AN UNTAPPED MARKET
September 8, 2008 J. JOSEPH GRANDMAISON Shipping Digest Online

Most Americans reading this column probably aren’t doing business in Africa. That is a shame because export opportunities in Africa are real and growing, and U.S. companies ought to be entering these markets now as African countries are developing their infrastructure and industries.

Over the years that I have served as a board member of the Export-Import Bank of the United States and have spoken with government and business leaders from all over Africa, it has become clear to me that too few U.S. companies are marketing in Africa. African contracts are often awarded to competitors from other countries at least in part because no U.S. companies have bid on them. That is unfortunate because Americans have a reputation for providing superior quality and for upholding their contracts. African project sponsors and other buyers are favorably disposed to U.S. companies – when there are some.

Here are the facts: The African continent is growing economically because of political stability and economic reforms in many countries. In 2006, the economy of all of sub-Saharan Africa increased 5.5 percent. In fact, 23 African countries expanded at a rate faster than 5 percent, and only Zimbabwe failed to grow.

Since the inception of the African Growth and Opportunity Act, U.S. trade with sub-Saharan Africa has increased from $29 billion in 2000 to more than $71 billion last year. AGOA provides beneficiary countries in sub-Saharan Africa with liberal access to the U.S. market and also contributes to better market opportunities for U.S. companies. In 2007, U.S. exports to sub-Saharan Africa totaled $14.4 billion, which is more than double the amount in 2001. Today 40 sub-Saharan African countries are eligible for AGOA benefits. AGOA is fostering an improved business climate in Africa and expanded U.S.-African trade.

Africa’s strong economic growth is producing a rising demand for equipment and services, as well as consumer products. Some of the sectors with substantial potential include oil field development, electric power generation, transportation, health care, telecommunications, computers and software.

Ex-Im Bank, the official export-credit agency of the U.S., has a congressional mandate to assist U.S. exports to sub-Saharan Africa, and we have increased our financing for these exports. We have seen a shift in demand for our products from short-term export-credit insurance (typically used for raw materials, spare parts and consumer products) to medium-term credit and long-term project and structured finance (typically used for capital goods and services).
In fiscal 2007, Ex-Im Bank authorized $442 million in transactions to 18 sub-Saharan African countries. Much of this financing assisted Boeing’s exports to African airlines, but it also supported exports of U.S. equipment and technology to African oil field and oil-storage projects, manufacturing and fishing companies, among others.

One market serving as a model for Ex-Im Bank financing in Africa is Nigeria. With oil sector revenue and the reform of its banking sector in 2006, Nigeria’s economy is growing considerably. Development of the power and transportation sectors, including ports, roads and airports, is particularly urgent.

To help U.S. exporters in Nigeria, Ex-Im Bank established a special delegated authority facility that now includes 14 Nigerian banks. This facility is making $1 billion in financing available for Nigerian buyers of U.S. goods and services.

The Nigerian model has been emulated with Ex-Im Bank’s new special delegated authority for the African Export-Import Bank, which can now provide up to $40 million in Ex-Im Bank-backed short-term and midterm financing. This facility serves as a marketing tool to promote the purchase of U.S. goods and services virtually throughout the continent.

Earlier this year, Ex-Im Bank also opened for medium-term financing in the public and private sectors in Angola, where opportunities in the oil, gas and mining sectors are enormous. We want more U.S. exporters to take advantage of these developments.

We advise companies to focus on markets where opportunities for their sectors are greatest. The U.S. Foreign and Commercial Service, www.export.gov/africa, is an excellent resource, and its Country Commercial Guides are invaluable. We also recommend participation in the Corporate Council on Africa’s 2008 U.S.-Africa Infrastructure Conference in Washington, D.C., on Oct. 6-8, 2008, http://www.africancl.org/.

Lastly, we invite those U.S. exporters seeking financing for their African contracts to contact Ex-Im Bank, www.exim.gov/products/special/africa. We can do more for U.S. exporters in Africa. We’ll help you realize the opportunities in this vast untapped market.

J. Joseph Grandmaison is a board member of the Export-Import Bank of the United States.