Sub-Saharan Africa: economic reforms are at a critical crossroads in 1992

U.S. Exporters Are Benefiting from the Gradual Recovery

After several years of economic restructuring, Sub-Saharan Africa has finally reversed the downward spiral which plagued the region in the 1980s. Africa's economic malaise bottomed out in 1986, and structural adjustment programs have helped the slow expansion continue into the 1990s. Although indicators are mixed, Africa appears poised to take advantage of an improved external economic environment in 1992, reflecting the slow recovery of world markets, a slight increase in non-fuel commodity prices, and restoration of trade with the Middle East after the disruption of the Persian Gulf War.

U.S. exports 1991 - $4.8 billion

U.S. imports 1991 - $11.7 billion

U.S. exporters are already benefiting from Africa's gradual recovery. With an assist from favorable exchange rates, U.S. sales to the region surged 18 percent in 1991 to $4.8 billion, compared to a 7 percent expansion in overall U.S. exports. Shipments to Africa have grown 70 percent in the past five years, led by such items as: aircraft and parts, oil and gas field equipment, construction and materials-handling machinery, computer and telecommunications equipment, farm machinery, motor vehicle parts, industrial chemicals, and paper mill products. Food grains have also performed well, particularly rice, wheat, and corn. However, the predominance of capital equipment in the export mix indicates that the United States is contributing to the development of Africa's productive base, and helping to make the region a stronger trading partner for the future. U.S. export prospects should continue to improve, provided the African countries pursue sound economic policies.

While U.S. exports to Africa have shown impressive growth, they have also become more concentrated geographically. South Africa and Nigeria, the region's two largest economies, accounted for more than 60 percent of U. S. sales to the Sub-Saharan region in 1991. Last July, President Bush lifted the trade and economic sanctions imposed on South Africa by the 1986 Comprehensive Anti-Apartheid Act. In February 1992, U.S. Eximbank credits were made available to the South African government for the first time in 15 years. Aside from the continuing prohibition on sales to the police and military, the South African market is now fully open to U.S. exporters.

Crude oil continues to dominate U.S. imports from Africa. Oil accounted for 71 percent of the $11.7 billion in purchases from the region in 1991, although imports were down slightly from a year earlier, due to the U.S. recession. U.S. economic recovery is important to the prospects of Africa's oil-exporting countries. Nigeria, whose $5.2 billion in crude oil sales to the United States made it our second leading supplier last year, is especially dependent on a strong U.S. economy. Angola, Gabon, Congo, Zaire, and Cameroon also ranked among the top 20 crude oil suppliers to the United States in 1991, and each earned more than $100 million from the sales.

While the United States is important to Africa as a trade partner, our long-term benefit to the region rests on our ability to supply private investment. Africa stands at a critical juncture in the development process. The response of foreign investors could be crucial to the region's ability to continue making the sacrifices demanded by economic growth in the 1990s. If investment flows increase substantially, Africa could finally achieve the goals of increased prosperity and self-sustaining growth. However, if the region fails to increase its access to private capital, skills, and management, the 1990s could be as unforgiving to Africa's development as the 1980s.

Democracy and Free Enterprise. The Sub-Saharan region has made a serious commitment to political and economic reform, in favor of democracy and free enterprise. In the last two years, at least eight countries have held free elections, some for the first time. Several more will join the democratization movement in 1992. Mauritania and Mali have already held elections this year, and the Gambia and Congo will soon follow suit. Nigeria, home to one of every four Africans, will elect a civilian government this fall, ending nine years of military rule. Angola plans to close out its 16-year epoch of civil war with elections late this year. With a renewed mandate from its March 17 referendum, South Africa will continue negotiations to replace its apartheid system with a new constitution. A multi-racial interim government could assume power this year, with elections to follow in 1993. While the world closely follows the birth of free institutions throughout the former Soviet Union, Africa continues its silent revolution, building democracy in relative obscurity.

Democratic institutions bring predictability, accountability, and the rule of law. It is no coincidence that these are also essential elements in building a climate of business confidence. Africa's democratic movement has been accompanied - and in many cases preceded - by economic structural reforms based on principles of the free market. Since 1983, more than 30 countries have instituted reform programs aimed at liberalizing their economies and building free enterprise. Twenty-four countries are pursuing arrangements with the International Monetary Fund, which typically involve measures to increase fiscal discipline, cut internal subsidies, devalue national currencies, divest state-owned enterprises, and liberalize trade.

These efforts are bearing fruit. Those countries that have consistently implemented structural reforms and stabilization policies have outperformed their neighbors in GDP growth, export revenues, and controlling inflation.

As the Africans address the challenge of structural adjustment, more U.S. firms are responding to the improved commercial climate. Companies are competing for contracts throughout the region, not only in the traditional extractive sectors, but also in telecommunications, health care, heavy industry, building products, and consumer goods.

However, these reform programs have meant great sacrifices on the part of African populations, as their governments strive to reduce consumption in line with limited productive capacities. After several years of sustained effort, several countries are suffering from "reform fatigue." Even now, further progress is threatened by internal political pressures, Africa's $175 billion foreign debt, renewed drought in East and Southern Africa, and continued deadlock in the Uruguay Round trade negotiations. A successful Round is essential to ensure Africa's continued access to its traditional markets in the developed countries.

The region also needs increased private investment to expand its narrow economic base and diversify its exports. Without greater access to private capital, Africa's continued commitment to economic reform is fragile, and prospects for growth remain in doubt.

With the end of the Cold War, Africa is no longer a contested venue between rival ideologies. However, business opportunities in Eastern Europe and the Commonwealth of Independent States now compete with those in Africa for the attentions of U.S. investors. In an effort to ensure that African opportunities receive their due, the Department of Commerce and the Department of State will co-sponsor their annual Conference on U.S. Trade and Investment in Africa in Seattle May 19-20. The Department of Commerce is also working with the U.S. Agency for International Development (AID) to establish an African Business Development Initiative. The initiative would strive to raise U.S. business awareness of Africa's opportunities, by mounting an intensified effort to facilitate two-way trade and U.S. investment in African joint ventures.

The Commerce Department also encourages expanded commercial ties with Africa through a selective trade promotion program. An aerospace trade mission was held recently in Southern Africa, and the third USA-West Africa Expo - the largest U.S. solo trade fair in Sub-Saharan Africa - will be held later this month in Abidjan, Cote d'Ivoire. An exhibition of U.S. computers, telecommunications, and office equipment will follow in Lagos, Nigeria in May.

Due to Africa's limited financial resources, such multilateral creditors as the World Bank and the African Development Bank take on added importance in financing project opportunities. U.S. firms increased their sales associated with African Development Bank (AFDB) projects to more than $100 million in 1991 - a threefold increase since 1988 - and the Department of Commerce is working to ensure that the U.S. share continues to grow. A U.S. and Foreign Commercial Service Officer in Abidjan monitors AFDB operations and provides advance project information for rapid dissemination to the business community through the Department's National Technical Information Service. The Bank has also opened a Washington, D.C. office.

Despite the economic and political progress of the past several years, Africa's needs remain great. By helping Africa's growing class of entrepreneurs to build viable free enterprise institutions, the U.S. private sector can ultimately help Africa share in the progress of the global economy.

Africa Conference

A U.S. Conference on Trade and Investment in Africa is scheduled for May 9-20, at The Edgewater Inn in Seattle, Wash. Speakers from U.S. government and Washington state agencies will discuss Sub-Saharan African business opportunities. Cost to attend is $60. To register, contact: Trade Development Alliance of Greater Seattle, 600 University St., Suite 1200, Seattle, Wash. 98101, Attention: Ellen Wohl, tel. (206) 389-7296.

COPYRIGHT 1992 U.S. Government Printing Office
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