Africa: an investment opportunity for U.S.

A recent Newsweek article quoting respected Oxford University author Paul Collier and other experts underscores Africa's growing economic clout. It surprisingly reports that Africans are richer, per capita, than the people of India. China and India get widespread media attention as Asia's two economic powerhouses -- but recent economic trends and data indicate that Africa is well on its way to become "the new Asia."

In 2007 and 2008, the article says, southern Africa, the Great Lakes region of Kenya, Tanzania and Uganda and even the drought-stricken Horn of Africa had gross domestic product growth rates on par with China and India. It is surprising to note that, even during a worldwide recession, the African continent tallied an almost 2 percent growth roughly equal to the rates of the Middle East -- and outperforming everywhere else but India and China.

What is the cause of this startling growth? Newsweek notes it is driven not by the sale of raw materials like oil or diamonds, but by a burgeoning domestic market that accounts for two-thirds of the continent's GDP growth.

"Accountants, teachers, maids, taxi drivers, even roadside street vendors, are driving up demand for goods and services like cell phones, bank accounts, up-market foodstuffs and real estate," the article says.

This growth of a middle class could number as many as 300 million -- out of a total population of 1 billion -- according to development expert Vijay Majahan, author of the book "Africa Rising."

It is also good news, Newsweek reports, that "entrepreneurship has increased at the same time, powered in part by the influx of returning skilled workers. Just as waves of expats returned to China and India in the 1990s to start businesses that in turn attracted more outside talent and capital, there are now signs that an entrepreneurial African diaspora will help transform the continent."

Corruption is a widespread problem in many African countries. There are security concerns and civil unrest in some areas, and even war in Sudan. But, with a few stark exceptions like Sudan and Zimbabwe, the forces of democratic governance and stability are still making slow but steady gains in more parts of the continent.

As I have often said, investment capital is a coward and will not flow into hostile environments. Many believe Nigeria to be hostile toward investment capital. But when visiting Nigeria recently I found a more welcome environment for venture capitalists. More than I've seen in 15 years. It seems everywhere in Lagos there is a construction project that will benefit its 18 million inhabitants. Nigeria's Imo state is actively courting U.S. business prospects in sectors ranging from agriculture and housing to energy development. Imo, led by Gov. Ikedi Ohakim, is located in the Niger Delta area where oil reserves are massive. I found that governor Ohakim is investing heavily in his people and a strong democratic environment. With the United States being a fossil fuel nation-- and with our domestic political left and the oil crisis in the Gulf working to stifle domestic and offshore exploration-- it is especially incumbent to plan for future energy supply for our continued demand. Africa and Nigeria would be a logical location for supply. I've made this claim for 15 years.

After I began my service in the U.S. Congress in 1995 I saw China really begin growing its footprint in Africa because its Communist rulers desperately need oil, raw materials and other products for their 1.2 billion people. But the United States must not concede Africa to the Chinese for vital economic and national security reasons. We will never be totally independent of Middle Eastern oil, but we can become less dependent. Our nation currently imports 58 percent of our daily energy consumption, so we can become less dependent by developing more sources domestically and diversifying our supply in, yes, Africa.

The Chinese can be beaten in the intense competition for African trade, investment and good will. In Zambia, Algeria and Sudan tensions and even rioting have occurred in recent years over blatant Chinese exploitation of workers and the dumping of cheap Chinese products in exchange for valuable raw materials. In the last Zambian elections, some politicians boosted their vote totals by running on a strong anti-China platform. And, just last March, a Namibian deputy trade minister openly demanded that the Chinese "stop flooding Namibia with unskilled labor and goods, and … develop the country instead."

World Bank President Robert Zoellick says that in light of the current economic crisis plaguing the United States and most of the West, long-term investors recognize that developed markets now have big risks too. This gives hope to even the poorest nations of resource-rich Africa. Indeed, there is an increasingly powerful case to be made for American business to diversify investment and explore energy opportunities and explore new friendships in Africa.

J.C. Watts is chairman of J.C. Watts Companies and a former Oklahoma congressman. His e-mail address is JCWatts01@jcwatts.com. He writes twice monthly for the Review-Journal.