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When President Barack Obama convenes nearly 50 African leaders in Washington next week for the U.S.-Africa Leaders Summit, the grand scale of the event could fill television screens for days. The real action, however, will be the behind-the-scenes, headlong rush by both Africans and Americans to capitalize on a new economic reality: Africa is on the move. And America's businesses and investors have just as many reasons to bring their business cards to the summit as Africans do.
Casual political observers often focus on Africa's natural resources, mineral wealth and conflicts as a strategic concern, but Africa is a massive and rapidly growing consumer market that is more fully appreciated by strategic investors with each passing day.
Africa's collective GDP surpassed that of Brazil and Russia six years ago, and it is estimated to be $2.6 trillion by 2020. That means $1.4 trillion in consumer spending.
Investors see an investment climate that is more welcoming than ever before. While there were was a slight downtick in foreign direct investment projects last year, foreign investors remain bullish on Africa and with good reason: 10 of the top 12 fastest-growing nations in the world are in Africa. As recently as 2011, Africa was ranked as eighth on the list of top 10 destinations for foreign investment; now it ranks second.
If one looks at the rate of return that investors have had in recent years it has been remarkably good. Even allowing for the Great Recession, researchers found that African private equity funds outperformed U.S. venture capital, posting an 11.2 percent annualized return.
The demand for major investments requiring imports of goods and technology is immense. To support its forecast economic growth and keep pace with demand, Sub-Saharan Africa will need to install 7 gigawatts of new power generation per year — enough to power an additional 7 million homes annually. That represents a phenomenal opportunity for U.S. companies that have poured billions into developing energy efficient technology and clean energy technology in recent years.
Roughly 60 percent of the world's total amount of uncultivated, arable land is in Africa. At a time when the global middle class is increasing its consumption of commodities at an unprecedented pace, agricultural production must keep pace. Here again, American producers have a technological edge.
Because Africa is installing new infrastructure, it has enormous leap-ahead potential. Over the past two decades, development experts have been astounded by the rapid growth and uptake of cellular telecommunications across Africa, which has provided millions of Africans with access that would have been unthinkable through land-lines. Even more remarkable has been the way in which some African countries have rapidly adapted cellphones for mobile banking, health care and other uses.
Considering that the median age on the African continent is 19 years old, what better time for American companies with consumer products to establish strong brand relationships?
None of this is to suggest that Africa does not have major legacy challenges. Some 600 million Africans still lack access to electricity, which means they have inadequate nutrition, health care and education as well as fewer job opportunities in the formal sector.
That is why President Obama has chosen to rally a whole-of-government effort in order to catalyze private sector investment into the energy sector there.
The lack of economic inclusion is also an issue that may take generations to solve. Women and girls, in many countries, face discrimination and barriers, such as being barred from educational opportunities, forced into marriages or denied legal rights necessary to own businesses. Those are among the reasons American development and aid agencies have focused so much investment in microfinance to lift people out of the informal economy.
Such indicators are cause for concern and engagement. But they also point up how much potential still remains untapped.
The compound annual growth rate of foreign direct investment into sub-Saharan Africa over the past seven years has been 19.5 percent. With even modest synergies between private infrastructure, investment climate reforms and improvements in health and welfare, that pace is only likely to climb.
A generation ago, American leaders worried appropriately that Africa was in a demographic free-fall, that so many were dying from AIDS and other communicable diseases that an entire generation of progress might be lost. Unless more people could overcome the hardships and vagaries of life in Africa, a window would close.
Today, American leaders are concerned about another type of window closing. They are concerned about American companies missing the opportunity to participate in the enormous promise of every African generation to come.
Elizabeth Littlefield is the president and CEO of the Overseas Private Investment Corporation (OPIC), the U.S. Government's Development Finance Institution. Her email is firstname.lastname@example.org; Twitter: @elittlefield.To respond to this commentary, send an email to email@example.com. Please include your name and contact information.