Compendium working group on u.s. investment in africa

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Compendium working group on u.s. investment in africa

  1. 1. Working Group onU.S. Investment in AfricaCOMPENDIUM OF ACTION PLANS AND BRIEFING MEMORANDA ORIGINALLY PREPARED FOR ADVISORY COMMITTEE ON AFRICA MITT ROMNEY PRESIDENTIAL CAMPAIGN PUBLISHED JANUARY 1, 2013 Assembled with Introductory Materials By Peter C. Hansen Chair, Working Group Law Offices of Peter C. Hansen, LLC 1725 Eye Street, NW, Suite 300 Washington, DC 20006 (202) 349-3780 (-3915 Fax) phansen@peterhansenlaw.com
  2. 2. Compendium – Table of ContentsAll page numbers refer to the “C” (“Compendium”) numbers set in the lower-right corner.Introduction to the Compendium ................................................................................................. 1List of Contributors ...................................................................................................................... 2Observations of the Chair ............................................................................................................ 4 I. The Present State of U.S. Private Investment in Africa – A Brief Introduction .............. 4 II. A Précis of the Contributors’ Shared and Divergent Views on Major Topics ................ 9Section A – Thematic Summary of Action Plans ...................................................................... 13Section B – Thematic Summary of Briefing Memoranda ......................................................... 26Section C – Contributor Action Plans, Memoranda and Profiles .............................................. 55DETAILED TABLE OF CONTENTS FOR SECTIONS A–CSECTION A – THEMATIC SUMMARY OF ACTION PLANS ............................................ 13 Introduction to the Working Group’s Action Plans ............................................................. 14 Part I – Top-Level Strategy and Diplomacy .................................................................... 15 U.S. Geopolitical Interests in Africa .............................................................................. 15 Principles ................................................................................................................. 15 General Proposals ................................................................................................... 16 Specific Principles – Somaliland ............................................................................. 16 U.S. Relationship with African States ........................................................................... 17 Principles ................................................................................................................. 17 Proposed U.S. Expectations for African States ....................................................... 17 General Proposals for U.S. Role in Relations with Africa ...................................... 17
  3. 3. Specific Legislative Proposals for U.S. Role in Relations with Africa – Vulture Funds .................................................................................... 18 Part II – U.S. Private Investment in Africa ..................................................................... 18 Principles ....................................................................................................................... 18 Executive Policy Proposals ............................................................................................ 19 General Legislative Proposals ....................................................................................... 19 Specific Proposals – Fighting Corruption ..................................................................... 20 Specific Proposals – Investment, Tax and Trade Treaties ............................................. 20 Part III – Aid Reform ........................................................................................................ 21 Principles ....................................................................................................................... 21 Executive Policy Proposals ............................................................................................ 21 General Legislative Proposals ....................................................................................... 22 Specific Legislative Proposals – AGOA ........................................................................ 22 Specific Legislative Proposals – PEPFAR .................................................................... 22 Part IV – Bureaucratic Reform ........................................................................................ 23 U.S. Agencies Generally ................................................................................................ 23 Principles ................................................................................................................. 23 P Executive Policy Proposals ...................................................................................... 23 Legislative Proposals ............................................................................................... 24 Multiple Agencies or Bodies ......................................................................................... 24 Specific Agencies and Other Bodies .............................................................................. 24 Millennium Challenge Corporation (MCC) ............................................................ 24 P Multilateral Development Banks (MDBs) ............................................................... 24 P Overseas Private Investment Corporation (OPIC) .................................................. 24 P U.S. Embassies and U.S. Commercial Service ........................................................ 25 PSECTION B – THEMATIC SUMMARY OF BRIEFING MEMORANDA ........................... 26 Introduction to the Working Group’s Briefing Memoranda ................................................ 27
  4. 4. Part I – Overview of Conditions Affecting Investment .................................................. 28 A. Africa’s Potential ..................................................................................................... 28 B. U.S. Corporate Approaches to Africa ...................................................................... 29 1. Analysis of Situation and Issues ......................................................................... 29 2. Proposed Solutions .............................................................................................. 30 a. Proposals for Coaching Programs (Both Private and Publicly Supported) ... 31 C. African Business and Political Conditions .............................................................. 32 1. Analysis of Situation and Issues ......................................................................... 32 a. The Scourge of Vulture Funds ...................................................................... 33 2. Proposed Solutions .............................................................................................. 34 D. Trade and Investment Treaties Between the U.S. and Africa .................................. 36 1. Analysis of Situation and Issues ......................................................................... 36 2. Proposed Solutions .............................................................................................. 36Part II – Competition Facing the U.S. in Africa ................................................................... 37 A. Competition from Countries Other than China .............................................................. 37 B. Competition from China ................................................................................................. 37 1. Analysis of Situation and Issues ............................................................................... 37 a. Doubts About China’s Ability to Build on Its Present Success .......................... 38 2. Proposed Solutions .................................................................................................... 39Part III – The Official U.S. Stance on U.S. Investment in Africa ........................................ 40 A. Overall U.S. Government Strategy Toward U.S. Investment in Africa ......................... 40 1. Analysis of Situation and Issues ............................................................................... 40 a. Compassionate Aid as a Counterbalance to Investment-Focused U.S.-Africa Relations .......................................................................................... 41 2. Proposed Solutions .................................................................................................... 42 a. Specific Proposals ............................................................................................... 43 B. U.S. Priorities Favoring Specific Countries and Economic Sectors .............................. 44 1. Proposals Concerning Specific African Countries ................................................... 44
  5. 5. a. Proposal to Recognize Somaliland, with an Eye to U.S. Investment There ....... 45 2. Proposals Concerning Specific Economic Sectors ................................................... 45 C. Improving Access to Credit for Both U.S. Investments and African Businesses .......... 46 1. Analysis of Situation and Issues ............................................................................... 46 2. Proposed Solutions .................................................................................................... 48 D. AGOA ............................................................................................................................ 48 1. Analysis of Situation and Issues ............................................................................... 48 2. Proposed Solutions .................................................................................................... 49Part IV – U.S. Aid Agencies and Programs ........................................................................... 50 A. Overview of U.S. Aid Programs .................................................................................... 50 1. Analysis of Situation and Issues ............................................................................... 50 2. Proposed Solutions .................................................................................................... 51 B. U.S. Aid Agencies – USAID .......................................................................................... 52 1. Analysis of Situation and Issues ............................................................................... 52 2. Proposed Solutions .................................................................................................... 53 C. U.S. Aid Agencies – Other than USAID ........................................................................ 54SECTION C – CONTRIBUTOR ACTION PLANS, MEMORANDA AND PROFILES ..... 55Emmanuel Aghimien and James M. Blazewicz ........................................................................ 56 Action Plan ........................................................................................................................ 57 Memorandum (by James M. Blazewicz) .......................................................................... 59 Profile of Emmanuel Aghimien ........................................................................................ 65 Profile of James M. Blazewicz ......................................................................................... 66David Baxter .............................................................................................................................. 67 Action Plan ........................................................................................................................ 68 Memorandum .................................................................................................................... 70 Memorandum (Addendum on Diaspora) .......................................................................... 78 Profile ................................................................................................................................ 79
  6. 6. James R. Blaze ........................................................................................................................... 80 Action Plan ........................................................................................................................ 81 Memorandum .................................................................................................................... 82 Profile ................................................................................................................................ 89Stuart H. Deming ....................................................................................................................... 90 Action Plan ........................................................................................................................ 91 Memorandum .................................................................................................................... 93 Profile ................................................................................................................................ 95Conal B. Duffy ........................................................................................................................... 98 Action Plan ........................................................................................................................ 99 Memorandum .................................................................................................................. 101 Profile .............................................................................................................................. 106André du Plessis ....................................................................................................................... 107 Action Plan ...................................................................................................................... 108 Memorandum .................................................................................................................. 109 Profile .............................................................................................................................. 113Jumoke Fajemirokun ................................................................................................................ 114 Action Plan ...................................................................................................................... 115 Memorandum .................................................................................................................. 116 Profile .............................................................................................................................. 117Tamara K. Gaw ........................................................................................................................ 118 Action Plan ...................................................................................................................... 119 Memorandum .................................................................................................................. 120 Profile .............................................................................................................................. 128Peter C. Hansen ........................................................................................................................ 129 Action Plan ...................................................................................................................... 130 Memorandum .................................................................................................................. 131 Profile .............................................................................................................................. 150
  7. 7. David Humphries ..................................................................................................................... 151 Action Plan ...................................................................................................................... 152 Memorandum .................................................................................................................. 153 Profile .............................................................................................................................. 161Justin Mahwikizi ...................................................................................................................... 162 Action Plan ...................................................................................................................... 163 Memorandum .................................................................................................................. 165 Profile .............................................................................................................................. 170Francis Joseph Mills IV ........................................................................................................... 171 Memorandum .................................................................................................................. 172 Profile .............................................................................................................................. 173Emeka Nwankwo ..................................................................................................................... 174 Action Plan ...................................................................................................................... 175 Memorandum .................................................................................................................. 177 Profile .............................................................................................................................. 186Laban Opande .......................................................................................................................... 187 Action Plan ...................................................................................................................... 188 Memorandum .................................................................................................................. 189 Profile .............................................................................................................................. 192Rick Orth .................................................................................................................................. 193 Action Plan ...................................................................................................................... 194 Memorandum .................................................................................................................. 195 Profile .............................................................................................................................. 198Jon Vandenheuvel .................................................................................................................... 199 Action Plan ...................................................................................................................... 200 Memorandum .................................................................................................................. 202 Profile .............................................................................................................................. 203
  8. 8. Introduction to the CompendiumThis Compendium blends together in one volume the two sets of advisory documents preparedby the members of the Working Group on U.S. Investment in Africa at the request of Amb. TiborNagy on behalf of the Romney Campaign’s Advisory Committee on Africa.The Working Group is a non-partisan, technical working group that represents the avant garde ofthe Sub-Saharan African investment field. Its members include supporters of the two opposingpresidential candidates of 2012, as well as political independents and non-Americans. Thegroup’s composition was commendably deemed acceptable to the Romney Campaign’s AdvisoryCommittee on Africa. It was further agreed that since the Working Group’s products were notpart of an electoral effort but rather aimed at developing a governing policy, the Compendiumwould be forwarded to officials of the incoming administration, whichever this happened to be.The Working Group began this project by producing sixteen briefing memoranda for Amb. Nagyon a broad range of subjects relevant to U.S. investment in Sub-Saharan Africa. Amb. Nagy thenmet with the Working Group in Washington, D.C. on September 14, 2012, and requested that theWorking Group prepare action plans that would turn the briefing materials into a comprehensivepolicy program. The Working Group subsequently did so. All of these materials are reproducedin Section C of this Compendium, along with the professional profiles of their authors. Precedingthis collection are in-depth thematic summaries and other introductory materials.The Contributors to the Working Group’s efforts were: Emmanuel Aghimien (action plan only),David Baxter, James R. Blaze, James M. Blazewicz, Stuart H. Deming, Conal B. Duffy, Andrédu Plessis, Jumoke Fajemirokun, Tamara K. Gaw, Peter C. Hansen (Chair), David Humphries,Justin Mahwikizi, Francis Joseph Mills IV (briefing packet only), Emeka Nwankwo, LabanOpande, Rick Orth and Jon Vandenheuvel.On behalf of all those who will benefit from the wealth of useful suggestions and thoughtfulanalysis to be found in this Compendium, I would like to extend my grateful thanks to theContributors. It has been a pleasure to work with you, and I hope that our joint efforts will bearfruit in the form of a true and profound U.S. partnership with Africa. Peter C. Hansen Chair, Working Group on U.S. Investment in Africa Washington, D.C. January 1, 2013 C1
  9. 9. List of ContributorsThe persons listed below are the Contributors who provided action plans, briefing memoranda,or in nearly all cases both, for the Working Group on U.S. Investment in Africa which assistedthe policy-development work of the Romney Campaign’s Advisory Committee on Africa. Inperforming this public service, the Contributors acted in a purely personal capacity. They did notspeak for any organization or entity for which they work or provide services. Any mention oftheir affiliations herein is intended merely to describe the nature of their current work.It must be observed that no political or ideological litmus test was applied in the selection of theContributors. Nor is this Compendium intended as a political tract. Indeed, some Contributorswere declared independents, and at least one openly expressed his support for the re-election ofPresident Obama. In addition, not all Contributors were U.S. citizens. Such political and nationalaffiliations were deemed perfectly acceptable for the purposes of this effort.The Contributors were asked to participate on the understanding that the Working Group wouldact as a purely technical advisory group to the Romney Campaign, with no formal connectionthereto. The Contributors in this spirit presented pieces as professional insights and technicalproposals for increasing fruitful U.S. private investment in Africa. Their individual action plansand briefing memoranda have in turn been presented in this Compendium in their original andunedited form, and summarized fully without regard to the views expressed.The ContributorsEmmanuel AghimienPresident and CEO, The Esentier GroupDavid BaxterInternational Business Director, JacobsJames R. BlazeDirector of Strategic Planning, Economics and Railway OperationsHarsco Rail Zeta TechJames M. BlazewiczCOO, The Esentier GroupStuart H. Deming, Esq.Deming PLLCConal B. DuffyVice President, Alliant Emerging MarketsAlliant Insurance Services C2
  10. 10. André du PlessisBusiness Development Manager, Schweitzer Engineering Laboratories (SEL)Jumoke FajemirokunNigerian Attorney, U.S. LLMTamara K. GawWashington, D.C. Attorney and AuthorPeter C. Hansen (Chair)Principal Counsel, Law Offices of Peter C. Hansen, LLCDavid HumphriesDirector of Communications and Congressional RelationsCHF International (now Global Communities)Justin MahwikiziFounder & Managing PrincipalPush54, LLCFrancis Joseph Mills IVLicensed Professional EngineerEmeka NwankwoPresident, Vertical Optimization, LLCLaban OpandeThe Opande Law FirmRich OrthBusiness Lead for International Defense and Diplomacy (IDD)SOC LLCJon VandenheuvelPresident and Co-FounderAfrica Atlantic Holdings Ltd C3
  11. 11. Observations of the ChairPeter C. HansenLaw Offices of Peter C. Hansen, LLCFrom Briefing Packet, September 11, 2012It has been a privilege to organize such a cadre of experts, whose pieces represent so effectivelythe thought of the avant garde in the field of U.S. private investment in Sub-Saharan Africa.What puts these experts in the vanguard is not their pro-investment sensibility when consideringU.S.-African relations. Such a sentiment is shared by most U.S. businesses and certainly by theoverwhelming majority of ambitious and Web-connected Africans. What makes these expertsstand out is their expert knowledge of relevant technical subjects, their hard-won practicalexpertise in investment matters, and their willingness to express views contrary to Washington’sconventional wisdom.The debate over U.S. investment in Africa has been settled everywhere but where it matters themost. Private parties on both sides of the Atlantic, and even most African governments, areclamoring for increased U.S. private investment to flow to the continent. This call is being takenup even by the most stolid and phlegmatic U.S. multinationals. In Washington, however, theofficial vision of Africa has remained essentially unchanged since the “We Are the World”concert of 1985. While the bureaucracy airily repeats pro-investment rhetoric, the reality isinstead one of aid programs that funnel money to an ineffective aid industry and that shut privateinvestment out of African markets by encouraging African dependency on public handouts.With U.S.-African economic relations held captive by a bureaucratic-industrial aid complex, andmired in stale ideologies of decades ago, the cutting edge of the debate over U.S. investment inAfrica is to be found at the Beltway’s edge. Within its perimeter, the policy battle must be joinedand fought with enormous vigor to overcome the deep ranks of those with vested interests in thestatus quo. The consequences of this struggle are not merely theoretical or ideological. What isreally at stake is the U.S. strategic position not only in Africa, but globally. Africa has become atheatre in which a rising China has moved to stake out its claim to superpower status. Thetraditional Beltway consensus about Africa has failed to respond to this strategic manoeuver, andthreatens to let the U.S. sleepwalk into disasters it could easily avoid if its eyes were opened.The Contributors’ memoranda are a powerful wake-up call. They have surgically identified andassailed the key defects in the present system, and proposed a host of specific reforms that canbring U.S. policy into line with the needs and priorities of U.S. private investors in Africa. Thispaper will review these specific proposals, as well as the various noteworthy divergences in theContributors’ strategic and tactical views. First, however, this paper will provide a brief tourd’horizon of U.S. private investment in Africa. Without a solid understanding of the basic factorsat play in investment decisions, proposals for reform cannot be properly evaluated.I. The Present State of U.S. Private Investment in Africa – A Brief IntroductionU.S. private investment in Africa, like any business investment, is undertaken when an investordecides that the expected returns outweigh the known and unknown risks. Since Africa presents C4
  12. 12. an enormous upside for returns, it must be deduced from the current paucity of U.S. privateinvestments in Africa – particularly outside the extractive industries – that the risks are perceivedby U.S. investors to be even larger than Africa’s profit potential. (The Contributors seem unitedin their view that such fears are significantly overblown.)Assuming that U.S. Government policy is to increase U.S. private investment in Africa, the taskof U.S. agencies must be to reduce those specific investment risks which the market cannot itselfovercome. In other words, the U.S. Government’s task must be to correct market failures. Thismay seem like a commonplace observation, but it is actually fraught with complications in lightof existing U.S. Government policy. To begin with, the “market” for U.S. investment in Africa isvery poorly understood, most especially by the U.S. “aid” agencies which dominate U.S. publicand private involvement with the continent.An Investment “Market” Is a Complex Set of ConditionsA “market” is simply a set of conditions that allow inputs to be introduced, related activity tooccur, and outputs to be removed. In a simple trading market, for example, money and goods areintroduced and then removed, with the only “related activity” being their exchange between theparties. Even for such a simple process, however, a large number of conditions must be in place.At a bare minimum, there must be a forum in which both parties can reliably verify that themoney and goods are actually on the table and removable. This in turn requires an identified andsecure space, a legal system setting and enforcing the rules for the exchange, ways to move themoney and goods to and from the exchange, and so forth.When direct investment rather mere trading is undertaken, the number of relevant conditionsincreases exponentially. To start with, the inputs are seldom the same as the outputs. One maysend materials to build a factory, and produce shoes as outputs. Even the money introduced andremoved must often run through a conversion process. As for the “related activity,” this is awhirlwind of interactions, purchases, sales, contracts, licenses and labor. The sets of conditionsapplicable to these individual actions may overlap in part, or they may be unique. For an investorto determine whether a project is feasible, the investor must try to determine what conditions arerequired for each action, whether they are present, and whether they can be navigated to finishthe desired project. This is what is simplistically referred to as the “return v. risk” calculation.Africa’s “Market” for U.S. Private Investment Is Unexplored and Thus Deemed High-RiskIn the case of Africa, the “market” for U.S. direct investment has hardly been explored, so thatits contours and conditions remain largely opaque and thus frightening for most U.S. businessplanners. For example, such a presumably simple matter as the purchase of a plot of land for afactory in Ghana can lead to unforeseen headaches as the U.S. investor runs into the complexitiesof a tribal land law that is both unknown and unimagined in U.S. corporate offices. Such pitfallsare called “unknown” risks, which are added to “known” risks such as those of expropriation,restrictions on profit-repatriation, and currency inconvertibility.For most would-be U.S. investors and their funders, the risk-profile formed by these various,often inchoate risks points to a chance of large to total loss. This in turn raises the cost of project C5
  13. 13. capital sky-high, if it is even available in the first place. Consequently, U.S. investors cannotachieve the financial “escape velocity” needed to reach Africa and its high-growth markets.To correct this fundamental “market failure” for U.S. private investment in Africa – the inabilityof business planners to develop risk-profiles that will attract affordable financing – “unknown”risks must be reduced to “known” risks, and these “known” risks must be then minimized bymitigation and offsets to allow a net-positive outlook for profits.African Investment Prospects Mostly Fall into the Gap Between the Potential and the PossibleAfrica is seen as being full of potential opportunities. This does not mean, however, that Africaoffers actual opportunities to every given investor. For many investors, Africa does not at thistime present conditions that make investment there attractive. In many cases, the discouragingconditions are the investor’s own expectations and ambitions.For example, many large U.S. companies put floors on their investment planning, so that small-scale African projects are simply not considered worthwhile, even if they offer high growthpotential over the medium term. On the other end of the scale, a lone entrepreneur may bepersonally willing to brave an African project, but is either unwilling or unable to do the difficultand often expense prep work that a pioneer business requires. The lone entrepreneur may alsosimply lack the resources to bear all of the shocks and setbacks that attend a project on theeconomic frontier. Thus, one often finds in U.S. investment circles an inverse relationshipbetween an interest in African markets, and an actual ability to invest there.Even where interest and resources co-exist in an investor, many simply lack suitable offerings.For example, a mid-sized U.S. hospital chain may not find a profitable route into Africa exceptthrough small clinics, which would require an entirely different business model, not to mentionmajor outlays to develop it. Even where an investor presents the trifecta of interest, ability andproduct, the investor will still then face all of the known and unknown risks referenced above,with vanishingly little business information or skilled support to guide the attempt.In such circumstances, it cannot be a surprise that U.S. business investment in Africa is low. Itneed not be this way, however. Africa is in fact replete with opportunities for any of the potentialinvestors described above. For this potential to be realized, the range of what is actually possiblemust be expanded. As the number of possible projects increases, so will actual investments.What must be done is to address the specific concerns of the U.S. investors found at each level ofthe size spectrum. For example, the small investor can be relieved of having to reinvent thewheel when the U.S. Government instead provides protection through bilateral investmenttreaties (BITs), clear and reasonable tax burdens through double-tax treaties (DTTs), and day-to-day help through support centers found both in the U.S. and at the local embassy. Meanwhile, themid-sized investor can be supplied with either public or private investment briefings, the servicesoffered by cadres of well-seasoned Africa experts, and the camaraderie and encouragement ofmutual-support clubs and associations. The large investor can for its part use major aid projectsas jumping-off points for its own private projects, or it can step in later in the game to takeadvantage of the rising African economies fostered by multitudes of smaller U.S. investors. C6
  14. 14. In short, to expand U.S. private investment in Africa, the interests, abilities and products of U.S.investors must be aligned with the actual needs and conditions of African markets. Once thispoint of equilibrium is reached, Africa’s investment “market” can be said to be fully open to U.S.investment. It can then safely be assumed that U.S. investment will begin to pour into Africa insearch of the high margins to be found in an explosively growing African market that this verysame investment will help to bring about.The Development of an African Investment Corps, and a Startup Industry of AdvisorsThe much-needed alignment between African needs and conditions on the one hand, and U.S.investor interests, abilities and products on the other hand, should presumably be performed bythe market. After all, market theory posits that any demand will attract suppliers seeking profits.In the case of those seeking profitable African ventures, a small cadre of advisers has indeedarisen to offer risk-mitigation services, from due-diligence to legal advice to tax management.This new industry is a product of the market’s invisible hand, moving quietly to meet needs.The appearance of a skilled advisory cadre for African investments, which arguably began inearnest around 2007-08, is an indicator that development is occurring or at least expected on theAfrican investment front. It does not prove, however, that there is a vibrant U.S. investor groupactually entering Africa. There unfortunately continue to be large dislocations in the market forAfrican advisory services. This is because the African investment corps in the U.S. is, unlike itscounterpart in China, uncertain and directionless. If China is Richard III, the U.S. is Hamlet.While statistics and U.S. Government rhetoric present a hazy picture of bright horizons and grimrealities, the actual features of the African investment field have not been properly explored fromthe perspective of an actual investor. This task of “market discovery” has been left to the Africanadvisory cadre, and to those individual businesses seeking to enter Africa. Indeed, it might besaid that this briefing packet is the first major survey of the field as seen by the advisors andinvestors themselves. It offers a gritty, hardened and intensely practical view of the field.As many advisors can testify, the “market discovery” conducted by individual investors can bean initially exhilarating but ultimately dispiriting experience. The rush of excitement spawned bythe prospect of wide-open African markets soon gives way to the innumerable cares and worriesof attempting to learn and navigate – almost always entirely on one’s own – the conditionspresent not only in the target market, but on the international investment plane. Advisors canattest to watching the wheel being reinvented again and again, often with the spokes being leftlying about as the re-inventor walks off the field in frustration.The advisory cadre’s own “market discovery” has been directed at exploring the contours of themarket for advice, and at learning the identity, needs and price-points of those who form the“demand” side of the equation. This has been the task particularly of those advisory groupswhich did not start off with a client base. This difficult and unforgiving learning process, whichwould be arduous for large outfits, has proven very difficult indeed for the more modest startups.(To their credit, most if not all advisory groups have tenaciously endured and survived.) Theharsh conditions of this pioneer business has, rather unexpectedly and certainly not by choice, C7
  15. 15. had the salutary effect of producing advisors who have undergone the same type of struggles astheir clients, and who have thus honed the flinty outlook needed to succeed.The shared travails of U.S. investors and their private advisors may have forged an investmentcorps of formidable capacity, but it has also revealed a large gap between the reality experiencedby this avant garde and the notions and rhetoric of comfortably situated bureaucrats and so-called Africa “experts.” While this divergence is frustrating for those in the private sector, asthey could certainly use skilled public-sector support, it is actually a perfectly natural and indeedhealthy development. A proposition that was once merely theoretical and hortatory – expandingU.S. private investment in Africa – is now ever more clearly becoming a day-to-day reality, withall its attendant messiness and rough-edged advances. It is to be expected that those on thecutting edge of such change will be the ones who can best explain its new developments, and toperceive the distance growing between themselves and those who cling to the old system.Unfortunately, Africa’s new reality has not even begun to dawn on official circles, which remainmired in old platitudes and increasingly irrelevant programs. One telling example of the depth ofgovernment complacency was not long ago illustrated by a think-tank meeting called to discusshow to introduce a basic awareness of bilateral investment treaties (BITs) to the bureaucracy andto those on Capitol Hill. Given such depressing circumstances, it is easy to understand the senseof many in the private sector that while the U.S. Government largely runs the show when itcomes to U.S.-African economic relations, U.S. officials are not looking out for U.S. business oreven aware of its needs, and that they are instead pursuing their own abstruse agendas.An Effective Role for the U.S. Government in Fostering U.S. Private Investment in AfricaIn the complex environment of U.S. private investment in Africa, the proper role of the U.S.Government is not immediately clear. There is no overarching public question to be decided, theresolution of which will channel private activity toward productive ends. What the field insteadpresents is a dizzying array of public and private entities struggling to connect in a profitablemanner, with each entity and each relationship revealing a unique set of complexities. Factorswhich are decisive for one party at one time turn out to be altogether irrelevant to another party,or even to the same party at a different time.In such a situation, the role of the U.S. Government cannot be decisive. It cannot organize, letalone centrally plan, the vast and immensely diverse set of interactions that would make up amature economic relationship between a superpower and a continent. If the U.S. Government isto act at all, it can do so only on the margins. It can ease the way for investors to pursue theirpersonal projects. It can encourage and gently nudge U.S. investors to get the ball rolling. Mostimportantly, it can step in where the market cannot, and reduce persistent risks to makeaffordably priced funding possible. The U.S. Government cannot, however, realistically try toreplace the U.S. investor corps. Indeed, it would be entirely counterproductive for the U.S.Government to spend money on a Potemkin version of a tax-generating U.S. investor contingent.Such a Potemkin-building effort is, unfortunately, exactly what the U.S. Government has beendoing for decades through its “aid” programs. While emergency responses to famines, epidemicsand other acute scourges are not only morally warranted but necessary, the U.S. Government has C8
  16. 16. made the mistake of treating all African problems as if they were famines or epidemics. Thus, toa degree not seen in any other region of the world, we see the U.S. Government sending “aid” toimprove all manner of alleged African problems. Earnest bands of Western consultants descendon cattle-herders whose ancestors have worn the same paths for thousands of years. Clinics areerected far from any known supply system. Waste-to-energy factories are dreamed up for citiesthat do not have trash-collection services. The results of such endeavors have been negligible,but the costs – both actual and in terms of private opportunities shoved aside by governmentofficials and their allies in the “aid” industry – have been large and growing.The tragedy of the situation is that the U.S. Government does not understand, and indeed canbarely even recognize, the market into which it tramples. By seeking to impose a system thatexists only in policy papers and speeches, the U.S. Government mangles and deforms the systemthat actually exists. The dire results are found in endlessly repeated statistics that show low andstagnant U.S. investor interest in Africa. They are also found in the ascendancy of China. If theU.S. had in the 1970s instituted for Africa measures friendly to U.S. private investment, Chinawould never have achieved more than a toehold on the continent as a low-budget alternative tosuperior U.S. projects. Indeed, it might be wondered whether China would even be in the globalposition it is, as it could have been merely a rising competitor to African industrial powerhouses.In putting this past behind itself, and in reforming African investment policy, a wise and humbleU.S. Government would cease to entertain grandiose ambitions of continent-building. It wouldinstead restrict itself to identifying and correcting specific market failures that have dampenedU.S. private investor interest in Africa. The first step along this path is to learn what specificmarket failures are actually occurring. The second step is to develop and implement strategies toaddress these specific market failures. Having thus learned to put one foot in front of the other,the newly dynamic U.S. agency will find that it must now continuously repeat this process –study and action, study and action – in order to keep moving forward.Once agencies are set to moving, their leaders will have the task of keeping up the institutionaldetermination to advance. Such firm resolve is not the natural state of a bureaucracy, whichprefers a well-paid humdrum. It is here that private-sector involvement and input will play acritical role. By tailoring U.S. agency priorities and practices to ever-evolving private-sectorneeds and goals, U.S. public agencies can remain both dynamic and useful.II. A Précis of the Contributors’ Shared and Divergent Views on Major TopicsThis briefing packet sets out ideas for a new U.S. Government policy régime that encourages andsupports U.S. investment in Africa. It is not a roadmap to some imagined policy endpoint. It isintended simply to identify critical issues, and to propose solutions that can help the U.S. regainits footing in Africa and usher in a new and far better era of U.S. economic, social and politicalpartnership with African countries and their citizens.The Contributors share a great number of views, but they obviously do not agree on every point.Each Contributor brings a unique focus and set of insights and experiences to the table. There arephilosophical differences between Contributors in their views of the nature and role of the Statein African investment matters. There are also more modest differences on tactical matters. What C9
  17. 17. comes through in all of the sixteen Contributions, however, is a shared commitment not only tothe people of Africa, but also to a vibrant, lasting and productive U.S. presence on the continent.The Contributors’ Strategic ViewsCertain views and proposals concerning U.S. investment in Africa are shared by most or even allof the Contributors. Perhaps not surprisingly, the Contributors are sanguine about Africa’spotential for explosive economic growth. While it is recognized that serious obstacles remain tobe dislodged in many areas, these hindrances are deemed to be more than offset by thetremendous potential for growth perceived in the rising, Web-connected middle classes that areappearing across the continent. At the same time, the Contributors appear to concur that AGOAhas to date proved irrelevant as a tool for engaging Africa. While the sentiments behind AGOAare considered worthy, it is judged by the Contributors that U.S. private investment, not a singletrade measure unmoored from Africa’s realities and focused almost entirely on natural resources(especially oil), is the avenue likeliest to lead to African growth and improved U.S. prospects.It is broadly recognized by the Contributors that U.S. private investors are the indispensable keyto strengthened U.S.-African economic relations. The Contributors uniformly call for U.S. publicpolicy and agencies to support U.S. private investors on the continent, albeit in conjunction withthe continued provision of “compassionate” aid. The Contributors do differ in the degree of theiracceptance of a State role in private investment. Where one view calls for the U.S. Governmentto set the legal conditions for safe investment and then retire, another view calls for the WhiteHouse to select industries for preferential treatment as development champions. This divergenceof views is likely to lead to much debate, and there is of course no one invariably right answer.The Contributors seem at one in finding U.S. corporate attitudes toward Africa to be typified byfears of the continent that are in many respects irrational. Certain Contributors note that evenwhere large U.S. corporations have provably done well in Africa, these successes have not beenproperly advertised and explained. This informational gap suggests a “market failure” that couldbe privately or (in the view of some Contributors) publicly filled by the development of briefingmaterials. Meanwhile, no Contributor would seem to dissent from the conventional view thatlocal partners are often indispensable to a project. The Contributors do differ from the standardview, however, in urging long-term relationships that are carefully planned and maintained.The Contributors express concern about African governments’ dependency on U.S. handouts,and the lack of seriousness that such gifts bring about in African official planning. This state ofaffairs is viewed as a burden on U.S. private investment in Africa, since aid tends to destroydemand for non-free products in important sectors. It is also viewed as a strategic blunder. It isnoted that a rising China has drawn African governments to itself through the introduction ofinvestment projects that provide higher returns than U.S. aid projects. Although skepticism isexpressed by several Contributors as to the likelihood of a continued Chinese ascendancy,particularly given increasingly negative African views of Chinese practices on the continent, it isagreed that China is currently supplying the U.S. with severe competition, and that U.S.influence is consequently waning in Africa despite Africans’ positive views of the U.S. C10
  18. 18. While conventional wisdom might call for an escalation in aid to buy off African clients and woothem away from China, the Contributors instead call for massive and even targeted increases inU.S. private investment. In other words, the Contributors call for the U.S. to compete head-to-head against China on the field of African investment. While China’s advantages in certain areasare acknowledged, it is also noted that the U.S. has serious advantages of its own. In addition tothis call to action, a number of further suggested responses to China are put forward. Theseproposals range from collaborating with Chinese firms to increase their dependence on U.S.inputs, to seeking out partnerships with locals that would serve to confront and compete withChinese operations. Such ideas are likely to prove useful starting-points for further discussion.The Contributors’ Tactical ViewsWhereas strategy seeks to achieve overarching goals, tactics are used to win the smaller victoriesneeded for overall success. The Contributors helpfully provide insights and suggestions relatingto this lower yet still critically important plane of activity. Several of the topics mulled by theContributors on this level merit mention.In jointly calling for increased U.S. investment, the Contributors diverge on the standards to beapplied by the U.S. Government to its African counterparts. On one end of the spectrum, a viewis expressed that the U.S. must cease to require African States to “earn” partnerships throughreforms or practices not expected of partners such as China. The more common view is,however, that moral pressure on African governments must be kept up. While this difference inapproach may seem rich with possibilities for debate, there may in fact be ways to harmonize thevarious views, at least in part. For example, it could perhaps ultimately be agreed that standardswill be kept in place, but that violations will have the effect of reducing benefits under an agreedframework for economic engagement, rather than serve as a moving hurdle to the establishmentof a partnership. It may be noted that the Contributors were all of one mind in urging continuedsupport for reform efforts, the only debate being over what relationship such efforts should haveto the facilitation of U.S. private investment.The Contributors uniformly recommend a closer working relationship between U.S. agencies andU.S. private investors, so that U.S. public policies, programs and actions hew more closely toU.S. private-sector needs and priorities. The Contributors differ, however, as to the specificnature of this engagement. While on one end it is urged that the U.S. Government merely seek toprovide a level playing field and to minimize systemic risks, it is contended on the other end thatthe White House establish policies and priorities that channel U.S. private investment towardspecified U.S. Government development objectives. Such a wide gap in proposed approacheswill no doubt prove fertile ground for debate.Several Contributors urge the adoption of coaching programs to foster U.S.-African partnershipsand to impart know-how and other capacity boosts to African enterprises. These Contributorsagree that long engagements (with minimums of 1½ to 3 years) are necessary to achieve resultsand to secure the trust of locals. Where the Contributors differ is in the manner in which suchcoaching is to be conducted. Where one Contributor urges distance-mentoring, others urgelengthy stays in-country. Meanwhile, while government support for such efforts is jointly calledfor, one Contributor cautions that private-sector enterprises should be made to pay at least part of C11
  19. 19. the cost to avoid moral hazard. Insofar as these different approaches cannot be squared by, forexample, matching different approaches to different project types, there will be room for debate.The topic of trade and investment treaties is discussed by several Contributors. While one viewholds that the widespread conclusion of such treaties must be a top strategic priority for the U.S.,other views are more ambivalent, finding that the delay and ideological priorities encountered inthe treaty-development process diminishes their usefulness. It is urged on the basis of suchskepticism that short-term policies and action plans be developed and implemented to secureU.S. investment objectives, at least during the treaty-development process, if not in lieu of it.The Contributors endorse the broad expansion of credit as a financial prerequisite for expandedU.S. private investment in Africa. It is urged that the U.S. Government’s main financing arms,Ex-Im and OPIC, be given long-term reauthorizations and license to operate autonomously asfree-market agents. At the same time, perhaps incongruously, it is suggested that these U.S.Government bodies make greater efforts to coordinate their activities. Meanwhile, it is proposedthat the U.S. Government liberalize its political-risk insurance (PRI) requirements, and evenpioneer innovative forms of insurance for African projects. Given the central importance ofincreased funding to the broadening of U.S. private investment in Africa, the subject of U.S.Government financing, guarantee and insurance operations will certainly bear further discussionas more specific tactical options are explored.The role and operations of U.S. aid agencies, and particularly USAID, are the subject of variousproposals. Some Contributors urge the consolidation of agencies, and even having one agency’sapproach be adopted for the entire combined entity. Other proposals variously recommend theidentification of trade and investment as a top priority in aid programs, the adoption of internalreforms (such as the Six Sigma approach), and the secondment or straight transfer of staffbetween agencies to spread knowledge and implementation of best practices. On the operationalside, the practical need for sustainability in project-development is emphasized, and variousproposals are given for coupling aid work with private-sector entities and initiatives. C12
  20. 20. Working Group on U.S. Investment in Africa SECTION A INTRODUCTION AND THEMATIC SUMMARY OF ACTION PLANS Prepared ByEmmanuel Aghimien Tamara K. Gaw David Baxter Peter C. Hansen James R. Blaze David Humphries James M. Blazewicz Justin Mahwikizi Stuart H. Deming Emeka Nwankwo Conal B. Duffy Laban Opande André du Plessis Rick OrthJumoke Fajemirokun Jon Vandenheuvel
  21. 21. Introduction to the Working Group’s Action PlansOn September 11, 2012, the Working Group on U.S. Investment in Africa submitted its BriefingPacket to the Romney Campaign’s Advisory Committee on Africa. This was followed by ameeting held on September 14, 2012 in Washington between the Advisory Committee’s Co-Chair, Ambassador Tibor Nagy, and most of the Working Group’s members. In the course of thismeeting, it was agreed that the Working Group would provide the Committee with a set of actionplans that distilled not only what had been discussed at the meeting, but also the proposals set outin the Briefing Packet. This packet of action plans is the result of this follow-up effort.This action-plan packet contains a wealth of innovative, practical ideas by sixteen members ofthe Sub-Saharan African investment field’s avant garde. (The group submitting action plansdiffers only slightly from the one that submitted the Briefing Packet, with Emmanuel Aghimienjoining and Francis J. Mills IV being unable to participate.) Each of the present Contributors wasasked by the Chair to address a specific topic, and to set out his or her ideas in a bullet-pointformat dividing fifteen entries equally between guiding principles, executive policy reformproposals, and legislative proposals. The Contributors had to work quickly, but came up with acornucopia of thoughtful and useful proposals for policy-makers and federal officials.There is no substitute for reading through the individual action plans, preferably in light of eachContributor’s entry in the Briefing Packet. Nonetheless, the packet’s sheer abundance of ideasand broad spectrum of topics can be overwhelming. The Chair has therefore compiled for thereader’s ease of reference a thematically organized list of 120 single-line proposal summaries.The topics covered fall under four main rubrics: (i) Top-Level Strategy and Diplomacy; (ii) U.S.Private Investment in Africa; (iii) Aid Reform; and (iv) Bureaucratic Reform. Under theseheadings, a host of subjects are addressed, including AGOA, bilateral investment treaties, anti-corruption measures, the development of a White House office to coordinate aid agencies,measures to curtail vulture funds, and the recognition of an independent Somaliland.Policy-makers across the Africa field will find in this packet a myriad of proposals relevant totheir work. It is hoped that these seeds of reform will take root and flower into vigorous policiesthat shift the U.S.-African relationship into more fruitful paths. The goal of all the Contributors isto foster a true partnership between the U.S. and Africa on every plane – economic, social andstrategic. The action plans contained herein are a superb guide to how this can be accomplished. Peter C. Hansen Chair, Working Group on U.S. Investment in Africa Washington, D.C. November 5, 2012 C14
  22. 22. Thematic Summary of Action PlansBy Peter C. Hansen, November 5, 2012*The following sets of thematically organized bullet points are intended to provide a fast-and-easyguide to all of the various policy proposals put forward by the Working Group Members in theirrespective action plans. For elaboration of these summarized proposals, including their extensivebacking analysis by the Members, reference should be made to the Members’ full action plans,and to the Briefing Packet that serves as background to this Action Plan Packet.The Chair’s call for action plans requested of each Member fifteen bullet points, divided equallybetween guiding principles, executive policy proposals, and legislative proposals. This call wentout in light of the Working Group’s briefing of Ambassador Nagy, and had a tight deadline thatdid not allow for extended consideration. The intent was to distill each Member’s policyproposals into their most concentrated form for use on the Hill and in the federal bureaucracy.The action plans submitted were therefore relatively terse and quickly written, and should not beread or expected to be anything more than the brief policy calls that they are intended to be.The general lack of overlap, and any conflicts that might be perceived, are not evidence of anydisagreement or group disinterest, but rather of the need to cover a wide field efficiently. EachMember was asked to make proposals on a different subject. Consequently, overlaps or the lackthereof are not a metric of popularity. In similar fashion, the thematic summary of the Members’proposals provided below is designed simply to group topics together in the most coherent andlogical manner possible. No conclusions should be drawn from their layout or ordering,particularly with respect to priority or popularity. No such effect is intended.Part I – Top-Level Strategy and Diplomacy U.S. GEOPOLITICAL INTERESTS IN AFRICA Principles • Trade and investment with Africa is of strategic importance.1 • Africa’s growth prospects and economic integration must be recognized.2 • Africa will be the Great Powers’ foremost zone of competition in the 21st century.3 • Check assertive BRIC advances within Africa,4 and particularly those of China.5* The only change made for the Compendium is that the page numbers have been updated to fit the new volume.1 Duffy, C100; Mahwikizi, C164; Opande, C188 (noting enormous size of African market); Vandenheuvel, C200.2 Mahwikizi, C164.3 Hansen, C130.4 Aghimien and Blazewicz, C58.5 Baxter, C68; Humphries, C152; Vandenheuvel, C200. C15
  23. 23. • Uphold free-market principles and best practices, including accountability.6 • Stick to democratic U.S. values, and eschew contrary foreign norms.7 General Proposals • Connect national security principles and other long-term strategic goals to trade.8 • Use OPIC and Ex-Im aggressively to stimulate investment and compete with China.9 • Measure U.S. performance as a trade-promoter, not an aid promoter.10 • Build strong strategic partnerships with promising emerging national economies.11 • Develop beachheads in rising countries, facilitated by foreign policy, aid and trade: o West Africa – Ghana (ECOWAS) rather than saturated Nigeria; o Southern Africa – Mozambique (SADC) rather than saturated South Africa; o East Africa – Tanzania (EAEC) rather than saturated Kenya.12 • Institute annual review of trade and investment policies in light of goals for growth.13 Specific Proposals – Somaliland • Press U.N. Security Council to remove Somaliland from U.N. arms embargo sanctions.14 • Seek to wrest Somaliland from domain of the Somalia and Eritrea Monitoring Group.15 • Open U.S. Interest Section Office in Hargeisa, Somaliland, in advance of recognition.16 • Recognize Somaliland, and then open U.S. embassy in Hargeisa, Somaliland.176 Aghimien and Blazewicz, C58; Baxter, C68-C69.7 Baxter, C69; Vandenheuvel, C200-C201 (urging that such values shape the drive to increase U.S. competitiveness,and specifically naming the values of freedom, entrepreneurship, the rule of law, the inclusion of SMEs, Africanbuy-in and ownership, and social, environmental and economic sustainability).8 Baxter, C69.9 Humphries, C152.10 Vandenheuvel, C201.11 Baxter, C68-C69; Duffy, C99 (suggesting that trade and investment treaties be concluded); Humphries, C150.12 Baxter, C68.13 Duffy, C100.14 Orth, C194.15 Id.16 Id.17 Id. C16
  24. 24. U.S. RELATIONSHIP WITH AFRICAN STATES Principles • There must be mutual trust and mutual benefit for U.S. and African trading partners.18 • The U.S. Government must show Africa respect by treating it like any other region.19 • Productive capital must be infused and diffused into the African private sector.20 • The U.S. and African public sectors must facilitate rather than replace the market.21 Proposed U.S. Expectations for African States • African governments must actively work to attract trade, investment and financing.22 • African States should increase domestic investment financing, including through equity.23 General Proposals for U.S. Role in Relations with Africa • Show appreciation for, and understanding of, the continent’s great diversity.24 • Tailor U.S. Government policies to the specific requirements of each country.25 • Align policies on Africa with those applied to larger developing markets like China.26 • Pursue region-wide access to markets, including through improved trade infrastructure.27 • Promote U.S. public and private engagement with regional trading blocs (e.g. SADC).28 • Translate standard U.S. concerns, legislation and intent for Africans, and vice versa.2918 Aghimien and Blazewicz, C57; Opande, C188.19 Hansen, C130.20 Id.21 Id.22 Duffy, C100.23 Mahwikizi, C163.24 Opande, C188.25 du Plessis, C108.26 Hansen, C130.27 Baxter, C68.28 Opande, C188.29 Aghimien and Blazewicz, C57; Fajemirokun, C115. C17
  25. 25. • Promote African use of U.S. skills and management techniques.30 • Engage U.S.-trained African experts in law, security, science and technology.31 • Offer training and mentoring in U.S. project-execution methods.32 • Promote training and mentoring programs for African governments and enterprises.33 • Encourage African States to reduce systemic financial risk and create new instruments.34 Specific Legislative Proposals for U.S. Role in Relations with Africa – Vulture Funds • Require disclosure of certain interested parties in U.S. vulture fund lawsuits.35 • Require disclosure of cost bases and interest for U.S. vulture fund claims.36 • Forbid compound interest for vulture fund claims, as is the case with zombie debt.37 • Cap vulture interest rates at reasonable, even if adjustable, level allowing fair recovery.38Part II – U.S. Private Investment in Africa Principles • The U.S. private sector must be unleashed in Africa to develop local economies.39 • Treat U.S. corporations as true partners of the U.S. Government.40 • Ensure U.S. regulations do not harm or relatively disadvantage U.S. investors in Africa.4130 Blaze, C81.31 Opande, C188.32 Blaze, C81.33 Aghimien and Blazewicz, C58; Vandenheuvel, C201 (urging particular attention be paid to business, law andaccounting).34 Mahwikizi, C164.35 Gaw, C119.36 Id.37 Id.38 Id.39 Hansen, C130.40 Baxter, C69.41 Mahwikizi, C164 (urging such review upon a regulation’s implementation, and regularly thereafter). C18
  26. 26. Executive Policy Proposals • Have President lead private trade and investment mission to targeted African countries.42 • Involve U.S. businesses in policy-development, with access to key decision-makers.43 • Foster U.S. corporate partnerships and PPPs with Africans, guided by case studies.44 • As feasibility studies locally hard to implement, instead foster one-on-one mentoring.45 • Deepen cooperation to develop and expand capital flows to African financial markets.46 • Ensure U.S. banks can enter Africa independently, with a local partner, or via stakes.47 General Legislative Proposals • Require Congress to review regulations affecting African investment every five years.48 • Incentives should encourage long-term strategic corporate partnerships.49 • Encourage U.S. banks to develop strategic partnerships with African banks.50 • Correct restrictive tax practices that hinder U.S. competitiveness in Africa.51 • Provide tax breaks for U.S. investors in development, health and science projects.52 • Institute dedicated guarantee facility for Africa project funding, backed up by PRI.53 • Develop Africa project-insurance products via “pioneer” program with $5B reserve.5442 Vandenheuvel, C200.43 Duffy, C98; Humphries, C152.44 Aghimien and Blazewicz, C57-C58; Blaze, C81.45 Blaze, C81.46 Mahwikizi, C163.47 Id.48 Id., C164.49 Baxter, C68.50 Mahwikizi, C163.51 Baxter, C69.52 Opande, C188.53 Duffy, C100.54 Hansen, C130. C19
  27. 27. Specific Proposals – Fighting Corruption • Develop creative, effective mechanisms to help companies compete while complying.55 • Do not undermine global progress in fighting corruption by tinkering with the FCPA.56 • Reward countries that comply with international anti-corruption and commercial laws.57 • Strongly support implementation of existing anti-bribery conventions now in force.58 • Develop UN monitoring mechanism like that of OECD Anti-Bribery Convention.59 • Consider addition of protocol to OECD Convention requiring domestic legislation.60 • Seek new protocol to African Union Convention prohibiting bribery of foreign officials.61Specific Proposals – Investment, Tax and Trade Treaties • Conclude trade treaties with resource-rich countries and possible U.S. markets.62 • Conclude simplified multilateral investment treaty (MIT) for U.S. and African States.63 • Conclude simplified multilateral double-tax treaty (MDDT) for U.S. and African States.64 • Provide funding for conclusion of investment and tax treaties with all African States.65 • Set goal for USTR to have FTAs and BITs with large U.S. trading partners in Africa.66 • Devote agency resources to conclude BITs and DTTs with all African States in 2 years.6755 Deming, C91.56 Id.; Opande, C188 (urging the FCPA’s strict enforcement).57 Opande, C188.58 Deming, C91.59 Id.60 Id., C92.61 Id.62 Opande, C188.63 Hansen, C130.64 Id.65 Id.66 Duffy, C99.67 Hansen, C130. C20
  28. 28. Part III – Aid Reform Principles • Wean African countries off aid and promote their self-reliance.68 • Redirect aid so as to maximize private investment and minimize dependency.69 • Facilitating trade and investment should be made a top priority for U.S. aid.70 • Low-cost improvements to trade and investment framework is more efficient than aid.71 • Split aid into: humanitarian; long-term development; investment and trade; diplomacy.72 • Projects must be informed as to needs and expected impacts, with local engagement.73 Executive Policy Proposals • Brand all aid “From the American People” rather than by individual agencies.74 • Declare that increasing African employment is the priority for U.S. aid and investment.75 • Leverage humanitarian programs to reduce investment risks (e.g. metrics, better roads).76 • Create or promote public-private partnerships (PPPs) of interest to U.S. and Africans.77 • U.S. foreign aid should not go to foreign companies if U.S. companies are available.78 • Promote U.S., African and international organization partnerships for youth education.7968 Opande, C188.69 Hansen, C130 (urging the institution of an “Aid and Investment Model” or “AIM”).70 Id. (urging the institution of a “Mature Market Model” or “M3”); Humphries, C152 (observing that all assistancemust be ROI-focused, with waste being unacceptable).71 Duffy, C100.72 Humphries, C152 (suggesting that each category be assigned to a different agency).73 Mahwikizi, C164.74 Humphries, C152.75 Mahwikizi, C163.76 Aghimien and Blazewicz, C58.77 Opande, C188.78 Blaze, C81; du Plessis, C108 (suggesting MCC follow the USAID model requiring a U.S. prime contractor).79 Vandenheuvel, C201 (suggesting example of 4-H). C21
  29. 29. General Legislative Proposals • Allocate aid funds in proportion to proven record of business-promotion commitments.80 • Punish sustained bad behavior, including corruption, with censures and aid conditions.81 • Reduce assistance to States that redirect investment and trade funds to Africa or Asia.82 • U.S. aid objectives must include development of African bank-regulation systems.83 • Funds and discretion for agencies to conduct DARPA-style contests for solutions.84 Specific Legislative Proposals – AGOA • Extend AGOA, and cover more commodities and services, to foster U.S.-Africa trade.85 • Amend AGOA to speed depreciation for harmless capital exports to U.S. subsidiaries.86 Specific Legislative Proposals – PEPFAR • Expand host-country ownership of PEPFAR while emphasizing sustainability.87 • Shift PEPFAR to challenge-grant model with specific local requirements and rewards.88 • Shift PEPFAR from treatment to prevention to reduce future financial and social costs.89 • Expand PEPFAR beyond HIV/AIDS to include TB and malaria, given co-morbidity.90 • Mandate a PEPFAR evaluation, knowledge-sharing and cross-surveillance regime.91 • Develop mobile clinics, reference libraries and health-indicator surveys via PEPFAR.9280 Baxter, C68.81 Id., C68-C69.82 Humphries, C152.83 Mahwikizi, C163-C164.84 Hansen, C130.85 Opande, C188.86 Duffy, C99.87 Nwankwo, C175.88 Id., C176.89 Id., C175-C176.90 Id. (urging implementation of new tests for HIV/AIDs, STDs and other co-infectors like TB, and further urginguse of targeted PEPFAR investment to help rebuild private health-care systems, while noting that private actors areoften excluded in favor of moribund and often corrupt public bodies).91 Nwankwo, C176.92 Id. C22
  30. 30. Part IV – Bureaucratic Reform U.S. AGENCIES GENERALLY Principles • The U.S. Government should focus on international, not inter-agency, competition.93 • Coordinated U.S. policies must aim for tangible, measurable results.94 Executive Policy Proposals • Develop policy-outcome metrics, the results of which are to be reported to Congress.95 • Strive for consensus on Africa, including by harmonizing official initiatives.96 • Coordinate efforts of U.S. agencies dealing with trade, investment and development.97 • Institute hub for coordinating U.S. agencies,98 perhaps at the White House.99 • Appoint inter-agency project finance coordinator to grow investment-finance options.100 • Appoint inter-agency coordinators to develop three regional investment centers.101 • Assign personnel to African countries based on their local and regional knowledge.102 • Bring in seasoned China-desk experts to change approach of Africa-focused offices.10393 Humphries, C152.94 Vandenheuvel, C200 (suggesting as examples official efforts to expand exports, create jobs, promote U.S.-Africancollaboration on industrial development, provide project finance, and educate future African industry leaders).95 Id., C201 (stating that bogus “body count” numbers must be rejected, and suggesting as new metrics: U.S.exports to Africa, U.S.-African partnership exports to the rest of the world; U.S. market share in middle-classAfrican markets for goods and services; and private job creation in the U.S. and Africa).96 Aghimien and Blazewicz, C58; Baxter, C69.97 Fajemirokun, C115; Humphries, C152 (emphasizing need for clear roles and responsibilities, withoutduplication); Vandenheuvel, C200-C201.98 Fajemirokun, C115; Mahwikizi, C163 (calling for appointment of International Development National Director).99 Humphries, C152 (noting that this proposed White House body should oversee all aid); Vandenheuvel, C198-199(calling for creation of “President’s Interagency Plan for Sustainable Investment in Africa”).100 Vandenheuvel, C201 (stating that the official should report to proposed White House inter-agency hub’s chief).101 Id. (suggesting regional centers in East, West and Southern Africa, and further that the regional coordinatorsreport to a proposed White House inter-agency hub’s chief, and work with both U.S. and African businesses).102 Opande, C188.103 Hansen, C130. C23
  31. 31. Legislative Proposals • Redirect funding from multilateral bodies to taxpayer-accountable U.S. agencies.104 • Pass “President’s Inter-Agency Plan for Sustainable Investment in Africa Act.”105 • Keep apolitical, better-managed organizational structures that handle large populations.106 MULTIPLE AGENCIES OR BODIES • Expand role of USTDA, and merge OPIC and Ex-Im into it to form a super-agency.107 • Multi-year or permanent authorizations of OPIC and Ex-Im.108 SPECIFIC AGENCIES AND OTHER BODIES Millennium Challenge Corporation (MCC) • Have MCC help develop guarantee funds for PPPs in high-priority sectors.109 Multilateral Development Banks (MDBs) • Direct U.S. Executive Directors at MDBs to push for expanded private-sector role.110 • Support ADB’s effort to raise a $22B “infrastructure bond” for private infrastructure.111 Overseas Private Investment Corporation (OPIC) • Improve OPIC’s lending capabilities to help both OPIC and investors.112 • U.S. financing aid terms should be competitive with those of 5 top competing nations.113 • Free OPIC to use profits for technical assistance to reduce reliance on outside agencies.114104 Humphries, C152.105 Vandenheuvel, C200.106 Opande, C188.107 du Plessis, C108.108 Humphries, C152.109 Duffy, C99.110 Id.111 Id.112 Id., C100.113 Blaze, C81.114 Humphries, C152. C24
  32. 32. • Direct OPIC to use credit subsidies to shrink burden on private project loan guarantors.115 U.S. Embassies and U.S. Commercial Service • Have State, Commerce and the White House jointly foster best embassy practices.116 • Hold conferences for U.S. ambassadors and DCMs to infuse market-focused policies.117 • Stop closing U.S. embassies’ Commercial Service posts, as occurred in Ghana.118 • Have U.S. Commercial Service identify opportunities to supply non-U.S. projects.119 • Have U.S. Commercial Service cover more countries, annually, in its market reports.120115 Duffy, C99.116 du Plessis, C108.117 Duffy, C100.118 du Plessis, C108.119 Id.120 Fajemirokun, C115. C25
  33. 33. Working Group on U.S. Investment in Africa SECTION B INTRODUCTION AND THEMATIC SUMMARY OF BRIEFING MEMORANDA Prepared By David Baxter Peter C. Hansen James R. Blaze David Humphries James M. Blazewicz Justin Mahwikizi Stuart H. Deming Francis Joseph Mills IV Conal B. Duffy Emeka Nwankwo André du Plessis Laban OpandeJumoke Fajemirokun Rick Orth Tamara K. Gaw Jon Vandenheuvel
  34. 34. Introduction to the Working Group’s Briefing MemorandaThis briefing packet is intended as an introduction to the thought of the Sub-Saharan Africaninvestment field’s avant garde. The sixteen memoranda presented here vary greatly in theirthemes and in their authors’ backgrounds and professional focus. The viewpoints expressed areinformed by an extraordinarily diverse range of experiences. Many of the authors are African,and hail variously from East, West and South Africa. Many authors are experienced Washingtonor development hands with intensive experience either in African matters, or in related fieldssuch as corruption. In several cases, these categories overlap.The Contributors to this packet, despite their great differences, not least on the political plane,share one characteristic which places them in the vanguard of the African investment corps. Thisis a hard-nosed determination to increase U.S. private investment in Africa, coupled with a closeattention to the innumerable conditions and practical details that variously serve to attract,impede or welcome U.S. private investors. This knowledge and perspective has in many casesbeen hard-won over the course of years and harsh experiences. It also sets them apart from thevast and complacent bureaucracies that currently dominate U.S. economic relations with Africa.Despite their friendly differences of view or approach in various strategic or tactical matters, theContributors reveal a striking commonality of view in holding that massively increased U.S.private investment in Africa is not only possible, but a strategic and indeed moral necessity. Farfrom fitting the stereotype of the exploitative plunderer, the Contributors express a firm intentionthat U.S. private investment, and facilitating public-sector efforts, be undertaken in a spirit oftrue and equal economic partnership, free of corruption and seeking always to build up Africansand African institutions. In nuanced and deeply thoughtful passages, the Contributors navigatethe complex issues raised by the freewheeling nature of private commercial projects, and theprospect of a U.S.-led economic explosion in Africa. If a classical spirit of free enterprise isreadily detected in the Contributors’ memoranda, it is one that is also quite conscious of themeaning, challenges and limits of the laissez-faire approach.What does surprise in this collection is the stark difference between the Contributors’ viewpointsand the gauzy rhetoric of the U.S. public sector. Again and again, the Contributors cut throughthe fog of official attitudes and platitudes, goring sacred cows like AGOA, the aid industry, andthat most harmful of official stereotypes, that of the pitiable and incompetent African. Thisbarbecue of conventional wisdom is not just a broadside against official complacency. It is also aserious and grittily realistic call for action to reform U.S. policy on African investment from topto bottom, and to set the U.S. on a course toward fruitful engagement and alliance with the manycountries and peoples of a great continent. Peter C. Hansen Chair, Working Group on U.S. Investment in Africa Washington, D.C. September 11, 2012 C27
  35. 35. Thematic SummaryBy Peter C. Hansen, September 11, 2012*The following thematic summary seeks to represent in an objective and systematic manner themany points raised by the sixteen Contributors in their respective pieces. Given the wide range ofthe topics addressed by the Contributors, the summaries of their pieces are divided into five mainthematic sections: (i) an overview of conditions affecting U.S. private investment in Africa;(ii) competition presented to the U.S. in Africa by China and other countries; (iii) the officialU.S. stance on U.S. private investment in Africa; and (iv) U.S. aid agencies and programs.PART I – OVERVIEW OF CONDITIONS AFFECTING INVESTMENTA. Africa’s PotentialAfrica’s decade of strong growth and immense, positive change was recognized.1 It was notedthat Africa this time really seems to be taking off economically in a sustainable fashion.2 It waspointed out that the U.S. need for African commodities (especially oil) was increasingly indirectrather than direct, as U.S. trading partners were taking up a greater share of manufacturing.3 Itwas observed that African exports will increasingly move toward manufactured goods, and that agrowing Africa is likely to import massive amounts of U.S. goods.4Africa’s growth potential was attributed to various factors, including: (1) the growth in Africancommodity exports;5 (2) increasing urbanization;6 (3) a growing middle-class;7 (4) major legaland economic reform efforts by progressive African governments;8 and (5) Africa’s large youthpopulation, which is connected to the Internet and attracted to capitalism.9 The value of theAfrican Diaspora was noted,10 as was the hardy African entrepreneur developing businesses inextremely harsh environments and without support.11* The only change made for the Compendium is that the page numbers have been updated to fit the new volume.1 Duffy, C101; Blazewicz (passim); Opande, C191.2 Duffy, C103-C104.3 Id., C102.4 Id.5 Baxter, C70.6 Id.7 Id.; Mahwikizi, C168; Vandenheuvel, C202.8 Blazewicz, C62-C64 (citing Nigeria and Ghana in particular, with respect to reforms in the energy sector).9 Mahwikizi, C165-C167, C169 (noting that this capitalist system is ironically being pursued in Africa by China andIndia rather than the U.S.).10 Baxter, C78 (noting that the Diaspora’s reach and influence is often underestimated); du Plessis, C112; Nwankwo,C180-C181.11 Nwankwo, C182 (using as an example local African food-processors who build factories using personalresources). C28
  36. 36. It was asserted that Africa is not special or exceptional, and requires the same wide-eyed, hard-nosed approach to development that has led to the successes of China, Brazil and India.12 It wasnoted that “international development experts” tended to ignore this stubborn fact.13 It waspointed out that the U.S. as a whole must approach Africa as investors rather than donors,14 andthat Africans want more investors, not more politicians, aid workers and exploitation.15 It wasobserved, however, that Africa often loses out in competition for investment projects becausethey cannot offer sufficient incentives (such as infrastructure, governance and cash offers) tokeep up with other regions.16B. U.S. Corporate Approaches to Africa1. Analysis of Situation and IssuesNote was taken of the need for an increased U.S. private-sector presence and positioning inAfrica.17 The successes of certain very large, branded U.S. companies in Africa were lauded.18U.S. companies were considered representatives of the U.S., and a link was made between theirreputation in Africa and that of the U.S.19 It was observed that U.S. multinationals have a hugereach in Africa, going places where the U.S. Government could not, and running projects thatUSAID could not accomplish.20 Nevertheless, it was pointed out that U.S. corporate successes inAfrica had not been well-publicized, and that best practices associated with these efforts had notbeen identified or disseminated.21It was noted that U.S. business circles perceived that U.S. nation-building programs spawnedantipathy to U.S. businesses, and that there is a preference in procurement for local companiesover U.S. providers.22 More generally, an extraordinary degree of fear of Africa as a potentialinvestment site was observed among U.S. companies,23 accompanied by a near-total lack ofcomprehension of the actual (lower) risks involved.24 It was pointed out that, given the relative12 Id., C179.13 Id.14 Vandenheuvel, C202.15 Blazewicz (passim); Vandenheuvel, C202.16 Nwankwo, C178.17 Vandenheuvel, C202.18 Baxter, C71-C72; Humphries, C157; Mills, C172.19 Humphries, C157-C159.20 Id., C157-C158.21 Baxter, C71.22 Id., C72.23 Id., C71.24 Id. C29
  37. 37. freedom of U.S. investors to work in today’s Africa, the dearth of U.S. private investment on thecontinent reflected risk perceptions so high that they outweighed the prospect of high profits.25Notice was taken of a lack of competitiveness and drive in U.S. companies as regards emergingmarkets, and Africa in particular.26 A view was expressed that for the U.S. to maintain its edge inthe global economy, U.S. industry must see investment and growth in Africa as a strategicimperative.27 It was elsewhere perceived, however, that the U.S. may be too late to the party.28Anecdotes were related about visits to Africa where no U.S. companies were present, but wherecompanies from many other countries were successfully closing deals.29It was pointed out that true and full U.S.-African corporate partnerships are quite possible.30 Itwas observed, however, that given differences in culture and business practices between the U.S.and Africa means that a long-term vision would require for success that goals, risks and thevalues of the relationship be articulated.31 It was further observed that U.S. businesses shouldundertake a full-spectrum review (e.g. due diligence, business development and managementprotocols) before making any commitments in Africa.32It was observed that while it was relatively easy to measure aid contributions made by the U.S.Government and NGOs (the latter being around $8.6 billion per year), it is very difficult todetermine how much aid comes from U.S. private-sector companies.33 It was noted that U.S.corporate aid included not only corporate social responsibility (CSR) funds, but also operationalbudget allocations directed toward what amount to aid projects.342. Proposed SolutionsA need was identified for U.S. businesses to build long-term relationships in Africa, based onsuccessful projects.35 It was suggested that U.S. corporations be encouraged to take part innation-building by introducing business practices that broaden access to wealth and foster25 Hansen, C131-C132 (noting that many perceived risks were unquantifiable since most involve a lack of publicprotection, such as impartial and efficient courts, which presents a risk-profile akin to anarchy).26 Baxter, C70.27 Id., C71.28 Id.29 Id. (referencing Mozambique, which incidentally has a BIT with the U.S.).30 Blazewicz (passim).31 Id., C59, C62-C64 (using example of U.S. power projects in Nigeria).32 Id., C60-C64 (using example of U.S. power projects in Nigeria).33 Humphries, C157.34 Id. (noting the example of a CHF International project to provide an urban development plan for a mine project inDRC, in partnership with a U.S. company which funded the plan out of its operational budget).35 Baxter, C76; Blazewicz (passim, using power projects in Nigeria as an example). C30

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