African Growth means American Success

May 11, 2012 By Nicholas Rogacki

In a time of economic uncertainty, the challenges we face are matched by opportunity.  Today’s global economy links us with emerging markets around the world, where developing countries are the destination of nearly half of U.S. exports and represent the greatest potential for U.S. export expansion.  In Sub-Saharan Africa, 17 countries have maintained rates of economic growth of five to seven percent per year for the last decade.  American businesses that have sought to tap into these growing markets are having an impact.  As foreign Direct Investment (FDI) in Africa grows, so does economic stability for developing nations in sub-Saharan Africa.  This not only benefits Africa, but also America as exports already support more than 10 million jobs in the United States.

Ernst & Young recently released the Africa Attractiveness Survey, which showed FDI in Africa up 27 percent over last year.  The U.S. is the leading investor with the largest number of FDI projects on the continent since 2003.  U.S.-based FDI projects have grown over 20 percent since 2007, and Chevron, Coca Cola, Exxon-Mobil, IBM, and Hewlett-Packard have all begun projects.

It’s no coincidence that U.S. companies are leading the charge.  The Export-Import (Ex-Im) Bank, Overseas Private Investment Corporation (OPIC), and U.S. Trade and Development Agency (USTDA) have been working to help grow American exports and facilitate U.S. investment in developing nations for years.  In 2011, the Ex-Im Bank supported about $41 billion in U.S. exports of goods and services while OPIC generated net income and contributed to U.S. deficit reduction for the 34th consecutive year.

Among the most important incentives for investing in these perceived volatile economies has been the risk and credit insurance these organizations provide for U.S. businesses seeking to expand to new markets.  OPIC political risk insurance and Ex-Im Bank’s export credit insurance have often been critical factors for many businesses’ initial decisions to invest in newer foreign markets where they might be more hesitant if acting alone.  Recently OPIC announced $150 million in political risk insurance to enable U.S. companies Belstar Capital Ltd. and Trade LLC to invest in the Ghana National Water Infrastructure Modernization Project, which will help increase access to clean water to 85 percent of the population by 2015.

OPIC loans not only help to open new markets, but also seek to do so without fostering dependency.  As FDI increases and economies grow and stabilize, OPIC and the Ex-Im Bank will not have to continue enticing investors.  In fact, 73 percent of Ernst & Young respondents anticipate that Africa’s attractiveness will improve over the next three years.

As the global landscape continues to become more and more interconnected, so do our economies.  OPIC, Ex-Im Bank, and USTDA represent an insightful understanding of this global dynamic, and Ernst & Young’s survey demonstrates the continued success and importance of programs such as these, funded by the International Affairs Budget.