverty. No country is going to create wealth if its leaders exploit the economy to enrich themselves, or police can be bought off by drug traffickers.”

Adding, “no business wants to invest in a place where the government skims 20 percent off the top, or the head of the port authority is corrupt. No person wants to live in a society where the rule of law gives way to the rule of brutality and bribery. That is not democracy, that is tyranny, and now is the time for it to end.”

As a matter of fact, several studies conducted in Ghana by anti-corruption institutions over the years show the police as corrupt. The political institution has also been cited in surveys as being corrupt. Political corruption in Ghana has even been nicknamed “kickbacks”.

Another study published by the Bank of Ghana on foreign direct equity investments in Ghana also shows that Europe and not America is the leading investor in the country.

The highlights of the survey, shows Europe as making the highest foreign direct equity investments (FDEI) to Ghana representing 60.7%., while investments from the African continent consist of 38.0%.

America places fifth among the top ten investor nations in Ghana. According to the report, the top ten sources of FDEI inflows in 2007 were Mauritius, 27.9%; France 19.4%; British Virgin Islands 18.4%); United Kingdom 16.9%; United States 5.9%; Togo 3.4%; Norway 3.3%; Israel 3.2%; Nigeria 2.1%, and Switzerland 1.9%.

The US Chamber of Commerce study is titled ‘The conversation behind closed doors: Inside the Boardroom: How Corporate America Really views Africa’.

The Chamber is also the world’s largest business federation with a membership of more than three million businesses and organizations of every size, sector and region as well as 112 affiliates in 99 countries around the world, making the Chamber a crucial source of investment in any country.

Despite the enthusiasm and hope that heralded the institution of the African Growth and Opportunities Act (AGOA) on May 18, 2000 to offer “tangible incentives” for African countries to open their economies and build free markets, not many American businesses as expected are doing business in Ghana.

To the extent that reports indicate that Ghana’s exports to the US under the AGOA fell in 2008 and continued to fall into the first quarter of 2009.

Ghana’s total exports under AGOA to the US market stood at US$42.2 million in 2008, a 38.4 percent decline from the US$68.6 million recorded in 2007.

From January to March this year, the country’s total value exported under the scheme was US$2.5 million, representing a momentous 86 percent decline over the US$18.1 million recorded in the first quarter of 2008.

The US Chamber of Commerce cited some of the following reasons for not investing in Africa; the image of lawlessness, corruption, unstable governments, an inadequate infrastructure, uneducated or untrained people, and an unwelcoming government attitude toward business.

Hopefully, President Obama’s visit to Ghana, which he clearly said was his endorsement of the country’s democratic culture and stability, would change the perception and spur some more US businesses to enter Ghana and invest.

These businesses would be joining other major US investors like Coca-Cola, Newmont Mining, Lehman Brothers, CMS Energy and Cargill.

American investors can look at the following areas; aerospace/defense, agribusiness, consumer goods, health care and information and communications technology.

The others could be infrastructure, media, petrochemical/extractive, pharmaceutical and transportation.

Africa not attractive investment centre for American businesses - Report

By Emmanuel K. Dogbevi

American businesses are not investing in Africa as they should due to a number of reasons including corruption, lawlessness unstable governments and inadequate infrastructure.

They are also hesitant to put their money in African countries because of the apparent lack of political will by African governments to curb corruption, a report released Wednesday May 20, 2009 by Baird’s CMC, a communications marketing consultancy together with the US Chamber of Commerce.

The report a copy of which was made available to ghanabusinessnews.com indicates that, overall, US businesses do not view Africa as an attractive place to invest.

The businesses take into consideration, the image of lawlessness, corruption, unstable governments, an inadequate infrastructure, uneducated or untrained people, and an unwelcoming government attitude toward business.

The businesses believe that these practices handicap those who will not or cannot “play the game” by these rules.

In addition, returns are not reasonably ensured or sustainable because costs can often escalate for reasons unrelated to business operations and the rules can change unexpectedly. This means that the time and resources already invested could be lost, the report said.

The report which is titled ‘The conversation behind closed doors: Inside the Boardroom: How Coporate America Really views Africa’ is in two parts, the study for the second part is ongoing.

The US Chamber of Commerce which is the world’s largest business federation has a membership of more than three million businesses and organizations of every size, sector and region as well as 112 affiliates in 99 countries around the world.

One of the objectives of the qualitative survey was to examine why US companies hesitate to invest in Africa. It also looked at what American businesses and African countries can do to increase US investments across the continent.

Ten industries were looked at in the survey and these are,aerospace/defense, agribusiness, consumer goods, health care and information and communications technology.

The others are, infrastructure, media, petrochemical/extractive, pharmaceutical and transportation.

The Executives who were interviewed, the report indicated, do not yet believe that they are at a competitive disadvantage because they are not investing in African countries.

According to the report, with no competitive traction, there is no sense of an opportunity being missed. Furthermore, since Africa is not selling itself overtly by asking for investment, the continent does not attract enough attention amidst competition for investment from other developing countries or regions. The only exceptions to this are China and India.

While the report recognized the fact that African countries are marketing themselves and creating the environment to attract investments, the lack of the following is a disincentive:

The fact that the rule of law does not prevail to the degree required to make Africa an attractive investment destination. This applies to corporate, societal, and criminal law.

Africa, the businesses observed, does not offer a sufficiently large middle class of consumers or show consistent economic growth that could promise a future market. Most African countries are small and have poor markets, and there are barriers to regional markets—such as taxes and the freedom of movement of people and goods.

According to the report however, if African countries want to position themselves, to attract a lot more foreign direct investment (FDI), from America, then they should do several things including the following:

• Invest in the health and education of the African people to create a large pool of skilled and productive human resources.

• Invest in and maintain infrastructure—transportation, communications, electricity, and security—so that there will be a reliable society in which to operate.

• Build a functioning legal system to ensure the rule of law, transparency, and fair play.

• Create a positive climate for foreign investments by reducing bureaucratic processes, eliminating corruption, and reforming tax systems, irrespective of country of origin.

• Ensure stable political environments—that may or may not be based on western democratic principles—that work toward the common good of all stakeholders in society.