Africa is home to seven of the top 10 fastest growing countries in the world, so it’s no surprise that countries have taken a strong interest in the region, with China leading the charge. With more than 40 years experience working in the continent, Dr. Sharon T. Freeman shares her insights on how the US fell behind and what they can learn from the Chinese
By Violet Law
In late July, President Barack Obama made a historical trip to Kenya and Ethiopia where he spoke highly of Africa’s future, saying that it was on the move. At a recent AmCham talk held slightly ahead of the President’s trip, Dr. Sharon T. Freeman, who has been steeped in promoting trade in Africa for decades, expressed a likewise notion. She believes a lot more can – and should – be done strategically to expand opportunities for American businesses on the continent.
“The US tries to plan its engagement around certain kinds of issues, and China has another approach … The Chinese approach is a strategic one: ‘We know what we want to do with the continent of Africa and with the specific countries of Africa, and here is how we’re going to move all of the pieces together’,” says Dr. Freeman, President of the All American Small Business Exporters Association and an advisor of the US Trade Representative’s Trade Advisory Committee on Africa (TACA).
“What we have in the US, by contrast, are aspirational goals. What we have is a desire for African countries to be better, to do better, to be better people, but we can’t legislate that. We therefore haven’t succeeded.”
An old Africa-and-China hand, Dr. Freeman spoke from her four decades of experience as an economic development and trade expert in more than 100 countries for leading international organizations and private firms. She has worked in Africa since the early 1970s, eventually covering 49 of the 54 countries in the continent.
As for China, she was among the first US government officials to work there beginning in 1979, the year that marked the Reform and Opening Up era. Dr. Freeman is also a veteran of doing business in Hong Kong having lived here for 12 years, serving as the representative and regional director of the forerunner to the US Trade and Development Agency at the US Consulate for four years in the 1980s.
Now heading a US-based association that promotes global trade and investment linkages for small businesses, she has developed a unique perspective on doing business in the continent.
In Dr. Freeman’s view, it’s high time the US plays catch-up with China in vying for business in Africa. The three-day US-Africa Leaders Summit held in Washington D.C. in 2014 represented a lost opportunity as the dignitaries were all in one place, but no strategy was put forth and no deals were made.
By contrast, she pointed out that at the Forum on China-Africa Cooperation (FOCAC) in Beijing in 2006, the Chinese government met all the presidents of the African countries and made bilateral agreements.”
“For the Chinese, the focus is business, and the business is happening,” said Dr. Freeman.
She recalls very early on in her career in Africa, she would see Chinese people and businesses in many of the countries even before anybody else thought of doing business in the continent. This highlights another area of contrast between America’s and China’s trade relations with Africa – its private sector participation.
Our small businesses are not as entrepreneurial in comparison to Chinese companies. We have a lot of protection and incentives [for] small firms which has made us risk-averse,” says Dr. Freeman.
One of the risks that they are concerned about is corruption, an issue that President Obama appealed the Kenyan government to stamp out during his time in the country. While some practices are considered corrupt in the US, it might not be that way in another country. “But if you’re a small guy, you can’t play that game. You don’t have the resources to get that redefined in another way,” she explains.
But while the increasing amount of foreign investments has helped African countries, there is a growing concern about the future as the Africans themselves are also struggling to compete with the Chinese.
“One of the problems Africans had and still have: they don’t have the capital to compete. If you go into the market in Ghana, you’ll see all the kente cloth is from where? China. It’s not the handmade kente cloth. They buy the buildings, they buy the goods and supplies and sell it all. And because the Chinese individual is so entrepreneurial, they will do anything,” she says.
“At some point, the African private sector has to be able to emerge so they don’t feel like they’re being taken over. Right now the crisis point hasn’t hit, but at the same time, institutions are still not highly developed in Africa so they cannot get financing to be a player and a partner. They are working in some of the enterprises but ownership is another matter.”
For the United States, their plans for Africa are still leaning towards being aspirational.
Besides having a committee on Africa in the US Chamber of Commerce in Washington D.C., there’s another from the Department of Commerce called Doing Business in Africa which provides information to companies on what business opportunities are there and topics like housing and infrastructure. The committee is encouraging all 19 federal agencies to encourage their constituencies to be more involved in the continent.
In April, it released a report that provided eight recommendations on how to strengthen commercial engagement between the US and Africa. They included: supporting capacity building activities for African financial regulators and participants through training and knowledge sharing, providing technological improvements to perishable goods storage and packaging facilities, establishing a dedicated US-Africa Infrastructure Center for better coordination and improving the perception of doing business in Africa with success stories.
The recent renewal of the African Growth and Opportunity Act (AGOA) is another encouraging sign of the US’s interest in Africa. First signed into law in May 2000, the act is meant to create tangible incentives for African countries to implement economic and commercial reform policies and help forge stronger commercial ties between Africa and America.
The act is also aimed to integrate Africa into the global economy so that US firms may find new opportunities in privatizations of African state-owned enterprises or in partnership with African companies in infrastructure projects.
However, Dr. Freeman points out that unlike Chinese businesses, American ones can’t hope for too much direct help from the federal government, largely due to how the role of the government is perceived.
“In American terms, the role of the government is to help ensure there are no barriers to trade but not to really facilitate trade or provide significant resources to make it happen. And that is the strategic difference. The Chinese do believe that that is the government’s place,” she explains.
“On the margins we can provide some incentives. But those incentives themselves are only provided to the extent that they are seen as removing barriers.”
The United States certainly has a lot of ground to make up. According to the report from Doing Business in Africa, the US share of Africa’s trade went from 13 percent in 2001 to seven percent in 2013. In the same time period, China’s share grew from a mere three percent to 14 percent, well overtaking the US.
The Chinese show no signs of slowing down as they have announced plans to reach US$400 billion in bilateral trade by 2020.
Violet Law is a Hong Kong-based American journalist and former consultant at Deloitte & Touche in Chicago. She regularly contributes to the Los Angeles Times and the South China Morning Post magazine and has published two books by Hong Kong University Press.