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U.S. Policy Blindness and the African Elephant

                                                                                                                                                                    Photo: TRT World

· Africa

The (un)renewed U.S. policy toward sub-Saharan Africa is destined to fail. It is based not only on a poor understanding of the region and its growth and development dynamics. Even worse, it is based on a rhetoric that belies the promise Secretary of State Mike Pompeo made during his hopscotch three-day trip to Senegal, Angola and Ethiopia. Mistaking entrepreneurship for business, pushing extractive and flashy business sectors and comparing U.S. investment as “good” to China’s “bad” investments will weaken America’s presence in Africa and further alienate African leaders and entrepreneurs.

No other continent illuminates how U.S. foreign policy “in a box” and bureaucratic resistance to change, despite the widening differences between Republicans and Democrats, can lead to results similar to those reached in the story of the blind men and the elephant: different pieces in the policymaking process may be partially correct, but none is able to provide an accurate or appropriate description of the elephant as a whole.

The blind men’s approach to sub-Saharan Africa continues leading the U.S. to err in its approach to engagement with the region. Secretary of State Pompeo’s recently completed visit is just one more example of how poorly devised U.S. policy toward Africa is: reactive and driven by real or perceived crisis and conflict, in Africa or with another nations present in Africa.

Africa is not a battleground for the U.S. vs. China allegiance

The U.S. has legitimate concerns over the continuing expansion of China into Africa. But the question is not, paraphrasing President John F. Kennedy, whether African governments will look West or East – to Beijing or Washington – for guidance, support and investment. Chinese willingness to provide critically needed funds for infrastructure development, as well as expertise and training, are welcomed in Africa and should not be demonized because of bad U.S. policy making and the consequent failure to step up to African challenges and opportunities. Nor does it mean that China is a voracious beast depleting Africa’s resources and killing local employment.

The real question is when will the U.S. embark on what Kennedy referred to as a “bold and imaginative program” to partner with (not bully and alienate) sub-Saharan African nations for achieving inclusive, equitable and sustainable development of Africa. As former CIA director R. James Woolsey (1993-1995) pointed out before a Senate Select Committee on Intelligence, “our security is tied to economics”. This is even truer in a world of growing disarray. As competition in the world market becomes more acute, U.S. policy for Africa must be bold and imaginative and support investments that empower Africans.

Quit the cotton-candy rhetoric

Africa has progressed, changed for the better and come into its own. The stage is set for African solutions to African problems. Instead of pursuing the past, Pompeo should be pursuing more constructive political and economic engagement with African leaders. It’s time to stop making empty promises dressed in big, visionary, top-down rhetoric that shrugs off the real needs, aspirations and potential of Africans.

Trying to turn back China’s engagement with Africa is neither possible nor feasible. But the U.S. does have the opportunity to lead a dialogue with China aimed at easing the harmful consequences of that involvement, while at the same time building better and more constructive relations with Africa by nurturing African industries and becoming a genuine trading partner in benefit of both U.S. and African businesses (Raymond W. Copson, The United States in Africa, 2007).

Africa is not for the taking of big corporations

Big is not better. Size isn’t what’s important for growth and development. Empowerment is the essence of development. If the U.S. really wants to be with Africa, in Pompeo’s words, “every step of the way”, U.S. policy to advance African economic growth and prosperity needs to identify and promote opportunities in Africa for micro and small U.S. businesses and support then with dedicated funding.

The entrepreneurs - “those people who are willing to go out and just crush it every day” – that Pompeo emphasized in his speech in Addis Ababa, Ethiopia’s capital – are being crushed by the very type of big business investments promoted by Pompeo. If African entrepreneurs are the hoped-for beneficiaries of U.S. private investment, then “true liberation” must be led by U.S. businesses than can partner with African businesses to develop and implement solutions to every-day African challenges.

Big U.S. companies invest mainly in extractive industries and do not aim to promote or facilitate inclusive or sustainable development, let alone improved governance or transparency, other than as a tangential part of their Corporate Social Responsibility marketing. Nor do they generate virtuous economic ecosystems that build endogenous entrepreneurial capacity. “The social value big business procures is small and mostly an afterthought to delivering on shareholder interests” (Africa is the land of opportunity for productive investments. Why isn’t your business there?).

Multimillion dollar deals like those signed in Senegal during Pompeo’s visit there earlier this week – by Bechtel for road construction, Weldy Lamont for an electric grid project, and GE to upgrade power plants and increase access to gas resources – are all needed to develop this West African country’s infrastructure. So is GE’s investment in the health care sector to provide diagnostic technology. But how productive will those investments be for Senegal as a whole? How will they actually provide better access to resources and services for the average Senegalese citizen, especially those in rural areas? How will they generate added value for them and contribute to their personal growth and welfare? How will they create shared wealth?

Be sincere. Focus on productive investments.

The Africa is certainly the land of opportunity for U.S. business investment and market expansion. But it is foolish to believe that multimillion dollar investments will be the torch for economic growth and value in a context where the majority of local businesses are micro and small, by American standards. It is just as foolish to believe that multinationals can and will work with micro and small local companies.

Big businesses making multimillion dollar investments may tout their contributions to sustainable economic growth and poverty reduction by selectively including local businesses in their supply chain. But the fact of the matter is that extractive industries, by their very nature and structure, create foreign dominated enclaves that provide limited direct employment, local capacity building and enterprise development.” (Africa is the land of opportunity for productive investments. Why isn’t your business there?).

If Pompeo is sincere about U.S. investments delivering value, he should encourage, and even require, Prosper Africa – the Trump Administration’s signature program to support U.S. private investment in Africa – to leverage the power of small to make productive investments that have a collective impact. U.S. investment value and innovation must be aligned with local realities and market needs in a way that will help all stakeholders realize their full potential for wealth creation. Instead of focusing exclusively on big multimillion dollar investments, Prosper Africa needs to make a bigger effort to attract and support micro and small U.S. businesses that can partner with African business to deliver market solutions with a positive transformation impact with a bottom-up social dimension.

Support the “lean” approach

The best way to counter growing Chinese economic influence and engagement is to engage meaningfully and constructively with local businesses, the majority micro and very small. This requires a “lean” approach to business and investment: doing more with less time, less energy, and less money and at the same time creating more employment and more economic opportunities for local entrepreneurs. Contrary to a “fat” approach, going “lean” generates revenues and at the same time generates collaborative economic energy, rather than incentivized patronage (“The Hottest Business Growth Bandwagon. Get on board to doing good business well…in Africa”).

Going international is not exclusive to big business. “It’s not about exporting goods and services. It’s about exporting solutions that can address local needs and contribute value to market evolution” (“Africa is ready for you. Are you ready for Africa?”). This means stepping beyond the usual compartmentalized asset-seeking, market-seeking or efficiency-seeking thinking that box in multinationals. It entails focusing on identifying new market gateways and capturing differential “value domains”, through context-specific and culturally-appropriate catalytic business development opportunities and investments. These are based on a “lean” rather than “fat” approach that factors in long-term negative consequences, instead of primarily focusing on the short-term, immediate benefits of “business as usual.”

Micro and small businesses, both American and African, are the inflection point for getting back to the basics for more sustainable, equitable and inclusive economic growth: profitable business for good that delivers shared value. They are also the prime energizers for rebuilding America’s ladder of opportunity in Africa.

Entrepreneur is not a synonym for business

Pompeo’s emphasis on entrepreneurs is welcome, as is his highlighting them as his hoped-for beneficiaries of U.S. private investment. Aid money, indeed, does not drive economic growth. The private sector does. But entrepreneur is not a synonym for business as usual.

The function of entrepreneurs, as Schumpeter famously wrote, is to “revolutionize the pattern of production by exploiting…untried technological possibility for producing a new commodity or producing an old one is a new way…”. Oil, gas and mining products or grid-connected energy are age-old commodities that exploit market opportunities. But they don’t build or develop new “liberating” business, technology or organizational models. Micro and small businesses do.

In the African context, individual clusters of micro and small businesses are the basis for meeting national goals for employment, productivity, innovation and competitiveness. This is not an expression of megalophobia. It is a realistic understanding of African socio-economic dynamics. It is also a more plausible response than Pompeo’s “true liberation” goop to the challenges and opportunities in Africa.

Pompeo not only confuses entrepreneur with business. He also confuses purpose with product. Entrepreneurs create through iterative processes of success and failure in pursuit of capture a “value domain” that is both profitable in returns and delivers a positive impact on local economic development (“What’s So Hot about Africa? Business Opportunities are Sizzling!"). Established corporations like Chevron, Coca-Cola, or GE extract and consume in pursuit of profits and maximum earnings for shareholders and executives while, if possible (but more as an afterthought) being socially responsible.

In other words, entrepreneurs are T-shaped people. They have deep knowledge/skills in one area and a broad base of general supporting knowledge/skills. They do business mindfully to achieve breadth through a specific focus that has a wide and beneficial impact on wealth and welfare. Corporations are more like inverted Ts. They have wide reach and an out-sized impact that enhance the welfare and wealth of a few.

Invest to yield Pareto-improving outcomes

U.S. investment should be meaningful and positively impactful, not big and showy. U.S. policy for Africa should focus on how to harness business as a source of societal benefits and creator of shared prosperity. This requires aligning the private purposes of the U.S. government and U.S. companies with the public well-being of Africans.

If the Trump administration really wants to, in Pompeo’s words, “show the world America still values free enterprise and the spirit of capitalism across the developing world”, the Secretary of State should be touting the potential of U.S. companies to deliver entrepreneurial solutions that: 1) will, in partnership with local African entrepreneurs, develop productivity-enhancing technologies that respond to local needs; 2) commit to and actually follow through on delivering shared value through partnerships that promote local content and enterprise development; 3) create virtuous economic ecosystems and inclusive market gateways through catalytic investments that better and more fully apprehend Africa’s market and competitive realities; and 4) are favorably viewed by the majority of Africans because they do not promote elite capture.

It’s not that big is bad or ugly. But focusing exclusively on big prevents the greater U.S. business community from thinking seriously about better solutions for Africa’s economic and social challenges, instead of bigger investments that can push back against economic gains made by China in Africa. U.S. economic statecraft needs to promote, facilitate and support a healthy and diverse business ventures into Africa.

The goal for the U.S. should be to make a constructive difference in Africa. This is the most effective way to “win” over China. Prosper Africa needs to ensure the investments it supports give due consideration to Africa’s human, natural and social capital and enable and empower different forms of business activity. And it needs to ensure they will generate economic activities that will yield Pareto-improving outcomes, which occur when a change in allocation harms no one and helps at least one individual to become better off without anyone becoming worse off.

Astrid Ruiz Thierry, Principal, Upboost LLC

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