Obama’s Advisors Give Final Recommendations On Doing Business In Africa

The President’s Advisory Council on Doing Business in Africa (PAC-DBIA) has issued its final recommendations to U.S.President Barack Obama before he leaves office in January 2017.
The advisors have focused  on five key recommendations that they think are the most critical to move the needle on United States (U.S.) trade and investment in Africa. For two years, the Council analyzed opportunities and challenges for American businesses in Africa, and issued two other sets of recommendations. This third set reflects the final views of the Council, and refines the recommendations previously made.

In 2014, President Obama appointed PAC-DBIA, a group of 15 American private sector leaders with business operations throughout Africa, to advise on how to advance the U.S.-Africa business agenda. While the advisors all have active business operations on the continent, to develop a consensus view on which actions to recommend, the Council traveled as a delegation led by U.S. Secretary of Commerce Penny Pritzker to East and West Africa to meet with country presidents, ministers of trade, investment and commerce, as well as the leading private sector players in both African and U.S.-owned businesses. Pritzker says the private sector industry representatives comprising the PAC-DBIA have been instrumental in helping the Obama administration develop the trade and investment priorities that have led to an expanded U.S.-Africa commercial relationship. “We have utilized their invaluable information, analysis, and recommendations to create sustainable commercial partnerships that lead to job growth, a stronger entrepreneurial ecosystem, and expanded economic opportunities. PAC-DBIA’s efforts continue to pay dividends for companies on both continents in areas as diverse as workforce training, energy, and transportation infrastructure.”

The five recommendations that PAC-DBIA made to the President and the Secretary of Commerce are as follows:

1. Accelerate Power Africa and Energy Infrastructure

The U.S. should pursue a detailed action plan to achieve 10,000 megawatts of electricity in Nigeria in the next five years. Because of Nigeria’s enormous potential as the largest country in the continent in terms of both population and GDP, and because the electricity generation and distribution capacities in Nigeria are among the least developed on the continent, the PAC-DBIA recommends that the President focus on Nigeria as the focal point for energy infrastructure. Specifically, PAC-DBIA recommends that that the U.S. and Africa policymakers collaborate to to focus on identifying and facilitating investment in electricity generation, especially for the hard- to-finance early stage projects.  After securing investment for electricity generation, it is essential to follow quickly with assistance in securing investment for electricity transmission and distribution.

One of President Obama’s greatest legacies will be Power Africa, a comprehensive set of resources including U.S. government backed financial and technical support to electrify Africa. Earlier this year, Power Africa announced a roadmap to double access to electricity across sub-Saharan Africa. Energy infrastructure, the Council noted, is a fundamental enabler of growth, security and quality of life. It is for this reason that PAC-DBIA recommends that the U.S. president make electricity its first and foremost priority.

2. Strengthen Vocational and Skills Training

PAC-DBIA recommends that the U.S. government invest in skills training within the populations of its African trade partners.  None of the recommendations can be implemented, or sustained, without a well-trained workforce. Most countries in Africa have a skills shortage. There is a wide gap between the strong academic programs offered by many universities in Africa, and the pragmatic skills required to advance the economies of most African nations. One constraint to increasing foreign direct investment in Africa is the large cost employers face to to develop their employees into productive staff members whose productivity is on par with global competitors.

Sim Tshabalala, Chief Executive of Africa’s leading bank, Standard Bank, makes the following remarks with respect to this recommendation: ‘We agree with the PAC-DBIA recommendation that the U.S. government place much greater emphasis on skills development and workforce training within the U.S.-Africa relationship. Africa’s workforce needs to upskill to become more globally competitive.’

The U.S. can leverage its many resources, including the U.S. Department of Education and the U.S. Department of Labor, each of whom have a range of expertise and knowledge that can be of value to African governments on how to better equip their citizens for the workforce. One particular sub-sector of the African workforce that requires critical attention is healthcare workers. As the healthcare industry becomes increasingly technological, the skills gap widens, and African healthcare workers need to develop technical skills to use the new technologies available to treat any number of afflictions.

3. Deepen U.S. Commercial Dialogue and Engagement

U.S.-Africa business is a two-way street, and PAC-DBIA advises the President to develop the communication and engagement with African governments and businesses.  Deeper engagement organically leads to more business engagement.

The U.S.-Africa Business Forum, taking place in New York on September 21, is one example of a milestone event that serves this purpose. A convening of the senior business leaders from the United States and Africa, hosted by the U.S. government and planned to deliver rich content and quality networking opportunities will yield results in terms of increased, organic business activity with Africa, without being prescriptive.

Other forms of recommended commercial dialogue and engagement include investor roadshows organized by the Department of Commerce to showcase investment opportunities in Africa, as well as sector forums, designed to bring leaders of the same industry in touch with one another from both the American and African sides of the able.

4. Improve Travel Routes and Transportation

Africa is the least connected continent, with less than 12% of its trade being intra-regional versus over 60% for the European Union. There are a number of factors that contribute to this situation, but the limited ability to connect by air, rail or road within the continent is an undeniable fact.

There are numerous ways in which the U.S. can assist Africa to improve its transportation routes, especially for air travel. Among the strong recommendations in the report is that the U.S. develop a coordinated financing strategy for Africa aviation projects across U.S. government financing institutions, including the Export Import Bank and the Overseas Private Investment Corporation, both of which have programs that assist in the financing of aviation infrastructure.  The approach to assisting in this realm should be holistic and comprehensive, as the U.S. has many resources to offer, including technical assistance through the U.S. Trade Department’s Aviation Cooperation Program which promotes development of  more robust regional and networks.

5. Negotiate Harmonized Tax Treaties

PAC-DBIA advises the President, through the Department of the Treasury, to pursue tax treaties with key African countries poised for large scale growth and development, including Nigeria and Ethiopia. Having a tax treaty in place strongly promotes foreign direct investment. For example, the United Kingdom (UK) has tax treaties in place with nearly twenty countries on the African continent, compared to the United States, which has four. Tax treaties encourage investment, and thus the UK had $7.4 billion of foreign direct investment into Africa last year vs. the U.S., which had $1.9 million.

The chair of PAC-DBIA, Dominic Barton, Global Managing Partner of McKinsey & Co. summarized the release of PAC-DBIA’s recommendations in this way: The recommendations are the result of two years worth of work undertaken by a group of American private sector leaders, all of whom are actively engaged in business in Africa. These companies are well aware of the real world opportunities and challenges associated with doing business in Africa, and have pooled this collective wisdom to put forth detailed recommendations that reflect their on the ground experiences.

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