What About the United States?

I think of Americans when they went to the West. Why did they go? Because it was empty.

Dr. Chris Kirubi, Chairman, International House Limited

Being in Africa doesn’t just make us better in Africa. It makes us better everywhere.

Jeff Immelt, Chairman and CEO, General Electric

African CEOs talk about the United States often, and at surprising depth. U.S. institutions, economic model, and culture are more top of mind than our proximity, trade, and investment might suggest. African bilateral trade with the U.S. in 2010 was 12 percent of Africa’s total, less than its trade with Europe or China.¹ The stock of FDI from the U.S. into Africa is second to France’s, but is overwhelmingly concentrated behind the fence-lines of natural resource operations.²

Despite a relatively low level of engagement, Africans have an overwhelmingly favorable impression of the United States. “The U.S. is popular for a lot of Africans, ” Nigerian Tony Elumelu said. “Even in the very Muslim parts of our country, you will see kids on the street with an Obama T-Shirt. I myself stayed up watching each of your presidential debates and your election. I am always surprised the U.S. does not do more with this.” The most recent Pew Global Opinion survey supports Tony’s assertion. In his native Nigeria, U.S. favorability is 81 percent. For comparison, the most recent European favorability rating in Nigeria is 67 percent.³

African business leaders are familiar with U.S. history, or more precisely the ideals that emerge from that history. The anticolonial origins of the United States, the pioneering of the West, and the rise of our continental economy are elements of America’s past that African business leaders know and that resonate for them. Each of these eras has a darker side, with large numbers excluded or pushed aside. Nonetheless, the ideals that emerge from them of entrepreneurialism, daring, and the “taming” of a continent are new and powerful in Africa.

Vimal Shah sees Africa today as a continental economy in the making, a challenge U.S. companies have mastered before. Speaking of the railroads and telegraph magnates that linked the U.S. economy, he said, “Yes, that’s what’s needed. Now if you have that, what they had, if you have that adventurous spirit—Africa is waiting.”

Chris Kirubi sees clearly the historic link with the American West. “I think of Americans when they went to the West. Why did they go? Because it was empty. So why don’t they use the same principles and come to Africa? You can go and build a skyscraper where one’s already built. You can build on top of it another one, but why don’t you come here and say, ‘There are no first-class hotels. There are no motels on the roadside between Nairobi and Mombasa. We’re going to build the motels. There are no fast-moving railroads. Why don’t we go to Africa and build them from south to north? ’”

Bharat Thakrar is keenly aware of the entrepreneurialism at the roots of American capitalism, and relates it to his parable for engaging Africa. “Crossing the Mara is second nature to you, ” he said. “Just look at when the immigrants settled in the U.S. or when they migrated West. It was not easy but the guys with the nerve went and did it. They went, they settled, and they succeeded.”

Some U.S. companies are advancing already. Coca-Cola, Cummins, and GE are among them. The Corporate Council on Africa has 149 U.S. corporate members, each expanding its business in Africa.

A few U.S. companies are engaged in the most important advances on the continent. The Main One subsea high-bandwidth cable was built and brought onshore by U.S. engineering firm SubCom, a division of Tyco Electronics. Main One CEO Funke Opeke works with them still, and sees more opportunity for others:

Our cable was built by an American company and we still have a great relationship with SubCom. We did a $180 million contract with them to get the cable built and they’ve successfully delivered and continue to support it. Now, perhaps they were unique in that sense, because they build cables around the world and they were open to working with us and just making it happen; they built the SEACOM system^* as well. I wish some of the other American companies that we want to do business with, software and telecommunications companies, were half as interested in doing business with us, because we’d be able to achieve a lot more with them.

Another American business that has seen this opportunity and acted on it is Indiana-based Cummins, Inc. Tim Solso spent his entire adult life in that company, from graduation at DePauw until his retirement in 2011 (Tim continues to be active in American industry as one of the new slate of board directors leading General Motors). The story of Tim’s, and eventually Cummins’s, decision to invest in Africa speaks to what U.S. companies can do in Africa. It includes a few wrong steps along the way, and many of the right ones.

As a young man, Tim’s impression of Africa was similar to that of many Americans:

When I thought of Africa, I really was thinking about the wild game and the animals and habitat and that type of thing. I also thought it was a place with a lot of conflict, civil wars, the residue of colonialism, and extreme poverty. And then there was the whole South African apartheid: the riots and the killing of people, forced segregation, and that type of thing. So it was an exotic place in terms of the wildlife but a continent that suffered a great deal. The biggest misconception I probably had was that I thought of Africa as one entity as opposed to fifty-four or fifty-five countries that are very, very diverse.

Tim’s first professional engagement with Africa was in 1981 as the managing director of Cummins subsidiary Holset Engineering. Tim was asked to assess an opportunity to invest in apartheid-era South Africa. He described both a trip and a conclusion that might seem unusual for a young Midwestern executive with a promising career and a lot on the line:

Because of the boycotts, the South African government couldn’t get diesel engines for military equipment, so they put out a request for bids to engine manufacturers to manufacture in South Africa. I was asked to make a recommendation to our leaders on the opportunity in front of us. The subsidiary I was leading made turbochargers for Cummins and others, and we already had distribution there. I took a trip to South Africa to meet with the distributors, but went on my own unaccompanied. While there, I met government officials, members of civil society, Afrikaans, English, and people they were then calling colored. While I was in Stellenbosch, I also made the decision to meet in private with some people who were protesters or rebels, and were wanted by the government.

The way I saw our challenge, the most important assessment I had to make was whether we, as one manufacturer in South Africa, could pay good wages and make a difference from within, or was apartheid so bad that you needed to get out and stay out until they fix their problem. Before I made a recommendation to Cummins, I wanted a personal education on what the issues were, and to talk to as many different people with different perspectives as I could get. Ultimately, my view was that if you could put the right terms in the bid, for example, pay equal wages and have no segregation in our workplace, that it was worth trying to do.

Despite the finding, Cummins ultimately did not bid on the opportunity and withdrew from South Africa until apartheid ended. But Tim’s emphasis on both commercial opportunity and social context, and his insistence on meeting broadly, would also characterize his return to Africa some twenty-five years later as CEO, when he elected to explore Africa as a whole and as a far larger and more strategic opportunity for the company.

Successful business leaders in Africa see America’s opportunity in Africa as very much still in front of it. “America has not missed an opportunity, ” said James Mwangi of Equity Bank. “It is availing itself now. Africa is just coming to the point that U.S. technology and capital is going to be most useful.”

The data support that case across multiple sectors. With the exception of South Africa, Africa is only beginning its journey from primary commodity production to modern manufacturing. Figure 8–1 shows the manufacturing value addition—a measure of manufacturing density—in the major economies of Africa. The relatively low percentages, combined with the young demographic described in chapter 3, speak to the opportunities for the United States to engage with Africa in its early stage of manufacturing, including agroprocessing. Beyond manufacturing, U.S. providers of health and education, two social services that are quickly privatizing, are among the most respected in Africa. And the consumer goods and retail sectors so well documented by the McKinsey Consumer Insight Center are both sectors in which U.S. firms are globally competitive.

Figure 8–1: Manufacturing value addition in Africa as % of GDP

Source: World Bank National Accounts Data 2012, The World Bank Group.

In Jeff Immelt’s experience at GE, it is precisely in production and related activities that the opportunities in fast-growth markets lie, rather than exports alone.

You are not going to win in a place if you treat it like a sales outpost. It doesn’t work anywhere. If you want to be a good global company you have to know how to make money in a country and for a country. If you don’t understand that, you’re never going to win.

Can we build a factory? Can we do product development? What is the best thing U.S. companies do outside the U.S.? We train people. We have the best industrial training in the world. Turns out, that’s kind of important. That actually makes you welcome. You have got to have roots and make some substantial investments that embed you. You have to be part of the fabric of the country.

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