The Business of Doing Business in Africa: On China & the U.S. Expanding their Reach on the Continent

Africa is quickly becoming one of the best places for investment opportunities and the world is taking notice. Africa is home to 6 of the 10 fastest growing economies in the world and offers a plethora of investment opportunities in technology, agriculture, infrastructure, and other industries. Various nations are taking note of this and are working to expand their footprint on the continent, with China leading the forefront. China has pledged billions of dollars to infrastructure development, aid, and debt relief to establish a greater presence in Africa. The United States has always had a presence on the continent but is looking to reestablish itself with the Trump administration’s proposed Prosper Africa initiative, which seeks business opportunities within the region. With all of these foreign players looking to expand their reach on the continent, it raises the question of why now and what potential do they see in doing business in Africa? 

China is growing to become one of the largest foreign investors in Africa, offering “no strings attached” loans that have become a growing worry for many. The belief is that China is engaging in neocolonialist policies, expanding its influence on the continent solely for economic gain. Chinese interest in Africa lies in infrastructure development, natural resource extraction, and manufacturing to contribute to China’s new Belt and Road Initiative, which is also known as the New Silk Road. Proposed by President Xi in 2013, it serves as a way for Asia to strengthen its connectivity with the rest of the world and promote the flow of goods, investments, and people. This ambitious project is to provide mutual benefit, as it allows Africa to gain key resources in order to aid its economic development and help China as it looks to trade resources in a more efficient way globally.

The U.S., on the other hand, is looking to expand in different ways. Since 2000, when the African Growth and Opportunity Act (AGOA) was passed, the US has had an ongoing relationship with Africa in order to improve economic relations. AGOA has since opened doors for new investments, trade, and aid that goes beyond economic development. It has paved the way for initiatives such as Power Africa, proposed by USAID in 2013, which strives to provide people across sub-saharan Africa with cleaner and more efficient electricity. But with the rapid development going on within the continent as well as the growing influence of China, the US is looking to further its involvement in Africa. The Prosper Africa initiative seeks to improve the business climate in the region and identify open markets for American businesses to enter. While interning at Baobab, I have become more cognizant of how the American companies we work with are not only intrigued by investment opportunities, but also driven by the possibility of having an impact. The growth opportunities are far too great to ignore and with these companies looking to invest their resources into them, it contributes to the bustling business ecosystem that African nations are looking to build.  

Although Africa offers a vast amount of opportunities for development and investment, it comes with a series of challenges as well. Political instability and debt serves as major challenges for businesses looking to enter the market. African countries are working to mitigate these challenges by implementing reforms to make doing business easier and to limit corruption. According to Doing Business, for the sixth consecutive year Sub-Saharan Africa leads with the highest number of business regulatory reforms in 2019 and 40 of the region’s 48 economies have each implemented at least one reform to improve conditions within the region. With the growing number of outside support and policies put in place in order to contribute to stability and order, Africa is leveraging its resources in order to create a more sustainable and business friendly environment. 

Africa, in many ways, has always been a place abundant with opportunity and potential. With one of the fastest growing economies in the world and a massive 1.2 billion population, Africa is on the rise to become a global powerhouse. With initiatives put in place by foreign players as well as new agreements like the African Continental Free Trade Agreement, which promotes intra-African trade and helps local businesses grow, Africa is a very attractive market for businesses. I implore that individuals take notice of the rapid development that is pushing Africa forward. As Americans, we must pay attention to the steps African stakeholders are taking, and act accordingly and respectfully, in order to fully capitalize on its potential.