Wednesday, November 14, 2007

African and U.S. business meet amid Chinese advances

from Reuters via Yahoo news

By Marius BoschTue

African and U.S. business leaders meet this week to seek ways to increase investment in the world's poorest continent, but experts say corporate America may have already lost critical ground to China and India.

U.S. firms, including oil giants Chevron and Exxon Mobil as well as soft drink maker Coca-Cola, will attend the U.S.-Africa Business Summit on November 14-16 in Cape Town, the Corporate Council of Africa said.

Business leaders are due to discuss trade and investment opportunities in Africa, but many analysts say U.S. companies are lagging far behind cash-flush Chinese firms that are leading a new rush into Africa.

"This is (an) economic scramble for Africa," said Jasper Okelo, an economist at the University of Nairobi.

In 2006, Africa's foreign direct investment inflows were $38.8 billion, with Nigeria and Egypt making up the biggest shares, according to data from UNCTAD, the United Nations' trade and development agency.

China, however, is seen as the emerging power in Africa. The Asian giant has invested billions, often in the form of credit and loans, in African economies in an effort to back its credentials there as an emerging economic superpower.

A deal that would see ICBC, China's biggest lender, buy a fifth of Standard Bank, South Africa's biggest banking group, for $5.6 billion in cash underscored China's determination to play a leading role in African markets.

It would be the biggest overseas acquisition by a Chinese bank and the largest foreign investment in Africa if approved by Standard Bank shareholders.

"There are concerns that China in particular has moved in very swiftly into key areas where the U.S. and other key players were hesitant to go," said Trudi Hartzenberg, director of South Africa's Trade Law Centre.

India also is seen to be making rapid inroads in Africa and may be eyeing investments in the gold mining sector to feed its domestic market, Hartzenberg added. Indian demand is one of the biggest drivers of the price of gold.

But China's overseas expansion has been criticized by human rights groups and others in the West, who argue that Beijing often turns a blind eye to abuses and corruption in its chase for assets and commodities, especially in Africa.

"HUGE SCOPE" FOR INVESTMENTS

Some experts believe the summit may lead to investment opportunities, especially in the agriculture and oil sectors.

"There is a lot of good that could happen for Africa especially if the businesses that are represented in the Corporate Council on Africa pay more attention to this region," said Michael Chege, economic advisor at Kenya's Ministry of Planning and National Development.

Leon Myburgh, sub-Saharan specialist at Citigroup, said how local economies benefited from foreign direct investment was more important for Africa than the nationality of investors. He said there was "huge scope" for foreign investments in Africa.

Many small African businesses have already benefited from the African Growth and Opportunity Act (AGOA), a 2000 U.S. law that allows nearly 40 African countries to export some goods free of duties and quotas into the United States.

But critics of the law argue that U.S. government subsidies to American farmers keep African growers mired in poverty, outweighing any real benefits the trade initiative offered.

U.S. investors are also facing stiff competition from those outside China and India.

Dubai-based JAFZA International upstaged a U.S. government corporation's plan to fund the development of a new special economic zone outside the Senegalese capital Dakar when it stepped in with a more complete financial offer.

The Middle Eastern group's bid prompted The Millennium Challenge Corporation (MCC), a U.S. initiative to help the world's poorest countries, to withdraw from contention.

(Additional reporting by Pascal Fletcher in Dakar and Duncan Miriri in Nairobi; Editing by Paul Simao and Giles Elgood)

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