Grant Harris encourages more US investments in Africa
Just as other countries are investing in Africa,
American businesses need to think of doing so too.
As a US investor, some questions may plague your mind when thinking of jurisdictions to allocate capital. Should Africa be on the list? This question is often answered by information on the media about political risk and difficulty navigating Africa’s business terrain. But is the media presenting the right approach to doing business in Africa?
Many US investors are influenced by negative views of Africa on the media leading to allocation of capital elsewhere. Grant Harris, a seasoned consultant on US-African affairs, thinks otherwise. According to him, there is a strong business case for doing business in Africa. In a presentation sponsored by the New York City Bar Association on April 25, 2018, he advocates the following reasons for investing and doing business in Africa:
1. Demography: Africa is the youngest and fastest-growing continent with an estimated median age of 19. By 2050, the continent will be a quarter of the world’s population. Thus the focus should be on how Africa fits into a company’s global growth strategy.
2. Increasing spending: According to a McKinsey report, by 2025 consumer spending would be $2.1 trillion. Investors and businesses producing consumer goods would benefit from this increased spending.
3. Increased connectivity due to internet penetration.
4. Fastest growing economies are in Africa: between 2000 and 2014, African growth outpaced global growth. Although 2015 recorded slow growth due to falling commodity prices, McKinsey and E&Y still give positive outlooks on investing in Africa.
In his presentation, Grant does not ignore the challenges of doing business in Africa. He outlines them but advises investors to take a more strategic approach to mitigate the risks posed by these challenges. A challenge he identifies is the poor quality of governance in some African countries. For him, poor quality of governance impacts negatively on the rule of law and discourages investment in a country. Another challenge is the inconsistency in the implementation of government policy. Inconsistency in government policy creates uncertainty for businesses and investors who may be interested in doing business or investing. While acknowledging the advantage of Africa's demography, he posits that it could pose a challenge if there are insufficient jobs to meet a growing young population. According to the IMF sub-Saharan Africa needs to create an average of 18 million high-productivity jobs annually till 2035 to maximize the potential of its demography else there will be economic and social problems.
Beyond the challenges, Grant says it is important to conduct due diligence and seek out local knowledge as should be done in any market asides Africa. In building a case for increased investment in Africa, Grant recognizes the role of various African government, and the African diaspora in the United States. For African governments continually competing for foreign direct investment, he advises prudence in the negotiation process to avoid sidelining local citizens. In his words, “it’s up to African leaders to get a good deal for their people." An example is ensuring that in the negotiation process, clauses are inserted which ensure transfer of knowledge and local capacity building. According to him, the African diaspora can provide useful negotiating skills during the deal process, and further help build the deal negotiating capacity of various African governments.
He believes investment must not destroy democratic institutions, but be done upholding democratic ideals else systemic problems are worsened.
Grant Harris is CEO of Harris Africa Partners LLC and advises companies on doing business in Africa. From 2011 to 2015, Harris served as the principal advisor to President Barack Obama on sub-Saharan Africa, as Special Assistant to the President and Senior Director for African Affairs at the White House. In this role, Harris conceived of the historic U.S.-Africa Leaders Summit, which generated $37 billion in new commitments to support trade, investment, and development across Africa.