compendium working group on u.s. investment in africa

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Working Group on U.S. Investment in Africa COMPENDIUM 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) [email protected]

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Page 1: Compendium   working group on u.s. investment in africa

Working Group on

U.S. Investment in Africa

COMPENDIUM 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)

[email protected]

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Compendium – Table of Contents

All page numbers refer to the “C” (“Compendium”) numbers set in the lower-right corner.

Introduction to the Compendium ................................................................................................. 1

List of Contributors ...................................................................................................................... 2

Observations 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 ................ 9

Section A – Thematic Summary of Action Plans ...................................................................... 13

Section B – Thematic Summary of Briefing Memoranda ......................................................... 26

Section C – Contributor Action Plans, Memoranda and Profiles .............................................. 55

DETAILED TABLE OF CONTENTS FOR SECTIONS A–C

SECTION 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

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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 Principles

Executive Policy Proposals ...................................................................................... 23

Legislative Proposals ............................................................................................... 24

Multiple Agencies or Bodies ......................................................................................... 24

Specific Agencies and Other Bodies .............................................................................. 24

Millennium Challenge Corporation (MCC) ............................................................ 24 Principles

Multilateral Development Banks (MDBs) ............................................................... 24 Pri

Overseas Private Investment Corporation (OPIC) .................................................. 24 Principles

U.S. Embassies and U.S. Commercial Service ........................................................ 25 Principles

SECTION B – THEMATIC SUMMARY OF BRIEFING MEMORANDA ........................... 26

Introduction to the Working Group’s Briefing Memoranda ................................................ 27

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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 .............................................................................................. 36

Part 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 .................................................................................................... 39

Part 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

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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 .................................................................................................... 49

Part 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 ........................................................................ 54

SECTION C – CONTRIBUTOR ACTION PLANS, MEMORANDA AND PROFILES ..... 55

Emmanuel 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 ......................................................................................... 66

David Baxter .............................................................................................................................. 67

Action Plan ........................................................................................................................ 68

Memorandum .................................................................................................................... 70

Memorandum (Addendum on Diaspora) .......................................................................... 78

Profile ................................................................................................................................ 79

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James R. Blaze ........................................................................................................................... 80

Action Plan ........................................................................................................................ 81

Memorandum .................................................................................................................... 82

Profile ................................................................................................................................ 89

Stuart H. Deming ....................................................................................................................... 90

Action Plan ........................................................................................................................ 91

Memorandum .................................................................................................................... 93

Profile ................................................................................................................................ 95

Conal B. Duffy ........................................................................................................................... 98

Action Plan ........................................................................................................................ 99

Memorandum .................................................................................................................. 101

Profile .............................................................................................................................. 106

André du Plessis ....................................................................................................................... 107

Action Plan ...................................................................................................................... 108

Memorandum .................................................................................................................. 109

Profile .............................................................................................................................. 113

Jumoke Fajemirokun ................................................................................................................ 114

Action Plan ...................................................................................................................... 115

Memorandum .................................................................................................................. 116

Profile .............................................................................................................................. 117

Tamara K. Gaw ........................................................................................................................ 118

Action Plan ...................................................................................................................... 119

Memorandum .................................................................................................................. 120

Profile .............................................................................................................................. 128

Peter C. Hansen ........................................................................................................................ 129

Action Plan ...................................................................................................................... 130

Memorandum .................................................................................................................. 131

Profile .............................................................................................................................. 150

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David Humphries ..................................................................................................................... 151

Action Plan ...................................................................................................................... 152

Memorandum .................................................................................................................. 153

Profile .............................................................................................................................. 161

Justin Mahwikizi ...................................................................................................................... 162

Action Plan ...................................................................................................................... 163

Memorandum .................................................................................................................. 165

Profile .............................................................................................................................. 170

Francis Joseph Mills IV ........................................................................................................... 171

Memorandum .................................................................................................................. 172

Profile .............................................................................................................................. 173

Emeka Nwankwo ..................................................................................................................... 174

Action Plan ...................................................................................................................... 175

Memorandum .................................................................................................................. 177

Profile .............................................................................................................................. 186

Laban Opande .......................................................................................................................... 187

Action Plan ...................................................................................................................... 188

Memorandum .................................................................................................................. 189

Profile .............................................................................................................................. 192

Rick Orth .................................................................................................................................. 193

Action Plan ...................................................................................................................... 194

Memorandum .................................................................................................................. 195

Profile .............................................................................................................................. 198

Jon Vandenheuvel .................................................................................................................... 199

Action Plan ...................................................................................................................... 200

Memorandum .................................................................................................................. 202

Profile .............................................................................................................................. 203

Page 8: Compendium   working group on u.s. investment in africa

Introduction to the Compendium

This Compendium blends together in one volume the two sets of advisory documents prepared

by the members of the Working Group on U.S. Investment in Africa at the request of Amb. Tibor

Nagy 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 of

the Sub-Saharan African investment field. Its members include supporters of the two opposing

presidential candidates of 2012, as well as political independents and non-Americans. The

group’s composition was commendably deemed acceptable to the Romney Campaign’s Advisory

Committee on Africa. It was further agreed that since the Working Group’s products were not

part of an electoral effort but rather aimed at developing a governing policy, the Compendium

would 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. Nagy

on a broad range of subjects relevant to U.S. investment in Sub-Saharan Africa. Amb. Nagy then

met with the Working Group in Washington, D.C. on September 14, 2012, and requested that the

Working Group prepare action plans that would turn the briefing materials into a comprehensive

policy program. The Working Group subsequently did so. All of these materials are reproduced

in Section C of this Compendium, along with the professional profiles of their authors. Preceding

this 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, André

du Plessis, Jumoke Fajemirokun, Tamara K. Gaw, Peter C. Hansen (Chair), David Humphries,

Justin Mahwikizi, Francis Joseph Mills IV (briefing packet only), Emeka Nwankwo, Laban

Opande, Rick Orth and Jon Vandenheuvel.

On behalf of all those who will benefit from the wealth of useful suggestions and thoughtful

analysis to be found in this Compendium, I would like to extend my grateful thanks to the

Contributors. It has been a pleasure to work with you, and I hope that our joint efforts will bear

fruit 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

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List of Contributors

The 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 assisted

the policy-development work of the Romney Campaign’s Advisory Committee on Africa. In

performing this public service, the Contributors acted in a purely personal capacity. They did not

speak for any organization or entity for which they work or provide services. Any mention of

their 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 the

Contributors. Nor is this Compendium intended as a political tract. Indeed, some Contributors

were declared independents, and at least one openly expressed his support for the re-election of

President Obama. In addition, not all Contributors were U.S. citizens. Such political and national

affiliations were deemed perfectly acceptable for the purposes of this effort.

The Contributors were asked to participate on the understanding that the Working Group would

act as a purely technical advisory group to the Romney Campaign, with no formal connection

thereto. The Contributors in this spirit presented pieces as professional insights and technical

proposals for increasing fruitful U.S. private investment in Africa. Their individual action plans

and briefing memoranda have in turn been presented in this Compendium in their original and

unedited form, and summarized fully without regard to the views expressed.

The Contributors

Emmanuel Aghimien President and CEO, The Esentier Group

David Baxter

International Business Director, Jacobs

James R. Blaze Director of Strategic Planning, Economics and Railway Operations

Harsco Rail Zeta Tech

James M. Blazewicz COO, The Esentier Group

Stuart H. Deming, Esq. Deming PLLC

Conal B. Duffy Vice President, Alliant Emerging Markets

Alliant Insurance Services

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André du Plessis Business Development Manager, Schweitzer Engineering Laboratories (SEL)

Jumoke Fajemirokun Nigerian Attorney, U.S. LLM

Tamara K. Gaw Washington, D.C. Attorney and Author

Peter C. Hansen (Chair) Principal Counsel, Law Offices of Peter C. Hansen, LLC

David Humphries Director of Communications and Congressional Relations

CHF International (now Global Communities)

Justin Mahwikizi Founder & Managing Principal

Push54, LLC

Francis Joseph Mills IV Licensed Professional Engineer

Emeka Nwankwo President, Vertical Optimization, LLC

Laban Opande The Opande Law Firm

Rich Orth Business Lead for International Defense and Diplomacy (IDD)

SOC LLC

Jon Vandenheuvel President and Co-Founder

Africa Atlantic Holdings Ltd

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Observations of the Chair

Peter C. Hansen

Law Offices of Peter C. Hansen, LLC

From Briefing Packet, September 11, 2012

It has been a privilege to organize such a cadre of experts, whose pieces represent so effectively

the 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 considering

U.S.-African relations. Such a sentiment is shared by most U.S. businesses and certainly by the

overwhelming majority of ambitious and Web-connected Africans. What makes these experts

stand out is their expert knowledge of relevant technical subjects, their hard-won practical

expertise in investment matters, and their willingness to express views contrary to Washington’s

conventional wisdom.

The debate over U.S. investment in Africa has been settled everywhere but where it matters the

most. Private parties on both sides of the Atlantic, and even most African governments, are

clamoring for increased U.S. private investment to flow to the continent. This call is being taken

up even by the most stolid and phlegmatic U.S. multinationals. In Washington, however, the

official 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 is

instead one of aid programs that funnel money to an ineffective aid industry and that shut private

investment 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, and

mired in stale ideologies of decades ago, the cutting edge of the debate over U.S. investment in

Africa is to be found at the Beltway’s edge. Within its perimeter, the policy battle must be joined

and fought with enormous vigor to overcome the deep ranks of those with vested interests in the

status quo. The consequences of this struggle are not merely theoretical or ideological. What is

really at stake is the U.S. strategic position not only in Africa, but globally. Africa has become a

theatre in which a rising China has moved to stake out its claim to superpower status. The

traditional Beltway consensus about Africa has failed to respond to this strategic manoeuver, and

threatens 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 and

assailed the key defects in the present system, and proposed a host of specific reforms that can

bring U.S. policy into line with the needs and priorities of U.S. private investors in Africa. This

paper will review these specific proposals, as well as the various noteworthy divergences in the

Contributors’ strategic and tactical views. First, however, this paper will provide a brief tour

d’horizon of U.S. private investment in Africa. Without a solid understanding of the basic factors

at play in investment decisions, proposals for reform cannot be properly evaluated.

I. The Present State of U.S. Private Investment in Africa – A Brief Introduction

U.S. private investment in Africa, like any business investment, is undertaken when an investor

decides that the expected returns outweigh the known and unknown risks. Since Africa presents

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an enormous upside for returns, it must be deduced from the current paucity of U.S. private

investments in Africa – particularly outside the extractive industries – that the risks are perceived

by U.S. investors to be even larger than Africa’s profit potential. (The Contributors seem united

in their view that such fears are significantly overblown.)

Assuming that U.S. Government policy is to increase U.S. private investment in Africa, the task

of U.S. agencies must be to reduce those specific investment risks which the market cannot itself

overcome. In other words, the U.S. Government’s task must be to correct market failures. This

may seem like a commonplace observation, but it is actually fraught with complications in light

of existing U.S. Government policy. To begin with, the “market” for U.S. investment in Africa is

very poorly understood, most especially by the U.S. “aid” agencies which dominate U.S. public

and private involvement with the continent.

An Investment “Market” Is a Complex Set of Conditions

A “market” is simply a set of conditions that allow inputs to be introduced, related activity to

occur, and outputs to be removed. In a simple trading market, for example, money and goods are

introduced and then removed, with the only “related activity” being their exchange between the

parties. 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 the

money and goods are actually on the table and removable. This in turn requires an identified and

secure space, a legal system setting and enforcing the rules for the exchange, ways to move the

money and goods to and from the exchange, and so forth.

When direct investment rather mere trading is undertaken, the number of relevant conditions

increases exponentially. To start with, the inputs are seldom the same as the outputs. One may

send materials to build a factory, and produce shoes as outputs. Even the money introduced and

removed must often run through a conversion process. As for the “related activity,” this is a

whirlwind of interactions, purchases, sales, contracts, licenses and labor. The sets of conditions

applicable to these individual actions may overlap in part, or they may be unique. For an investor

to determine whether a project is feasible, the investor must try to determine what conditions are

required for each action, whether they are present, and whether they can be navigated to finish

the 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-Risk

In the case of Africa, the “market” for U.S. direct investment has hardly been explored, so that

its contours and conditions remain largely opaque and thus frightening for most U.S. business

planners. For example, such a presumably simple matter as the purchase of a plot of land for a

factory in Ghana can lead to unforeseen headaches as the U.S. investor runs into the complexities

of a tribal land law that is both unknown and unimagined in U.S. corporate offices. Such pitfalls

are 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

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capital sky-high, if it is even available in the first place. Consequently, U.S. investors cannot

achieve 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 inability

of 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 by

mitigation and offsets to allow a net-positive outlook for profits.

African Investment Prospects Mostly Fall into the Gap Between the Potential and the Possible

Africa is seen as being full of potential opportunities. This does not mean, however, that Africa

offers actual opportunities to every given investor. For many investors, Africa does not at this

time present conditions that make investment there attractive. In many cases, the discouraging

conditions 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 growth

potential over the medium term. On the other end of the scale, a lone entrepreneur may be

personally willing to brave an African project, but is either unwilling or unable to do the difficult

and often expense prep work that a pioneer business requires. The lone entrepreneur may also

simply lack the resources to bear all of the shocks and setbacks that attend a project on the

economic frontier. Thus, one often finds in U.S. investment circles an inverse relationship

between 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 except

through small clinics, which would require an entirely different business model, not to mention

major outlays to develop it. Even where an investor presents the trifecta of interest, ability and

product, 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. It

need not be this way, however. Africa is in fact replete with opportunities for any of the potential

investors described above. For this potential to be realized, the range of what is actually possible

must 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 of

the size spectrum. For example, the small investor can be relieved of having to reinvent the

wheel when the U.S. Government instead provides protection through bilateral investment

treaties (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, the

mid-sized investor can be supplied with either public or private investment briefings, the services

offered by cadres of well-seasoned Africa experts, and the camaraderie and encouragement of

mutual-support clubs and associations. The large investor can for its part use major aid projects

as jumping-off points for its own private projects, or it can step in later in the game to take

advantage of the rising African economies fostered by multitudes of smaller U.S. investors.

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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 this

point 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 in

search of the high margins to be found in an explosively growing African market that this very

same investment will help to bring about.

The Development of an African Investment Corps, and a Startup Industry of Advisors

The 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 by

the 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 indeed

arisen 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 in

earnest around 2007-08, is an indicator that development is occurring or at least expected on the

African investment front. It does not prove, however, that there is a vibrant U.S. investor group

actually entering Africa. There unfortunately continue to be large dislocations in the market for

African advisory services. This is because the African investment corps in the U.S. is, unlike its

counterpart 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 grim

realities, the actual features of the African investment field have not been properly explored from

the perspective of an actual investor. This task of “market discovery” has been left to the African

advisory cadre, and to those individual businesses seeking to enter Africa. Indeed, it might be

said that this briefing packet is the first major survey of the field as seen by the advisors and

investors 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 be

an initially exhilarating but ultimately dispiriting experience. The rush of excitement spawned by

the prospect of wide-open African markets soon gives way to the innumerable cares and worries

of attempting to learn and navigate – almost always entirely on one’s own – the conditions

present not only in the target market, but on the international investment plane. Advisors can

attest to watching the wheel being reinvented again and again, often with the spokes being left

lying 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 the

market 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 groups

which did not start off with a client base. This difficult and unforgiving learning process, which

would 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.) The

harsh conditions of this pioneer business has, rather unexpectedly and certainly not by choice,

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had the salutary effect of producing advisors who have undergone the same type of struggles as

their 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 investment

corps of formidable capacity, but it has also revealed a large gap between the reality experienced

by 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, as

they could certainly use skilled public-sector support, it is actually a perfectly natural and indeed

healthy development. A proposition that was once merely theoretical and hortatory – expanding

U.S. private investment in Africa – is now ever more clearly becoming a day-to-day reality, with

all its attendant messiness and rough-edged advances. It is to be expected that those on the

cutting edge of such change will be the ones who can best explain its new developments, and to

perceive 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 remain

mired in old platitudes and increasingly irrelevant programs. One telling example of the depth of

government complacency was not long ago illustrated by a think-tank meeting called to discuss

how to introduce a basic awareness of bilateral investment treaties (BITs) to the bureaucracy and

to those on Capitol Hill. Given such depressing circumstances, it is easy to understand the sense

of many in the private sector that while the U.S. Government largely runs the show when it

comes to U.S.-African economic relations, U.S. officials are not looking out for U.S. business or

even 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 Africa

In 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, the

resolution of which will channel private activity toward productive ends. What the field instead

presents is a dizzying array of public and private entities struggling to connect in a profitable

manner, with each entity and each relationship revealing a unique set of complexities. Factors

which 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, let

alone centrally plan, the vast and immensely diverse set of interactions that would make up a

mature economic relationship between a superpower and a continent. If the U.S. Government is

to act at all, it can do so only on the margins. It can ease the way for investors to pursue their

personal projects. It can encourage and gently nudge U.S. investors to get the ball rolling. Most

importantly, it can step in where the market cannot, and reduce persistent risks to make

affordably priced funding possible. The U.S. Government cannot, however, realistically try to

replace 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 been

doing for decades through its “aid” programs. While emergency responses to famines, epidemics

and other acute scourges are not only morally warranted but necessary, the U.S. Government has

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made the mistake of treating all African problems as if they were famines or epidemics. Thus, to

a degree not seen in any other region of the world, we see the U.S. Government sending “aid” to

improve all manner of alleged African problems. Earnest bands of Western consultants descend

on cattle-herders whose ancestors have worn the same paths for thousands of years. Clinics are

erected far from any known supply system. Waste-to-energy factories are dreamed up for cities

that 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 government

officials 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 can

barely even recognize, the market into which it tramples. By seeking to impose a system that

exists only in policy papers and speeches, the U.S. Government mangles and deforms the system

that actually exists. The dire results are found in endlessly repeated statistics that show low and

stagnant U.S. investor interest in Africa. They are also found in the ascendancy of China. If the

U.S. had in the 1970s instituted for Africa measures friendly to U.S. private investment, China

would never have achieved more than a toehold on the continent as a low-budget alternative to

superior U.S. projects. Indeed, it might be wondered whether China would even be in the global

position 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 humble

U.S. Government would cease to entertain grandiose ambitions of continent-building. It would

instead restrict itself to identifying and correcting specific market failures that have dampened

U.S. private investor interest in Africa. The first step along this path is to learn what specific

market failures are actually occurring. The second step is to develop and implement strategies to

address 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 institutional

determination to advance. Such firm resolve is not the natural state of a bureaucracy, which

prefers a well-paid humdrum. It is here that private-sector involvement and input will play a

critical role. By tailoring U.S. agency priorities and practices to ever-evolving private-sector

needs and goals, U.S. public agencies can remain both dynamic and useful.

II. A Précis of the Contributors’ Shared and Divergent Views on Major Topics

This briefing packet sets out ideas for a new U.S. Government policy régime that encourages and

supports U.S. investment in Africa. It is not a roadmap to some imagined policy endpoint. It is

intended simply to identify critical issues, and to propose solutions that can help the U.S. regain

its footing in Africa and usher in a new and far better era of U.S. economic, social and political

partnership 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 are

philosophical differences between Contributors in their views of the nature and role of the State

in African investment matters. There are also more modest differences on tactical matters. What

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comes through in all of the sixteen Contributions, however, is a shared commitment not only to

the people of Africa, but also to a vibrant, lasting and productive U.S. presence on the continent.

The Contributors’ Strategic Views

Certain views and proposals concerning U.S. investment in Africa are shared by most or even all

of the Contributors. Perhaps not surprisingly, the Contributors are sanguine about Africa’s

potential for explosive economic growth. While it is recognized that serious obstacles remain to

be dislodged in many areas, these hindrances are deemed to be more than offset by the

tremendous potential for growth perceived in the rising, Web-connected middle classes that are

appearing across the continent. At the same time, the Contributors appear to concur that AGOA

has to date proved irrelevant as a tool for engaging Africa. While the sentiments behind AGOA

are considered worthy, it is judged by the Contributors that U.S. private investment, not a single

trade 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 key

to strengthened U.S.-African economic relations. The Contributors uniformly call for U.S. public

policy and agencies to support U.S. private investors on the continent, albeit in conjunction with

the continued provision of “compassionate” aid. The Contributors do differ in the degree of their

acceptance of a State role in private investment. Where one view calls for the U.S. Government

to set the legal conditions for safe investment and then retire, another view calls for the White

House to select industries for preferential treatment as development champions. This divergence

of 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 by

fears of the continent that are in many respects irrational. Certain Contributors note that even

where large U.S. corporations have provably done well in Africa, these successes have not been

properly advertised and explained. This informational gap suggests a “market failure” that could

be privately or (in the view of some Contributors) publicly filled by the development of briefing

materials. Meanwhile, no Contributor would seem to dissent from the conventional view that

local partners are often indispensable to a project. The Contributors do differ from the standard

view, 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 of

affairs is viewed as a burden on U.S. private investment in Africa, since aid tends to destroy

demand for non-free products in important sectors. It is also viewed as a strategic blunder. It is

noted that a rising China has drawn African governments to itself through the introduction of

investment projects that provide higher returns than U.S. aid projects. Although skepticism is

expressed 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 is

agreed 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.

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While conventional wisdom might call for an escalation in aid to buy off African clients and woo

them away from China, the Contributors instead call for massive and even targeted increases in

U.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 areas

are acknowledged, it is also noted that the U.S. has serious advantages of its own. In addition to

this call to action, a number of further suggested responses to China are put forward. These

proposals 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 with

Chinese operations. Such ideas are likely to prove useful starting-points for further discussion.

The Contributors’ Tactical Views

Whereas strategy seeks to achieve overarching goals, tactics are used to win the smaller victories

needed for overall success. The Contributors helpfully provide insights and suggestions relating

to this lower yet still critically important plane of activity. Several of the topics mulled by the

Contributors on this level merit mention.

In jointly calling for increased U.S. investment, the Contributors diverge on the standards to be

applied by the U.S. Government to its African counterparts. On one end of the spectrum, a view

is expressed that the U.S. must cease to require African States to “earn” partnerships through

reforms 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 in

approach may seem rich with possibilities for debate, there may in fact be ways to harmonize the

various views, at least in part. For example, it could perhaps ultimately be agreed that standards

will be kept in place, but that violations will have the effect of reducing benefits under an agreed

framework for economic engagement, rather than serve as a moving hurdle to the establishment

of a partnership. It may be noted that the Contributors were all of one mind in urging continued

support for reform efforts, the only debate being over what relationship such efforts should have

to the facilitation of U.S. private investment.

The Contributors uniformly recommend a closer working relationship between U.S. agencies and

U.S. private investors, so that U.S. public policies, programs and actions hew more closely to

U.S. private-sector needs and priorities. The Contributors differ, however, as to the specific

nature of this engagement. While on one end it is urged that the U.S. Government merely seek to

provide a level playing field and to minimize systemic risks, it is contended on the other end that

the White House establish policies and priorities that channel U.S. private investment toward

specified U.S. Government development objectives. Such a wide gap in proposed approaches

will no doubt prove fertile ground for debate.

Several Contributors urge the adoption of coaching programs to foster U.S.-African partnerships

and to impart know-how and other capacity boosts to African enterprises. These Contributors

agree that long engagements (with minimums of 1½ to 3 years) are necessary to achieve results

and to secure the trust of locals. Where the Contributors differ is in the manner in which such

coaching is to be conducted. Where one Contributor urges distance-mentoring, others urge

lengthy stays in-country. Meanwhile, while government support for such efforts is jointly called

for, one Contributor cautions that private-sector enterprises should be made to pay at least part of

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the cost to avoid moral hazard. Insofar as these different approaches cannot be squared by, for

example, 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 view

holds 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 in

the treaty-development process diminishes their usefulness. It is urged on the basis of such

skepticism that short-term policies and action plans be developed and implemented to secure

U.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 expanded

U.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 as

free-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 proposed

that the U.S. Government liberalize its political-risk insurance (PRI) requirements, and even

pioneer innovative forms of insurance for African projects. Given the central importance of

increased 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 discussion

as more specific tactical options are explored.

The role and operations of U.S. aid agencies, and particularly USAID, are the subject of various

proposals. Some Contributors urge the consolidation of agencies, and even having one agency’s

approach be adopted for the entire combined entity. Other proposals variously recommend the

identification of trade and investment as a top priority in aid programs, the adoption of internal

reforms (such as the Six Sigma approach), and the secondment or straight transfer of staff

between agencies to spread knowledge and implementation of best practices. On the operational

side, the practical need for sustainability in project-development is emphasized, and various

proposals are given for coupling aid work with private-sector entities and initiatives.

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Working Group on

U.S. Investment in Africa

SECTION A

INTRODUCTION AND THEMATIC SUMMARY

OF ACTION PLANS

Prepared By

Emmanuel Aghimien

David Baxter

James R. Blaze

James M. Blazewicz

Stuart H. Deming

Conal B. Duffy

André du Plessis

Jumoke Fajemirokun

Tamara K. Gaw

Peter C. Hansen

David Humphries

Justin Mahwikizi

Emeka Nwankwo

Laban Opande

Rick Orth

Jon Vandenheuvel

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Introduction to the Working Group’s Action Plans

On September 11, 2012, the Working Group on U.S. Investment in Africa submitted its Briefing

Packet to the Romney Campaign’s Advisory Committee on Africa. This was followed by a

meeting 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 this

meeting, it was agreed that the Working Group would provide the Committee with a set of action

plans that distilled not only what had been discussed at the meeting, but also the proposals set out

in 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 of

the Sub-Saharan African investment field’s avant garde. (The group submitting action plans

differs only slightly from the one that submitted the Briefing Packet, with Emmanuel Aghimien

joining and Francis J. Mills IV being unable to participate.) Each of the present Contributors was

asked by the Chair to address a specific topic, and to set out his or her ideas in a bullet-point

format dividing fifteen entries equally between guiding principles, executive policy reform

proposals, and legislative proposals. The Contributors had to work quickly, but came up with a

cornucopia 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 each

Contributor’s entry in the Briefing Packet. Nonetheless, the packet’s sheer abundance of ideas

and broad spectrum of topics can be overwhelming. The Chair has therefore compiled for the

reader’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 these

headings, 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 to

their work. It is hoped that these seeds of reform will take root and flower into vigorous policies

that shift the U.S.-African relationship into more fruitful paths. The goal of all the Contributors is

to foster a true partnership between the U.S. and Africa on every plane – economic, social and

strategic. 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

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Thematic Summary of Action Plans

By Peter C. Hansen, November 5, 2012*

The following sets of thematically organized bullet points are intended to provide a fast-and-easy guide to all of the various policy proposals put forward by the Working Group Members in their respective action plans. For elaboration of these summarized proposals, including their extensive backing 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 equally between guiding principles, executive policy proposals, and legislative proposals. This call went out in light of the Working Group’s briefing of Ambassador Nagy, and had a tight deadline that did not allow for extended consideration. The intent was to distill each Member’s policy proposals 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 be read 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 any disagreement or group disinterest, but rather of the need to cover a wide field efficiently. Each Member was asked to make proposals on a different subject. Consequently, overlaps or the lack thereof 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 and logical 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.

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• 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.17

6 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, African buy-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.

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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.29

18 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.

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• 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.38

Part 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.41

30 Blaze, C81. 31 Opande, C188. 32 Blaze, C81. 33 Aghimien and Blazewicz, C58; Vandenheuvel, C201 (urging particular attention be paid to business, law and accounting). 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).

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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.54

42 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.

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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.61

Specific 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.67

55 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.

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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.79

68 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 assistance must 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).

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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.92

80 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 urging use of targeted PEPFAR investment to help rebuild private health-care systems, while noting that private actors are often excluded in favor of moribund and often corrupt public bodies). 91 Nwankwo, C176. 92 Id.

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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.103

93 Humphries, C152. 94 Vandenheuvel, C200 (suggesting as examples official efforts to expand exports, create jobs, promote U.S.-African collaboration 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-class African 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, without duplication); 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 coordinators report 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.

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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.114

104 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.

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• 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.120

115 Duffy, C99. 116 du Plessis, C108. 117 Duffy, C100. 118 du Plessis, C108. 119 Id. 120 Fajemirokun, C115.

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Working Group on

U.S. Investment in Africa

SECTION B

INTRODUCTION AND THEMATIC SUMMARY

OF BRIEFING MEMORANDA

Prepared By

David Baxter

James R. Blaze

James M. Blazewicz

Stuart H. Deming

Conal B. Duffy

André du Plessis

Jumoke Fajemirokun

Tamara K. Gaw

Peter C. Hansen

David Humphries

Justin Mahwikizi

Francis Joseph Mills IV

Emeka Nwankwo

Laban Opande

Rick Orth

Jon Vandenheuvel

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Introduction to the Working Group’s Briefing Memoranda

This briefing packet is intended as an introduction to the thought of the Sub-Saharan African

investment field’s avant garde. The sixteen memoranda presented here vary greatly in their

themes and in their authors’ backgrounds and professional focus. The viewpoints expressed are

informed 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 Washington

or development hands with intensive experience either in African matters, or in related fields

such 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. This

is a hard-nosed determination to increase U.S. private investment in Africa, coupled with a close

attention 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 cases

been hard-won over the course of years and harsh experiences. It also sets them apart from the

vast 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, the

Contributors 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. Far

from fitting the stereotype of the exploitative plunderer, the Contributors express a firm intention

that U.S. private investment, and facilitating public-sector efforts, be undertaken in a spirit of

true and equal economic partnership, free of corruption and seeking always to build up Africans

and African institutions. In nuanced and deeply thoughtful passages, the Contributors navigate

the complex issues raised by the freewheeling nature of private commercial projects, and the

prospect of a U.S.-led economic explosion in Africa. If a classical spirit of free enterprise is

readily detected in the Contributors’ memoranda, it is one that is also quite conscious of the

meaning, challenges and limits of the laissez-faire approach.

What does surprise in this collection is the stark difference between the Contributors’ viewpoints

and the gauzy rhetoric of the U.S. public sector. Again and again, the Contributors cut through

the fog of official attitudes and platitudes, goring sacred cows like AGOA, the aid industry, and

that most harmful of official stereotypes, that of the pitiable and incompetent African. This

barbecue of conventional wisdom is not just a broadside against official complacency. It is also a

serious and grittily realistic call for action to reform U.S. policy on African investment from top

to bottom, and to set the U.S. on a course toward fruitful engagement and alliance with the many

countries and peoples of a great continent.

Peter C. Hansen

Chair, Working Group on U.S. Investment in Africa

Washington, D.C.

September 11, 2012

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Thematic Summary By Peter C. Hansen, September 11, 2012

*

The following thematic summary seeks to represent in an objective and systematic manner the many points raised by the sixteen Contributors in their respective pieces. Given the wide range of the topics addressed by the Contributors, the summaries of their pieces are divided into five main thematic 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 official U.S. stance on U.S. private investment in Africa; and (iv) U.S. aid agencies and programs.

PART I – OVERVIEW OF CONDITIONS AFFECTING INVESTMENT

A. Africa’s Potential

Africa’s decade of strong growth and immense, positive change was recognized.1 It was noted that Africa this time really seems to be taking off economically in a sustainable fashion.2 It was pointed out that the U.S. need for African commodities (especially oil) was increasingly indirect rather than direct, as U.S. trading partners were taking up a greater share of manufacturing.3 It was observed that African exports will increasingly move toward manufactured goods, and that a growing Africa is likely to import massive amounts of U.S. goods.4 Africa’s growth potential was attributed to various factors, including: (1) the growth in African commodity exports;5 (2) increasing urbanization;6 (3) a growing middle-class;7 (4) major legal and economic reform efforts by progressive African governments;8 and (5) Africa’s large youth population, which is connected to the Internet and attracted to capitalism.9 The value of the African Diaspora was noted,10 as was the hardy African entrepreneur developing businesses in extremely 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 and India 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 personal resources).

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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 was noted that “international development experts” tended to ignore this stubborn fact.13 It was pointed out that the U.S. as a whole must approach Africa as investors rather than donors,14 and that Africans want more investors, not more politicians, aid workers and exploitation.15 It was observed, however, that Africa often loses out in competition for investment projects because they cannot offer sufficient incentives (such as infrastructure, governance and cash offers) to keep up with other regions.16

B. U.S. Corporate Approaches to Africa

1. Analysis of Situation and Issues

Note was taken of the need for an increased U.S. private-sector presence and positioning in Africa.17 The successes of certain very large, branded U.S. companies in Africa were lauded.18 U.S. companies were considered representatives of the U.S., and a link was made between their reputation in Africa and that of the U.S.19 It was observed that U.S. multinationals have a huge reach in Africa, going places where the U.S. Government could not, and running projects that USAID could not accomplish.20 Nevertheless, it was pointed out that U.S. corporate successes in Africa had not been well-publicized, and that best practices associated with these efforts had not been identified or disseminated.21 It was noted that U.S. business circles perceived that U.S. nation-building programs spawned antipathy to U.S. businesses, and that there is a preference in procurement for local companies over U.S. providers.22 More generally, an extraordinary degree of fear of Africa as a potential investment site was observed among U.S. companies,23 accompanied by a near-total lack of comprehension of the actual (lower) risks involved.24 It was pointed out that, given the relative

12 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.

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freedom of U.S. investors to work in today’s Africa, the dearth of U.S. private investment on the continent reflected risk perceptions so high that they outweighed the prospect of high profits.25 Notice was taken of a lack of competitiveness and drive in U.S. companies as regards emerging markets, and Africa in particular.26 A view was expressed that for the U.S. to maintain its edge in the global economy, U.S. industry must see investment and growth in Africa as a strategic imperative.27 It was elsewhere perceived, however, that the U.S. may be too late to the party.28 Anecdotes were related about visits to Africa where no U.S. companies were present, but where companies from many other countries were successfully closing deals.29 It was pointed out that true and full U.S.-African corporate partnerships are quite possible.30 It was 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 the values of the relationship be articulated.31 It was further observed that U.S. businesses should undertake a full-spectrum review (e.g. due diligence, business development and management protocols) before making any commitments in Africa.32 It 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 to determine 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 operational budget allocations directed toward what amount to aid projects.34

2. Proposed Solutions

A need was identified for U.S. businesses to build long-term relationships in Africa, based on successful projects.35 It was suggested that U.S. corporations be encouraged to take part in nation-building by introducing business practices that broaden access to wealth and foster

25 Hansen, C131-C132 (noting that many perceived risks were unquantifiable since most involve a lack of public protection, 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 in DRC, 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).

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expansion of the middle class.36 It was asserted that U.S. investments in Africa must be globally competitive and profitable, not “social enterprises.”37 It was elsewhere suggested in a similar vein that bilateral aid budgets should reflect the fact that private enterprise drives successful economic and social development, not U.S. Government-direct aid programs.38 A specific proposal urged that U.S. companies be encouraged to open franchises in Africa,39 and that USAID technical assistance be provided to help host-country governments upgrade their laws so as to welcome franchises.40 It was suggested that franchises could be encouraged in non-heavy industries (such as modern cleaning services) to allow operation in multiple countries without heavy regulatory drag.41 It was observed that the U.S. Government has not made much of an effort to encourage U.S. businesses to partner with African governments or businesses.42 It was asserted that increased public-private partnerships (“P3” or “PPP”) would bring U.S. companies into Africa, creating larger local export markets on both sides of the Atlantic, while also building African capacities.43 It was in the same vein suggested that U.S. partnerships (such as PPPs) would develop African know-how and lead toward industrial and economic growth.44 It was pointed out that if the U.S. Government assisted African food processors in improving their capacity through the facilitated involvement of U.S. companies, this would allow U.S. aid agencies to source food regionally when responding to African food crises.45 a. Proposals for Coaching Programs (Both Private and Publicly Supported)

It was proposed that in place of expensive, one-off feasibility studies, the U.S. Government agencies should finance coaching, training and mentoring assistance by U.S. businessmen and women for African policy-makers and planners.46 It was suggested that these coaches would help African policy-makers and planners learn to ask the right questions for developing effective

36 Baxter, C74 (noting the fruitful participation of U.S. companies in South African civil society during apartheid, which led to many of these companies’ former employees serving today as pro-U.S. national leaders); Nwankwo, C180-C185 (using the example of U.S. development of local African food processors).

37 Vandenheuvel, C202.

38 du Plessis, C111.

39 Duffy, C104; Mahwikizi, C168-C169 (discussing this as part of a proposed Tactical Investment Hedge Program, and using the example of a hypothetical U.S. cleaning company entering Africa).

40 Duffy, C104.

41 Mahwikizi, C168.

42 Opande, C190.

43 Blazewicz, C60, C62; Opande, C190.

44 Blazewicz, C60; Opande, C190.

45 Nwankwo, C182.

46 Blaze, C85-C86; Mills, C172 (suggesting a broad array of U.S. representatives, from businesspeople to former Peace Corps volunteers, to scholars and trade-association representatives); Nwankwo, C184 (proposing that such programs use the Six Sigma model).

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projects, a process which could lead to solutions based in U.S. practice that would in turn lead to an orientation toward the U.S.47 It was separately suggested in the same vein that U.S. aid agencies learn from the past and present experiences of missionary groups who have successfully worked in Africa for more than a century, and that the aid agencies sponsor private-sector “manufacturing missionaries” to help develop African industries.48 It was proposed that coaches be appointed and supported for 2-3 year consultancy periods, with occasional visits rather than management takeovers.49 It was elsewhere observed, however, that having American “boots on the ground” in Africa for long periods at a stretch (e.g. 1½ to 3 years) is the best way of promoting U.S. aims on the continent, particularly as this length of time is usually required to form productive relationships with Africans due to the absence of institutional mechanisms that in the West reduce the need for personal trust.50 It was opined that U.S. business in Africa would increase along with the number of Americans on the ground.51 It was predicted that a coaching program would lead to new U.S. jobs and exports as African business develop, both independently and as partnerships with U.S. firms.52 It was predicted that such a “barn raising” project would inspire Americans and likely be oversubscribed by interested U.S. participants.53 It was cautioned, however, that to avoid “government-sponsored tourism,” the coaching companies should assume part of the cost of their coaching interventions.54 An illustrative proposal was made to develop African food-processing companies by surveying the existing African industry for the purpose of producing an “Almanac of Food Processors and Manufacturers” for each country that could be used to guide targeted U.S. interventions.55

C. African Business and Political Conditions

1. Analysis of Situation and Issues

Unwelcoming African business conditions were cited as a depressant on U.S. private investment, such conditions including “indigenization” laws requiring majority ownership by locals.56 It was noted that “friendly nations” like China are sometimes exempted from such restrictive laws,

47 Blaze, C86-C88 (using the example of railway development); Nwankwo, C185.

48 Nwankwo, C184.

49 Blaze, C86.

50 Mills, C172.

51 Id.

52 Nwankwo, C185.

53 Id., C184-C185.

54 Id., C184, n. 2.

55 Id., C184.

56 Baxter, C73 (referring to Zimbabwe).

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creating disparities in treatment that discourage or effectively bar U.S. investment.57 Other identified, serious local risks include restrictions on free-market competition, corruption and the threat of frivolous litigation.58 It was noted that U.S. businesspeople tend to be timid when working in places like Nigeria because of a fear of putting a foot wrong under the FCPA.59 In addition to being hit with criticisms concerning U.S. investment, African governments were assailed for failing to support their own nationals’ business-building efforts,60 particularly in respect of their failure to provide frameworks in which African youth could establish and grow businesses through “institutionalized entrepreneurship.”61 Concerns were expressed about aid’s fostering of African dependency.62 Specific concern was expressed over U.S. and multilateral aid agencies’ fostering of African official preferences favoring dreamy and uneconomic projects unmoored from business concerns and invariably funded by donors.63 For example, it was noted that basic matters such as “traffic demand” and economies of scale (including viability thresholds) are often ignored in African political planning.64 It was observed that in food-security matters, aid that admittedly helps the needy also serves to reinforce the wealth of aid-producers and diminish the capacity for local production.65 It was pointed out that the actual amount of aid distributed in a given year, and also over many years, by the “big five” donors (i.e. the U.S. State Department, USAID, MCC, OPIC and IFC) was surprisingly paltry, and indeed wholly insufficient either to develop Africa or to replace the private investment shunted aside by the aid industry’s capture of the African market.66 a. The Scourge of Vulture Funds

The shadowy “vulture funds” industry was surveyed in great detail, and the need to curtail them argued in similar depth.67 It was pointed out that vulture funds, by acting as “zombie creditors”68 buying defaulted debt cheap and aggressively seeking payouts of the full amount – often by bringing simultaneous collection actions and lawsuits before courts in multiple jurisdictions –

57 Id.

58 Baxter, C73; Blazewicz, C60.

59 Fajemirokun, C116.

60 Nwankwo, C179; Opande, C190.

61 Mahwikizi, C166, C169. See also Vandenheuvel, C202 (noting that “African businesses must be creditworthy, bankable, wired and formal”).

62 Blaze, C82-C83; Hansen, C132, C137-C138; Mahwikizi, C165, C169.

63 Blaze, C82-C83 (using the example of international railway projects in Africa).

64 Id., C83 (using the example of international railway projects).

65 Nwankwo, C178.

66 Hansen, C138-C140 (comparing aid contributions to companies with comparable market-capitalizations).

67 Gaw (passim).

68 Id., C124-C125 (noting that this refers to a debt so old that one has forgotten about it, until it unexpectedly returns). Zombie creditors are restricted by U.S. law. See id., C125.

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effectively siphon off U.S. aid money when the indebted country pays up.69 It was observed that in one case, Liberia was ordered to pay a sum equivalent to 150% of its annual health budget.70 It was noted that vulture funds are often based in “secrecy jurisdictions,” like Delaware, and that this practice, combined with exploitation of tax havens, raises serious issues of tax compliance since it is extremely difficult to learn much about a vulture fund’s business.71 The disruptions of debt forgiveness effected by vulture funds, as holdout creditors, was observed and criticized.72 Vulture funds were identified as a threat to U.S. private investors doing business with targeted African States, for example through draining funds that could be used to pay investors, and even litigation aimed at collecting the demanded sum from the company.73 It was noted that countries like China do not allow vulture-fund litigation, so that U.S. investors are put at a competitive disadvantage by having to insulate against such threats.74

2. Proposed Solutions

It was asserted that African governments should put up funds alongside U.S. aid.75 It was suggested that, where possible, a dollar-for-dollar (“$-4-$”) approach should be favored, so that U.S. investment is matched by an equal contribution by the host country, the result being a scaling of projects to the local capacity to maintain the project in a sustainable manner, with U.S. companies even being able to enter risk-free as a result.76 In a similar vein, it was urged that host-country “ownership” of aid programs be considered a necessary condition for U.S. funding, on the ground that local-government responsibility for outcomes will improve those outcomes while also diminishing dependency.77 It was suggested that African planners be encouraged to incorporate business principles into their project-planning.78 It was more generally urged that NEPAD be revisited, and that the U.S. seek to create a “peer review mechanism” whereby African States will join the U.S. in championing free trade and investment promotion.79

69 Id., C120-C123.

70 Id., C122. See also id., C123 (discussing the similarly dire predicament of the DRC).

71 Id., C121-C123.

72 Id., C122.

73 Id., C123, C125.

74 Id., C123.

75 Hansen, C145, C148-C149 (suggesting that the U.S. develop a formula to determine for each African country the multiplier by which local contributions would matched by U.S. aid); Mahwikizi, C167.

76 Baxter, C76-C77.

77 Duffy, C102, n. 1.

78 Blaze, C83-C85 (using the example of a proposed bi-national railway project in West Africa).

79 Duffy, C105 (specifically naming Ghana, Nigeria, Senegal and South Africa as potential partners in this proposed endeavor).

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It was recommended that African government agencies’ capacities be developed in respect of investment-related matters, such as trade, taxation, customs and corruption,80 as well as the rule of law and judicial reform.81 Customs reform was deemed particularly important as a means to speed the clearance of goods and to prevent corruption and delays, which are now often extreme. 82 It was specifically suggested that special attention be given to standardizing customs excise duties and forming customs unions.83 It was deemed that stern anti-corruption measures are needed on the ground in Africa,84 with proposals for reform (or continued practice) including U.S. Government reporting of corruption incidents to aid-receiving governments, public identification of corrupt officials, debarment of corrupt companies from national and international public projects, and withholding of aid where corruption is not mitigated.85 It was emphasized that the bribery of foreign officials is directly antithetical to U.S. policies that encourage democracy and market economies.86 It was suggested that the credibility of U.S. foreign policy would be undermined by any signal that the U.S. Government does not take corruption by its citizens and companies to be a serious matter.87 It was specifically argued that the FCPA should be maintained in its current form, as currently proposed changes in its legal standards would devastate anti-corruption efforts after years of painstaking and bipartisan efforts to put effective norms and practices in place.88 It was observed that the FCPA has inspired many other national and international instruments, and has in any event been complemented by the U.K. Bribery Act, which imposes even tougher standards, and which must in any event be complied with by many U.S. companies, regardless of any watering down of the FCPA.89 It was separately noted, however, that measures like the FCPA and ITAR had engendered reluctance and delay among U.S. investors.90 In respect of vulture funds, it was urged that the U.S. follow the lead of its allies (e.g. the U.K. and Belgium) and competitors (e.g. China) in severely curtailing or banning vulture-fund litigation, including through “sunshine” legislation forcing disclosures by vulture funds, requirements that simple rather than compound interest be used in calculating sums owed, and capping interest rates.91

80 Baxter, C73; Fajemirokun, C116.

81 Fajemirokun, C116.

82 Baxter, C73.

83 Id.

84 Id., C74; Fajemirokun, C116.

85 Baxter, C74.

86 Deming, C94.

87 Id.

88 Deming (passim).

89 Id.

90 Blazewicz, C60 (nevertheless asserting that investor behavior must follow the highest ethical standards).

91 Gaw, C123, C126-C127.

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D. Trade and Investment Treaties Between the U.S. and Africa

1. Analysis of Situation and Issues

It was observed that recent U.S. efforts at establishing pro-investment agreements in Africa had been to little effect, being primarily ideological in nature.92 It was separately pointed out that the U.S. civil service was largely unaware of why BITs and DTTs were important.93 It was noted that existing BITs and DTTs had been concluded almost entirely with non-anglophone African countries, to which U.S. investors were less inclined due to differences in language, law and culture.94 It was considered that tax issues, including the double-taxation of U.S. expat income, impeded U.S. private investment in Africa.95 It was observed that double-taxation of U.S. worker income rendered such highly skilled (and already expensive) workers unattractive relative to non-U.S. foreigners and locals, as the U.S. workers must be compensated at a higher level to account for the increased tax burden.96 It was observed that the U.S. needs to help render international commercial transactions with Africa more efficient, and thereby stimulate U.S. imports of African goods.97 In this same vein, it was suggested that flexible foreign-exchange controls be established to allow the repatriation of profits without excessive taxation.98

2. Proposed Solutions

It was urged that U.S. BITs and DTTs be signed with States across Sub-Saharan Africa,99 with quick ratification to follow.100 It was suggested that any U.S. debates over the content of the Model BIT be set aside to achieve this goal of 100% treaty coverage, even if the terms of the standard African BIT needed then to be watered down.101 There was a call for increased funding for the USTR to negotiate BITs and FTAs with African States.102

92 Baxter, C72.

93 Hansen, C135.

94 Id., C144.

95 Baxter, C73.

96 Id.

97 Vandenheuvel, C202.

98 Baxter, C73.

99 Hansen, C132, C144.

100 Id., C144.

101 Id.

102 Duffy, C104 (calling for Angola, Côte d’Ivoire, Ghana, Kenya, Nigeria, Senegal and South Africa to have both BITs and FTAs by 2020). Senegal incidentally already has a BIT with the U.S. No Sub-Saharan African country has an FTA with the U.S., however.

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It was proposed that the U.S. Government make the bold move of offering African States a multilateral investment treaty (MIT) and a multilateral double-tax treaty (MDDT).103 It was predicted that such an effort would garner both bipartisan support in the U.S., and broad support in Africa.104 It was suggested that in order to avoid conflicts with other treaties, the MIT merely set a floor of protection for investment, upon which other treaties could layer protections.105 It was also urged that equitable tax treaties be concluded at the national or regional levels, with a requirement of most-favored nation treatment in tax matters.106 It was suggested that since treaty-development is a lengthy process, that aggressive, short-term action plans be adopted in the meantime to foster U.S. private investment in Africa.107 It was in the same vein urged that trade and investment policies be used to open doors for U.S. companies in high-risk environments, such as post-conflict countries, even in the absence of BITs.108

PART II – COMPETITION FACING THE U.S. IN AFRICA

A. Competition from Countries Other than China

Competition from Brazil,109 Europe110 and India111 was noted, including with respect to raw-material extraction and export for use in industry.112 It was observed that non-U.S. companies moving into Africa saw this effort as globalizing their markets and helping them weather their poor home economies.113

B. Competition from China

1. Analysis of Situation and Issues

It was widely observed that China is offering the U.S. severe competition in Africa,114 and that the U.S. economic and political position in Africa was declining as a result.115 Among the 103 Hansen, C144, C148.

104 Id., C144.

105 Id.

106 Baxter, C73.

107 du Plessis, C109.

108 Id., C112.

109 Humphries, C155-C156; Opande, C191.

110 Baxter, C70-C71; Humphries, C155-C156.

111 Baxter, C70-C71; Humphries, C155-C156; Mahwikizi, C165; Opande, C191.

112 Baxter, C70-C71.

113 Id., C71.

114 Id., C70-C71; Duffy, C102; du Plessis, C109-C110, C112; Hansen, C140-C142; Mahwikizi, C166; Nwankwo, C179; Opande, C191; Orth, C196.

115 du Plessis, C110; Hansen, C140-C142; Mahwikizi, C166; Nwankwo, C181.

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reasons seen for China’s strength in Africa were cheap financing from China,116 and low construction costs in Africa.117 It was also noted in terms of trade that while Africa imported the most from China, Africa exported the most to the U.S.118 It was observed that the aid-focused U.S. approach to Africa had the U.S. teaching and medicating China’s African workers.119 It was pointed out that China’s profit-seeking approach to Africa gave it a financial reason to continue building its commercial empire in Africa, whereas the U.S. aid-industry’s dominance of U.S. involvement on the continent meant that resources were limited to Congressional grants.120 It was noted along this line that this structural difference in resources meant that the U.S. could not compete with China, and would thus decline in Africa if the aid model remained dominant.121 It was observed that China, not the aid-focused U.S., provided the capitalist model to which ambitious African youth were being drawn.122 It was also noted that China’s economic power on the continent was translating into political clout, and was affecting how African governments dealt with human-rights issues.123 It was seen that African governments welcomed Chinese investments while giving only lip-service to U.S. concerns, given the comparative lack of return provided by aid.124 It was observed that China does not seek to build African governments’ capability or capacity.125 a. Doubts About China’s Ability to Build on Its Present Success

Skepticism was expressed about China’s ability to last as a power in Africa, given the inability of former powers to gain from their involvement in Africa.126 It was predicted that China’s trading of large construction investments in return for African natural resources, while mutually beneficial and warmly welcomed by African governments in the short term, would prove ugly in the long term.127 It was noted, for example, that in Cape Verde, Chinese merchants selling Chinese products had entirely displaced locals, with locals citing the reasons as being their lower production costs and prices, and their higher competitiveness.128 It was also observed that South Africa resents being displaced by China as a major trading player in Sub-Saharan Africa.129

116 Baxter, C72.

117 Id.

118 du Plessis, C110.

119 Hansen, C142.

120 Id.

121 Id.

122 Mahwikizi, C165.

123 Id., C166-C167.

124 Id., C166; Opande, C191.

125 Orth, C196 (discussing the specific example of Somaliland).

126 Duffy, C102-C103.

127 Mahwikizi, C166.

128 Baxter, C72.

129 du Plessis, C111.

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2. Proposed Solutions

The need to restore U.S. pre-eminence in Africa was noted.130 It was suggested that the U.S. Government adopt a “smart policy” approach that takes proper account of China’s current role on the continent, and engages the Chinese in areas of potential complimentary collaboration.131 It was specifically suggested that U.S. Government encourage and facilitate U.S. corporate efforts to supply Chinese companies in Africa, including with respect to sophisticated equipment for infrastructure projects.132 (It was noted that such supplies were already occurring through strictly private channels, and could be sped up with even modest help by the U.S. Government, including through commercial-service clearing houses.133) Far from being self-defeating, it was pointed out that such a move would engender Chinese dependence on U.S. firms and technology while at the same time increasing U.S. exports.134 The U.S. advantage over China in having major international brands was noted.135 It was further observed that while Chinese companies had an advantage in terms of scale for African projects, U.S. companies could compete in terms of higher-quality performance and the even more important factor of better relationships (e.g. with communities and labor).136 It was considered that while the U.S. will not emulate China’s approach to Africa, the U.S. Government and U.S. companies could learn lessons from China’s experience.137 It was opined that concern for the reputation of the U.S. in Africa must remain paramount, because while conditions are attached to U.S. aid, and the U.S. thus cannot compete with the faster-moving and larger-scaled investments by Chinese state enterprises, the U.S. does not adhere to a 19th-century style of exploiting Africa.138 An opportunity for U.S. companies was identified in changing (and increasingly negative) African perceptions of Chinese investments.139 It was urged that the U.S. Government emphasize and shed light on issues with China by engaging African States more openly about trade and investment.140 It was suggested that U.S. companies could, in contrast to the Chinese approach,

130 Id., C110-C111; Duffy, C105.

131 du Plessis, C110-C111.

132 Id., C111.

133 Id. (referring to sales of GE turbines to Chinese companies).

134 Id.

135 Humphries, C158.

136 Id.; Vandenheuvel, C202. See also Mills, C172 (noting the critical importance of relationships for any American effort in Africa).

137 du Plessis, C110.

138 Humphries, C158; Mahwikizi, C167.

139 Baxter, C72; Duffy, C102; du Plessis, C111.

140 du Plessis, C111.

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instead partner with locals in mutually beneficial projects.141 It was observed that Africans tend to have very positive views of the U.S.142 It was also observed that U.S. Government-facilitated coaching efforts would allow U.S. investors to see Africa at ground-level, which China is currently best at doing.143

PART III – THE OFFICIAL U.S. STANCE ON U.S. INVESTMENT IN AFRICA

A. Overall U.S. Government Strategy Toward U.S. Investment in Africa

1. Analysis of Situation and Issues

The need for aggressively pro-investment U.S. Government policies was cited,144 given the strategic U.S. need to increase its foreign-policy options.145 It was observed that U.S. influence in Africa is waning as a result of its failure of leadership.146 It was suggested that the aid-driven U.S.-Africa relationship had outlasted its usefulness in securing U.S. strategic interests.147 Aid’s displacement and inefficient channeling of U.S. private-sector investment in Africa was criticized.148 A need for greater nuance in U.S. trade and investment policies was noted.149 It was observed that the U.S. appeared to have developed a “blanket approach” to Africa as a whole, “with a belief that one size fits all” and without regard to Africa’s immense diversity.150 It was pointed out that the phrase “trade and investment policies and objectives” for Africa means in Washington parlance simply “creating export opportunities for U.S. manufacturers.”151 It was pointed out that the U.S. position in Africa, being at least 39% aid and with most of the rest directed toward resource-extraction, differs enormously from the similar overall U.S. investment position in China, which contains no aid component and is directed primarily to banking and manufacturing concerns.152 It was observed that the respective U.S. approaches to China and Africa had led to a massive empowerment of China, which is now diverting resources

141 Baxter, C72; Mahwikizi, C168-C169; Nwankwo, C180-C182.

142 Duffy, C104.

143 Nwankwo, C185.

144 Baxter, C71; du Plessis, C112; Hansen, C142, C149 (noting that U.S. investors could far outspend the U.S. Government in Africa); Humphries, C154, C156.

145 Baxter, C71; Duffy, C101-C102, C105; du Plessis, C109, C112; Hansen, C142, C149; Mahwikizi, C165, C167.

146 Nwankwo, C180.

147 Mahwikizi, C165.

148 Id.

149 du Plessis, C112; Opande, C189-C191 (noting that Americans must “first analyze, understand and appreciate who Africa really is,” including in respect to their geographic, legal, religious and socio-cultural aspects).

150 Opande, C189-C190.

151 Hansen, C134-C135.

152 Id., C135, C140-C141.

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gained from trade with the U.S. to build a commercial empire in Africa.153 It was noted that the U.S. Government had not imposed conditions on China before engaging China economically, while a “building utopia” mentality caused the U.S. Government to fixate on perceived African failings while also discouraging Africa’s industrial development.154 a. Compassionate Aid as a Counterbalance to Investment-Focused U.S.-Africa Relations

Despite interest being expressed in using aid in a manner friendly to U.S. investment in Africa, compassionate considerations were considered necessary to balance and temper a focus on business concerns.155 It was observed that aid associated with long-term market building is distinct from shorter-term relief work.156 It was noted that the latter, which is more familiar to the U.S. public, tends not to accommodate many stakeholders as such projects typically must evolve very quickly.157 It was suggested that a separate agenda be developed for relief projects.158 It was urged that compassionate aid not be made secondary to trade and investment priorities, not least because attempts to do so could backfire, particularly in light of public opinion.159 In this same vein, caution was urged when partnering aid with investment, as it was observed that public opinion could be hostile to aid perceived as being tied to political or business ends.160 It was observed that survey data suggested that U.S. public opinion viewed fostering overseas markets and U.S. exports as the least compelling argument for funding aid.161 At the same time, insofar as the means of delivering aid was concerned, the survey data showed the highest level of support (even beyond that for individual donations to charities) as being for partnerships that bring together governments, charities and corporations.162 It was noted that the survey data revealed the view that government-to-government aid was the greatest cause of corruption,163 and low marks being given to U.N. organizations, corporations and religious organizations, but high marks being given to large, international humanitarian organizations.164

153 Id., C140-C142.

154 Id., C131.

155 Baxter, C71; Duffy, C101; Humphries, C153, C160; Mills, C172; Nwankwo, C178.

156 Mills, C172.

157 Id.

158 Id.

159 Humphries, C160; Mills, C172.

160 Humphries, C159-C160 (citing privately circulated, unpublished survey statistics from the Gates Foundation).

161 Id. (putting survey support for such a proposition at 19% of those deemed “engaged” and at 20% of those not so deemed).

162 Id., C160 (listing data putting this support at 46%, with individual donations to charities at 39%, and U.S. Government transfers to developing-nation governments at 6%).

163 Id.

164 Id. It may be noted that the survey was commissioned by the Bill & Melinda Gates Foundation. See id., C159.

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2. Proposed Solutions

It was asserted that Africa’s prosperity must be paired with that of the U.S.165 It was proposed that a central policy objective should be to increase African demand for U.S. goods and services by building African economies and prosperity.166 It was observed that the U.S. needs to seek full participation of all, or at least a majority, of Africans in each country, without raising any perception of favoritism or partisanship.167 It was urged that U.S. policy be aimed at ensuring a level playing field for U.S. companies looking to invest in Africa.168 It was likewise opined that the underlying objective for U.S. aid should be the promotion of a climate that welcomes long-term U.S. foreign investment in Africa.169 It was urged that U.S. aid be driven more by market and business practices, and less by ideologies which are not business-friendly.170 It was in the same vein suggested that aid be strategically rebalanced toward promoting trade and investment, and away from development aid, the importance of which was nonetheless recognized.171 It was further suggested that aid should be tied directly to U.S. strategic interests, such as securing access to strategic commodities or opening markets to U.S. companies.172 It was proposed that the U.S. Government pursue policies directed at minimizing the risks faced by U.S. companies looking at Africa.173 It was asserted that a concerted, collaborative effort between the U.S. Government and U.S. companies would be required to make successful U.S. private investment in Africa possible.174 It was suggested that an action-driven U.S. Government strategy for market-penetration by U.S. private enterprise would allow U.S. companies to expand successfully.175 It was suggested that the single measurable success metric for Africa policy should be the increase in U.S.-Africa trade and investment.176 It was elsewhere proposed that bureaucratic growth and sclerosis by avoided by having DARPA-style prizes offered for private-sector solutions to identified problems, such as the lack of websites publishing African business information.177

165 Duffy, C101-C102; Opande, C191.

166 Vandenheuvel, C202.

167 Opande, C190.

168 Baxter, C73.

169 Id., C75; Hansen, C142; Humphries, C153, C156.

170 Baxter, C77.

171 du Plessis, C109.

172 Baxter, C75.

173 Id., C73.

174 Id., C72; du Plessis, C109-C110; Humphries, C154, C158; Nwankwo, C182.

175 du Plessis, C109.

176 Id.

177 Hansen, C146.

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It was suggested that the U.S. Government gear its efforts toward engaging the various African regional blocs (COMESA, ECOWAS, IGAD, OHADA and SADC), as these were seen to be generally better managed than individual African countries.178 The U.S. Government was urged to seek out U.S.-trained lawyers in Africa to assist in navigating local legal matters, and in efforts to harmonize local laws affecting investment.179 It was asserted that the U.S. Government must shift its developmental priorities from building public programs to building industries.180 a. Specific Proposals

It was proposed that a “Mature Market Model” (“M3”) be instituted in U.S. agencies to redirect policies and programs toward the objective of turning African States into mature markets for U.S. investment.181 It was asserted that the U.S. Government must cease to uniquely burden Africa with “earning” U.S. partnership, and that the U.S. Government must economically engage Africa in the same manner as it has China and Mexico.182 Accompanying the “M3” proposal was a proposal for an “Aid and Investment Model” (“AIM”) that would require U.S. civil servants to minimize dependency and consider U.S. investor concerns and interests when formulating U.S. aid programs.183 A “Tactical Investment Hedge Program” was proposed to focus aid only on highly effective and often traditional subjects (such as health and military assistance), and offset decreases in aid out of other areas by increasing investment in key African manufacturing and service sectors.184 The Program would partner U.S and African companies in order to introduce best practices to small, high-growth African industries in fields not yet facing consolidation pressures.185 The Program would invest in the African “mid-market entrepreneur” sector falling between micro-finance and the big brackets, thereby improving the African corporate credit environment and supplementing the work of African banks.186 This “forgotten middle” was elsewhere identified as a group ignored by aid programs, facing high operating costs and a lack of institutional support, high borrowing costs, and a flood of competing products from China.187

178 Id., C144 (urging such an approach as a means of concluding BITs and DTTs, and of burnishing the U.S. Government’s multilateral credentials); Opande, C190.

179 Opande, C191.

180 Vandenheuvel, C202.

181 Hansen, C142-C143, C148-C149.

182 Id., C143-C144.

183 Id., C145-C146, C148-C149.

184 Mahwikizi, C167-C168. See also Mills, C172 (noting that aid focusing on business or market-development may come at the expense of equally important, often traditional purposes such as advancing political, military, humanitarian and resource-acquisition aims).

185 Mahwikizi, C167-C169.

186 Id., C169.

187 Nwankwo, C179.

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A recommendation was made that the U.S. Government publish a guide for companies seeking to invest in the communities surrounding aid projects.188 It was suggested that USAID provided a percentage of funding to match corporate investments in such accompanying projects, to encourage the mobilization of corporate money while ensuring some level of quality-control to make sure best practices were met.189 It was suggested that concerns about “corporate welfare” could in such situations be mitigated by having an NGO run such jointly funded projects.190 It was proposed that uniform, international standards be developed for both aid and investment projects, so that shoddy projects and waste of U.S. funds could be avoided. 191 One suggested way of implementing this idea was for the U.S. Government to gather lessons learned and best practices from U.S. companies already successfully working in Africa.192

B. U.S. Priorities Favoring Specific Countries and Economic Sectors

1. Proposals Concerning Specific African Countries

Calls were made for particular attention to be given to concluding trade and investment treaties (i.e. BITs, DTTs and FTAs) with Angola,193 Côte d’Ivoire,194 Ghana,195 Kenya,196 Liberia,197 Mauritius,198 Nigeria,199 Senegal,200 and South Africa.201 A program proposal for matching U.S. companies with food processors suggested that if the whole continent could not be covered, the “regional breadbaskets” should first be targeted.202 It was pointed out that investment policies should be tailored to the political climate of the country or region involved,203 and that political stability in African countries be promoted using

188 Humphries, C158.

189 Id., C158-C159.

190 Id., C159.

191 Baxter, C76.

192 Id.

193 Duffy, C104; Hansen, C144.

194 Id.

195 Id.

196 Id.

197 Hansen, C144.

198 Id.

199 Duffy, C104; Hansen, C144.

200 Duffy, C104. Senegal already has a BIT with the U.S., but not a DTT or an FTA.

201 Duffy, C104; Hansen, C144. South Africa already has a DTT with the U.S., but not a BIT or an FTA.

202 Nwankwo, C184.

203 Opande, C190.

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policies rooted in common values (and avoiding culturally sensitive ones) with lines in sand drawn for undemocratic countries that threaten U.S. allies.204 It was urged that countries that are hostile to the U.S. (like Zimbabwe), or mismanage their own wealth (e.g. Nigeria) should have their U.S. aid severely curtailed.205 It was also suggested that “Marshall Fund” principles be applied when rebuilding war-torn countries (e.g. South Sudan).206 a. Proposal to Recognize Somaliland, with an Eye to U.S. Investment There It was specifically recommended that the U.S. recognize Somaliland as an independent State de

jure, as it has already been a de facto independent State and functioning democracy since 1991.207 It was observed that recognition would, among other things, lift embargoes and help U.S. investors enter the area, including through a Commerce Department desk at the U.S. embassy to be established there.208 While it was recognized that there is an issue of established borders per the uti posseditis principle, it was urged that this principle be set aside in this case given the facts on the ground pointing to independence, and given many examples of sundered States in recent history, both in Africa and elsewhere.209 It was noted that USAID already has small projects operating in Somaliland, and that the State Department’s Somalia Desk recognizes the benefits of U.S. private business in Somaliland, even though this presence is currently very limited.210 It was further observed that U.S. involvement in developing an independent Somaliland’s institutions and security apparatus would counter both Chinese and Islamist influences there,211 while serving as a good example to both Puntland and south-central Somalia.212

2. Proposals Concerning Specific Economic Sectors

It was suggested that there be an increase in aid to build the African infrastructure necessary for trade.213 It was further urged that tenders for such projects take into account the special constraints faced by U.S. companies which might otherwise not bid for such projects, and also

204 Baxter, C74.

205 Id., C75; Hansen, C145 (suggesting that a country’s refusal to sign a BIT and a DTT with the U.S. would lead to a finding of economic unfriendliness, leading to a curtailing of non-emergency U.S. aid).

206 Baxter, C75. See also Fajemirokun, C116 (urging U.S. Government measures to incentivize U.S. investors to work in post-conflict countries).

207 Orth (passim).

208 Id.

209 Id., C196.

210 Id.

211 Id.

212 Id., C197.

213 Baxter, C74. See also Fajemirokun, C116 (urging that the U.S. Government incentivize U.S. investors to embark on infrastructure projects in Africa).

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with an eye to providing U.S. companies with “launch pads” provided by their implementation of African aid projects.214 It was proposed that a coordinated trade and investment strategy determine: (1) U.S. priorities for investing in Africa; (2) priority African growth industries; and (3) how best to align them in light of U.S. rivals in Africa such as China, Brazil and Europe.215 This coordinated strategy would allow USAID to determine the role to be played by U.S. aid in developing target African industries, in developing the right environment for growth and stability, and in helping U.S. companies undertake development work relating to their projects.216 In the same vein, it was proposed that this coordination be aimed at encouraging and quality-controlling private investment in line with U.S. Government development plans, to maximize reputation-building and thereby increase investment.217 It was suggested that the White House develop an overall strategy for U.S. private investment in Africa, and identify overall U.S. investment priorities, and that this strategy’s implementation be run from a department or the White House.218 It was suggested that different rates of loan-guarantee coverage for commercial bank loans be instituted to favor the identified priority industries.219 A different proposal was made for the establishment of a highly targeted capacity-building program aimed at developing food-processing facilities in Africa.220 This program would go beyond “technical assistance” in its comfortable advisory sense, and would provide “technical assistance” in a hands-on, engineering sense that involved an active transfer of know-how to local operators, managers and workers at all levels.221 It was elsewhere observed that the U.S. would benefit from selling technology to Africa, and also from providing relevant training.222

C. Improving Access to Credit for Both U.S. Investments and African Businesses

1. Analysis of Situation and Issues

It was observed that aid budgets should support trade and investment initiatives where bodies (like Ex-Im and OPIC) are not already self-sustaining.223 It was noted that U.S. competitors such as China and Europe use their finance institutions aggressively, so that the U.S. approach toward

214 Baxter, C74.

215 Humphries, C155-C156.

216 Id.

217 Id., C158.

218 Id., C154, C156, C158.

219 Id., C157.

220 Nwankwo, C179.

221 Id., C180 (noting that the term “technical assistance” had been “bastardized to mean a snazzy laptop, shiny PowerPoint presentation and an over-priced hotel suite in the host county’s capital”).

222 Opande, C191.

223 du Plessis, C111-C112; Humphries, C156.

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OPIC was in effect ceding U.S. market share in Africa.224 It was noted that OPIC’s main focus is SMEs, which are the engines of growth in the developing world.225 It was suggested that U.S. public policy had deformed the environment for U.S. investment in Africa, so that it was very difficult for U.S. investors to raise private capital for their projects.226 It was observed that many U.S. investors could not achieve financial “escape velocity” to reach Africa because they could not obtain private capital at affordable rates.227 It was pointed out that most current funding for U.S. projects in Africa came from public sources, whether directly or indirectly through publicly funded but nominally private investment outfits.228 It was noted that the U.S. Government could not substitute for the massive private capital needed for a properly large U.S. presence in Africa, so that U.S. private capital had to be unlocked and tapped.229 It was noted that OPIC has since 2007 been held back by its need for short-term reauthorizations by Congress, so that it has been hindered from making longer-term, strategic investments.230 It was further noted that OPIC is prohibited from using any of its income on technical assistance for project-management, so that OPIC must rely on partnerships (such as with USAID or IFC) to implement projects, at a great cost to speed, efficiency, investment potential and profits for the U.S. Government.231 It was observed that project insurance sufficient to reassure funders must go beyond political-risk insurance (PRI) to provide broad and deep protection against a wide range of risks.232 It was noted that while OPIC provides coverage only where BIT-style protections are present (either publicly or through a private contract), the U.S. had failed to provide such protections for 89% of Sub-Saharan Africa.233 With respect to local African businesses, it was noted that a lack of corporate credit has been a major stumbling-block, and that U.S. private investment would help to rectify this problem by spurring a modernization of procedures, including improved due-diligence, human capital, and secured-transactions laws allowing otherwise illiquid assets such as real estate to be unlocked.234 224 Humphries, C157.

225 Id.

226 Hansen, C131-C132.

227 Id., C146.

228 Id.

229 Id., C146-C148.

230 Humphries, C156. See also Mahwikizi, C165-C166 (considering Congressional short-term reauthorizations of Africa-focused agencies, such as USAID, to be a general problem).

231 Humphries, C156.

232 Hansen, C147-C149.

233 Id., C147 (observing that OPIC’s requirement of BIT-style protections puts a heavy burden on investors to negotiate privately the same protections that the U.S. could publicly negotiate once for all, and thus effectively excludes from its political-risk insurance many SMEs lacking the resources or leverage needed for such negotiations).

234 Mahwikizi, C169.

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2. Proposed Solutions

It was urged that public credit subsidies be increased, and credit-evaluation criteria be relaxed, as expanded access to credit would greatly increase U.S. private trade and investment in Africa.235 It was recommended that the U.S. Government pioneer a project-insurance program that would by trial and error (and relying on a public fund allocation) develop underwriting standards and rates for all facets of private U.S. investments in Africa, upon which the private market could build and improve.236 It was proposed that there be greater coordination between the U.S. Government’s development-finance and export-credit authorities, particularly OPIC and Ex-Im.237 It was further urged that Ex-Im and OPIC be given greater autonomy to operate as free-market agents, to better support U.S. investment in African markets.238 It was recommended that OPIC be given multi-year authorizations, so long as OPIC restricts itself solely to privately untouchable investments, and does not compete with the private sector.239 It was also urged that OPIC be allowed to use a percentage of its profits to fund technical-assistance programs, as even small such investments can have massive positive effects.240 It was suggested that greater technical-assistance grants be made to OPIC lending facilities if OPIC cannot perform such assistance itself.241 It was suggested that MCC include as a “country strategy” the financial support of host-country guarantee funds for economic and social projects, the strategy behind such support being to use such support funds to purchase financial guarantees, or to establish a safely invested, hard-currency “pool” for backstopping grants of credit, the end result being an income-generating guarantee fund that skirts the restrictions on sovereign guarantees (which are off-balance-sheet contingent liabilities) established by the IMF, World Bank and national rules.242

D. AGOA

1. Analysis of Situation and Issues

AGOA was deemed essentially irrelevant to increased U.S. investment in Africa,243 especially given the fact that energy products are far and away the largest component of AGOA exports.244 235 Duffy, C104-C105.

236 Hansen, C147-C149.

237 Humphries, C156.

238 Baxter, C75.

239 Humphries, C157.

240 Id.

241 Id., C156.

242 Duffy, C105. See also Blazewicz, C61 (observing that African States expect investors to cover their own expenses).

243 Baxter, C72; Hansen, C136-C137, C141-C142; Nwankwo, C181.

244 Hansen, C136-C137; Nwankwo, C181.

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It was asserted that AGOA’s lack of meaningful impact on Africa was a matter of common knowledge,245 particularly in Africa, where AGOA was also reported to be considered not only the only recognizable engagement by the U.S. in African trade, but also largely one-sided in favor of the U.S.246 It was pointed out elsewhere that the U.S. civil service had failed to support AGOA by undertaking the actions necessary – including the unleashing of U.S. investors – that would make trade under AGOA possible.247 The bane of AGOA was identified as its attempt to get African companies already constricted by local demand inelasticity, and its attendant lack of funding for product improvements, to produce the same substandard and uncompetitive products for export.248 While the intent of AGOA was considered unassailable, its execution was deemed ineffective.249 AGOA was described as a “wonderful dinner party being held at a location that is physically inaccessible and for guests who do not even know the appropriate dress code.”250

2. Proposed Solutions

It was suggested that if the right perceptions and expectations about trade could be propounded, this would build African confidence and rapport, which would in turn help to promote U.S. trade with Africa.251 It was elsewhere proposed that U.S. Government facilitation of U.S. private investment in Africa would help realize the dream of AGOA through increased bilateral trade.252 It was proposed that AGOA be expanded to include an “investment element” that would include components such as accelerated depreciation on the U.S. goods imported into investments made by U.S. firms in Africa.253 It was noted, however, that there would have to be increases in domestic consumption before trade increased, as the expected path for development runs from import substitution (and domestic market development) to export generation.254

245 Nwankwo, C181.

246 Opande, C190.

247 Hansen, C137.

248 Nwankwo, C181-C182 (observing that the African companies involved knew that their products were sub-par, but that they had no choice but to make them in that way because they did not have the capital needed for improvements).

249 Nwankwo, C181.

250 Id.

251 Opande, C190.

252 Nwankwo, C182.

253 Duffy, C104.

254 Nwankwo, C179, C182 (noting that China’s exporters began by serving the Chinese market until they developed to the threshold of international competitiveness).

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PART IV – U.S. AID AGENCIES AND PROGRAMS

A. Overview of U.S. Aid Programs

1. Analysis of Situation and Issues

It was observed that the U.S. Government’s aid system had not kept up with Africa’s potential as an emerging market.255 It was noted that understaffing, increasing procedural demands and low staff experience had contributed to U.S. aid agencies’ ineffectiveness.256 It was further observed that U.S. Government aid agency programs and even entire bureaucracies were often duplicative, uncoordinated and even mutually competitive, to the detriment of the overall aid objective.257 A similar problem was identified for investment-promoting U.S. Government agencies.258 It was suggested that a “bureaucratic-industrial ‘aid’ complex,” formed by U.S. aid agencies and large-scale aid companies, had captured much of the market for U.S. investment in Africa, pushing out U.S. private investors by providing free goods and services to select recipients, and thereby dropping the price-point for such products to zero.259 It was observed that the ineffective, uncoordinated and often repetitive nature of aid projects had created a self-reinforcing cycle of funding, fanfare and failure.260 It was asserted that the U.S. civil service views Africa as its playground, and that its approach to Africa reflects an ambivalence or hostility to U.S. private investment as undesirable competition.261 It was observed that the dire investment statistics resulting from the aid-focused U.S. Government approach to Africa were perceived by U.S. civil servants as reflecting a market rejection of Africa, thus leading to a continuation of harmful policies in a vicious cycle.262 A need was noted for a pragmatic, realistic aid policy to increase trade and investment.263 It was noted that U.S. business faced high costs and great confusion when attempting to learn about and navigate between these various U.S. Government resources.264 It was cautioned, however, that the U.S. should not take the drastic step of ending all aid activities in Africa.265

255 Humphries, C154.

256 Mahwikizi, C166.

257 Baxter, C72 (citing U.S. HIV-AIDS prevention programs in East Africa).

258 Id.

259 Hansen, C132-C133, C136-C138.

260 Id., C132-C133.

261 Id., C134-C136 (noting that U.S. official publications often downplay Africa’s potential as a market for U.S. private investment).

262 Id., C135-C136 (calling such statistics a “carbon-monoxide killer” because while the results could be seen in the statistics, the causes for the dire numbers could not, so that the wrong inferences can be – and are – drawn by the U.S. civil service).

263 du Plessis, C109.

264 Baxter, C72.

265 Mahwikizi, C167.

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Criticism was leveled against aid interventions that provide “investment incentives” to a few already well-heeled and well-funded investors, whose large investments are touted by aid agencies but cannot serve as engines for broad-based economic development.266 Criticism was also expressed toward the use of non-U.S. companies to implement MCC aid programs, particularly in respect of large infrastructure projects.267 It was separately noted that partnerships between U.S. companies and USAID-funded groups in development projects was not unknown, but is sporadic and generated by the companies and groups rather than by USAID itself.268

2. Proposed Solutions

It was urged that the U.S. partner rather than compete with its allies on aid projects, as this cooperation would lessen costs – particularly in light of Western financial crises – and as multi-donor projects would attract multinational companies by expanding national eligibility.269 It was further urged that U.S. agencies coordinate their programs to end wasteful aid projects and to maximize U.S. and local economic opportunities.270 It was along this line suggested that aid projects no longer be individually formed, but instead derive from large strategic programs tied to market-based goals.271 It was in this vein proposed that a gestalt review of a sector, conducted with heavy U.S. private-sector involvement, would divide the sector into “project theatres” for which both aid and private-sector solutions could be identified and implemented.272 It was recommended that strategic partnerships be developed between U.S. aid agencies like USAID/MCC or the Peace Corps, and U.S. businesses operating in relevant countries, so that the aid agencies could absorb corporate best practices and rotate interns into the private sector, while in return assisting U.S. companies with investment and growth abroad.273 It was separately urged that aid agencies must transparently publish all aid-program information, including project details, costs and outcomes, to give investors ideas for market-entry, and to facilitate academic and Congressional review.274 It was proposed that USAID and MCC adopt the Six Sigma approach to training, guiding and supporting African companies in their progress toward excellence, in the manner of many top companies as well as the U.S. Postal Service.275 It was predicted that such a change of approach

266 Nwankwo, C178.

267 Baxter, C71; du Plessis, C111.

268 Humphries, C158.

269 Baxter, C76 (noting that this is already happening in Mozambique).

270 Hansen, C146.

271 Id., C146, C148-C149.

272 Id.

273 Baxter, C75.

274 Hansen, C146.

275 Nwankwo, C183-C184.

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would have bipartisan support in Congress and in host nations, as it would constitute “smart aid” and would have an inbuilt sunset clause in that it would be limited to building specific skills.276 It was opined that aid should not be provided for projects which the host country cannot thereafter maintain and operate.277 It was likewise recommended that revenue-driven aid projects (e.g. desalination plants), including PPP projects, be scaled to the host country’s ability to afford them after the program ends.278 It was suggested that sustainable-business principles be applied in all feasibility studies, with the agency applying the same evaluation standards as would a private purchaser of the project, and without exceptions being made for politics.279 It was proposed that bidders on aid projects be permitted to add private projects to the tendered aid projects, with the aid component serving the same function as an “anchor store” in a mall.280 It was cautioned, however, that such license should be predicated on the contractor treating the aid component as a free-standing project given priority and guaranteed completion.281 It was suggested that U.S. Government aid, in the form of a PPP sponsored by USAID, could complement U.S. private capital investments over a certain threshold, such as by coupling the investment with traditional aid that drives social development, helps to raise the profile and importance of the investment, opens markets to U.S. companies, and splits and thus diminishes the private investor’s risk.282 A very specific proposal recommended that the U.S. join the AfDB’s effort to develop a large “infrastructure bond” of roughly $22 billion, and that the U.S. urge the AfDB to use this funding for PPP projects, with the project lenders being required to abide by the Equator principles.283

B. U.S. Aid Agencies – USAID

1. Analysis of Situation and Issues

Criticism was offered against the lack of a relationship between USAID projects for African governance and democracy on the one hand, and the promotion of trade and investment on the other.284 USAID’s lack of vision in this respect was noted,285 as was USAID’s lack of expertise

276 Id., C183.

277 Baxter, C76.

278 Id. (noting that desalination plants in Cape Verde are proving unable to provide affordable water to locals).

279 Id.

280 Hansen, C145, C148-C149.

281 Id., C145.

282 du Plessis, C111.

283 Duffy, C105.

284 Humphries, C155.

285 Id.

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in trade and investment matters.286 In the same vein, criticism was leveled against USAID’s cumbersome procurement process and delays in awarding field work.287 USAID was criticized as an organization with confused priorities and no explicit strategy for effectively promoting trade and investment.288 It was also noted that the current Administration’s development initiatives – Feed the Future, Global Climate Change, and the Global Health Initiative – have not addressed the matter of private trade and investment.289 USAID’s list of trade and investment programs was described a “dizzying smorgasbord of limited, uncoordinated interventions” that included joint projects such as one with the Corporate Council on Africa (CCA), and small investments in the regional Trade Hubs.290 It was observed on a positive note that USAID had instituted a Diaspora Program that reaches out to African Diaspora communities to provide advice and assistance with remittances that fund development projects.291 It was considered that the Diaspora Program deserved strong continued support, as it: (i) provides a source of supplemental funding that is an alternative to aid budgets; (ii) limits risk; (iii) builds upon strong local networks; and (iv) adds credibility to proponents of projects.292

2. Proposed Solutions

It was urged that trade and investment be turned into a top USAID priority, equal to any relevant presidential directive, and that it be coordinated with other agencies’ programs and funded appropriately.293 It was noted that this would require appropriate hiring choices, and could require resource-shifting away from lower-priority regions such as Eastern Europe.294 Secondments between USAID and USTDA or Commerce were called for as an effective way of increasing staff capacity and coordination.295 It was elsewhere suggested more generally that China experts from within the U.S. civil service be brought into U.S. agency offices that deal with Africa in order to introduce an outlook and practices appropriate to high-growth markets, and to facilitate the transition away from an aid-focused approach.296

286 Id.

287 Mahwikizi, C165.

288 Humphries, C154-C155 (noting that “economic growth and trade” is only one of USAID’s 11 listed sectors).

289 Id., C154.

290 Id., C155.

291 Baxter, C78.

292 Id.

293 Humphries, C154.

294 Id., C155.

295 Id., C155-C156.

296 Hansen, C143.

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It was suggested that USAID and MCC be consolidated into one organization, with MCC’s approach replacing USAID’s except in respect of short-term strategic or humanitarian matters.297

C. U.S. Aid Agencies – Other than USAID

It was recommended that U.S. aid agencies and their missions be consolidated and reorganized to eliminate duplication.298 For example, it was suggested that USTDA be folded into the State Department to end the duplication of their services, with the combined office reaching out to U.S. businesses to gather lessons learned and to develop advice on best practices.299 It was elsewhere suggested in the same vein that the Commerce Department’s ITA and the State Department should realign their strategies and processes in tandem in order to increase trade and investment, and to avoid competition.300 It was in the context of such a proposed process that it was suggested that Commerce Department posts be added at U.S. embassies, and not simply staffed by State Department officials or locally recruited staff;301 It was suggested that DOD be given a U.S.-first purchasing policy to encourage U.S. businesses to enter and work in countries with DOD nation-building operations.302

297 Baxter, C75.

298 Id., C74-C75.

299 Id., C75.

300 du Plessis, C112.

301 Id.

302 Baxter, C75.

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Working Group on

U.S. Investment in Africa

SECTION C

ACTION PLANS, BRIEFING MEMORANDA

AND CONTRIBUTOR PROFILES

Prepared By

Emmanuel Aghimien

David Baxter

James R. Blaze

James M. Blazewicz

Stuart H. Deming

Conal B. Duffy

André du Plessis

Jumoke Fajemirokun

Tamara K. Gaw

Peter C. Hansen

David Humphries

Justin Mahwikizi

Francis Joseph Mills IV

Emeka Nwankwo

Laban Opande

Rick Orth

Jon Vandenheuvel

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EMMANUEL AGHIMIEN & JAMES M. BLAZEWICZ

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Facilitating on-ground U.S. investment activity in Africa necessitates the development of a true mutually beneficial solution, which clearly has become a double edged sword. To succeed, one requires the development, understanding, and establishment of mutual trust and benefits with its future African trading partners, while at the same time balancing traditional issues, investment and legal roadblocks, and mistrust of the unknown. The vision needs to be able to translate and relate U.S. initiatives, trade legislation, and intent toward the Africans, and vice-versa and being able to promote training and mentoring programs for African governments and enterprises to enable them to realize the mutual benefits of potential partnerships. The interests of our group panel are clear and honourable but somewhat skewed toward the US (top down) more so than addressing Africa’s diversity and needs. And even more importantly, we may need to step back to ensure that we (legislators, financiers, and business leaders) effectively understand the objectives, intent, and functionally of legislation when discussing FCPA and other anti-corruption measures. In today’s world, they often appear to be at odds, and in many ways, counterproductive. The archetype must not rely on what may be outdated historical information and preconception. We as drivers (Government and Business Organizations) must not rely on third party innuendo, outdated historical perspectives, or historically used paradigms and decision tools that do not consider the new realties, current situations, and emerging opportunities. The experience and expertise of our group (Group Dynamic) should focus on success, and case studies that convincingly demonstrate to prospective investors, legislators, and decision-makers:

• How the use of Partnering has ameliorated fears of corporate leadership regarding in-country investment

• How we can apply Partnering experiences to addresses the benefits, sustainability and viability of co-investment partnerships

• How Organizational efforts have led to innovative methods for protecting investment, and offsetting the socio-political concerns related to local conditions, security, and macro-economic flux

• How Entities have executed fact finding efforts that accurately portray risk / benefit scenarios, local partnering and business opportunities, and investment incentives

• How Partnering has leveraged and integrated local indigenous manpower and processes that drive positive results from familiar operational structures/value chains/infrastructure/market

• How Organizations have executed due diligence efforts necessary to gain accurate data and insights critical to adapt and develop predictive modelling practices that portray local information and data critical for accurate and predictive ROI, profitability and financial benchmarks

• How organizations have demonstrated cultural understanding and commitment to socio-economic responsibilities/ improve local living standard, and achieve long term sustainability

• How organizations have managed oversight functions including in-country operational accountability, applying continuous improvements and control for growth, and future investment expansion

Building investment-facilitating links between U.S. and African governments Focussed provisions to:

• Engage the private sector communities and recognise accredited non-governmental entities, as key drivers to building mutually beneficial investment initiatives, and shaping preferred outcomes for lasting relations between U.S. and the often-volatile African governments.

• Leverage U.S. humanitarian programs, educational and economic support as competitive policy instruments to help U.S. investors mitigate local risk; reduce overall venture exposure and ameliorate the inherent infrastructural gaps, business metrics and social-cultural sensibilities that present barriers to doing business in Africa.

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• Constitute innovative solutions (“vendor vs. partnership approach”) and augment social entrepreneurial models to equalize the playing field for inclusive public –private partnership (PPP) collaboration, and check the assertive BRIC market advances within the region.

• Fortify valued U.S. free market principles and best practices to deliberately influence the “rule of the engagement”; elevate accountability of critical stakeholders across the value chain; and condition the local market dynamics for positive ROI and long-term sustainability.

Opportunity is clearly there, but there must be consensus among those in the US, and as long as there are competitive initiatives, consensus will be difficult to achieve.

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Page 74: Compendium   working group on u.s. investment in africa

DAVID BAXTER

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Page 75: Compendium   working group on u.s. investment in africa

African Economic Beachheads for U.S. investment

Premise: The United States needs to promote strong strategic relationships with emerging

national economies that show great promise for growth and which have great potential to be

trading partners of the United States. Economic powerhouses that have been the focus of years

of US investment and which have an existing regional political and economic leadership role (i.e.

West Africa – Nigeria, Southern Africa – South Africa, and East Africa – Kenya) often have

sufficient national resources to power their own growth and have saturated markets that are

less open to US investments. It is proposed that promising less developed nations be supported

as strategic beachheads for US trade that will enable long term economic relationships to

develop that are mutually beneficial and which will promote equal free trade opportunities that

will combat the exploitative practices of other Africa trading partners such as China.

Proposed Focus Regions and Beachheads include:

� West Africa – Ghana (access to ECOWAS)

� Southern Africa – Mozambique (access to SADCC)

� East Africa – Tanzania (access to the East African Economic Community)

Proposed legislative provisions:

� US aid and foreign policy to the abovementioned nations should be prioritized by US

government agencies – especially aid policy objectives that improves trade infrastructure

and business practices – and which encourages new regional access to markets that are not

restricted through nationalistic trade barriers

� Mutually inclusively beneficial trade agreements should be promoted with the

abovementioned nations

� National trade and economic institutions/agencies in these nations should receive capacity

building support through strategies which for example combat corruption thereby opening

these target nations to truly competitive business practices

� Countries that have a favorable proven record should receive additional aid proportional to

their business promotion commitments

� US corporations should receive economic and tax incentives to be long term strategic

partners with beachhead nations that will strengthen access to mutual markets and sources

of raw strategic natural resources

Executive Policy Changes:

� Countries in Africa that are corrupt and that show no inclination to improve should be

censured and receive less US aid

� Countries that show they are true friends of the US and support business practices that are

fair, transparent and equitable should receive favored nation status

� MCC aid principles and guidelines should underlie trade and aid agreements with beachhead

nations

� Relationships with non-beachhead African nations should not ignore strategic concerns -

however, strict conditions should be attached to aid that indicate that aid will not reward

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long term bad behavior

� Non-beachhead nations that have a policy that favors unfair trade practices with nations

that are not friendly to the US should be sanctioned

Principles behind the legislative and policy proposals:

� The US should base its policy on values that are not undermined by global values that are

not democratic and not based on US economic best practices

� Economic partnerships should be based on long term strategic goals that are mutually

conducive to economic growth

� National security principles and long term strategic goals should be synchronized when

developing trade agreements

� US corporations should be considered to be true partners of the US government

� Restrictive tax practices that reduce US corporations international competitiveness in the

beachhead nations should be revisited and revised

C69

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JAMES R. BLAZE

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Comments by Jim Blaze

2 Bullet points listing proposed legislative provisions

1) In no case should a US government foreign aid agency use a foreign based company as a

vendor for feasibility projects or for management and oversight of the agency’s grant in

aid programs

a. MCC does this often.

b. It should be prohibited as long as US companies are available

2) US financing aid for services (consulting) or for product sales and or leasing should be

offered as financial lengths of time and interest rates that are directly competitive with

terms and rates offered by the five most significant competing nations.

1 Bullet point for executive policy changes

Foreign aid agencies should extend their assistance to foreign nations so as to offer

training and or mentoring on the execution of projects so as to promote the use of US

skills and management techniques. This would help in distributing the power of US

business techniques into partner nations that lack such practical skills.

Making such skilled people available on a one-on-one basis could be more important than

funding broad feasibility reports – which often the nation has no idea as to how to

execute on a day to day basis. The reports too often end up on a nook case.

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STUART H. DEMING

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MEMORANDUM

TO: Peter C. Hansen

FROM: Stuart H. Deming1

DATE: October 9, 2012

RE: The Foreign Corrupt Practices Act

In response to a request that bullet-point suggestions be provided relative to how

to enhance or further positions taken in the previously submitted memorandum on the

Foreign Corrupt Practices Act (“FCPA”), the following is being submitted subject to two

overriding considerations. First of all, the overarching focus of U.S. policy should be to

foster increased global efforts to fully implement the international anti-bribery

conventions that have now entered into force. Secondly, as previously indicated, any

efforts to tinker with the FCPA could easily undermine rather impressive international

development brought about by the leadership of the United States.

• Take steps to make the monitoring mechanism under the UN

Convention against Corruption a more open and transparent

process like that associated with the OECD Anti-Bribery

Convention.2

• Preferably, in international fora, and elsewhere, develop creative

and effective mechanisms for companies seeking to do business in

high-risk countries to facilitate their ability to compete and comply

with their legal obligations.3

1It should be noted and emphasized that I am very active in the Obama campaign. At the request

of Peter Hansen, I was asked to provide a short briefing on the Foreign Corrupt Practices Act solely on an

informative basis with the understanding that I was not and would not become involved with the Romney

campaign. Accordingly, out of deference to my good friend, Mr. Hansen, and the larger issues, a previous

memorandum and this follow-up memorandum were prepared. As noted, it should not be perceived as any

indication of my support for Mr. Romney or his campaign.

2The impact of the monitoring mechanism relating to the implementation and enforcement of the

OECD Anti-Bribery Convention is impressive. This is particularly so with respect to the United

Kingdom’s adoption of the U.K. Bribery Act.

3Of all of the bullet-point recommendations, developing new and effective mechanisms may be the

most challenging yet beneficial steps that could be taken. It is in the interest of U.S. business, U.S. foreign

policy, U.S. legal requirements, and, most importantly, the host country. No easy answer is readily

available. But seeking out such mechanisms is well worth serious and extensive exploration. Years ago,

no one believed that a series of anti-bribery treaties was possible, let alone being actively enforced in a

number of countries.

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• Consider adding a protocol to the OECD and other anti-bribery

conventions mandating the adoption and implementation of

domestic legislation calling for accurate record-keeping for entities

subject to the terms of the anti-bribery conventions.4

• Take steps calling for the addition of a protocol to the African

Union Convention prohibiting the bribery of foreign officials.5

4Except for publicly-held companies, U.S. law is not as rigorous as the company laws in many

jurisdictions. The U.S. may be required to extend record-keeping requirements to non-public companies.

This may be challenging since non-public companies are less apt to be subject to federal regulation.

Nonetheless, it has been well-established that accurate books and records are critical to deterring

questionable corporate conduct both in the anti-bribery context and other contexts.

5Unknown to many, the African Union Convention is largely limited to domestic corruption.

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MEMORANDUM

TO: Peter C. Hansen

FROM: Stuart H. Deming1

DATE: September 6, 2012

RE: The Foreign Corrupt Practices Act

In recent years, there has been a push from some parts of the U.S. business sector

to make changes in the Foreign Corrupt Practices Act (“FCPA”). At the core of such an

effort is what is described as an undue burden on U.S. companies due to what is argued

as a lack of clarity in interpreting certain terms, such as “foreign official.” The unstated

but underlying premise is that it makes it more difficult for U.S. companies to do

business abroad. Hence, U.S. jobs are thereby adversely affected.

For knowledgeable experts in this area of law, serious concern exists that such

efforts will have devastating consequences for a global effort that was launched under the

first Bush administration. That effort culminated in a series of international conventions

that were ultimately completed and ratified under the Clinton and second Bush

administrations with overwhelming Congressional support. Most countries now have

laws similar to the FCPA. In Western Europe, active enforcement is well underway.

Many countries, such as Germany, have brought numerous cases. The United

Kingdom has adopted what is known as the UK Bribery Act, which is often described as

the “FCPA on steroids.” A number of countries, like Canada, have a multitude of cases

under investigation. In addition, led by the World Bank, the multilateral lending

institutions have also become very active in taking action against individuals who and

entities which are beneficiaries of contracts or financing from these institutions.

Seeming glacial to some, in the larger context, especially when some countries

have had to make fundamental changes in their legal systems, the pace of change has

been dramatic. The success of these international efforts has been a direct result of U.S.

leadership. Any efforts to tinker with the FCPA will be perceived as a signal that the

U.S. is no longer taking its leadership seriously. It will have a domino effect around the

world in dampening enforcement efforts.

1It should be noted and emphasized that I am very active in the Obama campaign. At the request

of Peter Hansen, I was asked to provide a short briefing on the Foreign Corrupt Practices Act solely on an

informative basis with the understanding that I was not and would not become involved with the Romney

campaign. Accordingly, out of deference to my good friend, Mr. Hansen, and the larger issues, this

memorandum was prepared. As noted, it should not be perceived as any indication of my support for Mr.

Romney or his campaign.

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Foreign policy is yet another consideration. Corruption is at the heart of uprising

that is taking place throughout much of the world. It must be always kept in mind that

the bribery of foreign officials is directly antithetical to U.S. policy of encourage

democracy and market economies. To signal that we do not take seriously the corrupting

influence of our citizens and companies undermines the credibility of U.S. foreign policy.

Finally, from a technical standpoint, the suggested revisions to the FCPA are

largely moot in light of the breadth and scope of the UK Bribery Act.2 Any competent

compliance official today will advocate compliance with both the FCPA and the UK

Bribery Act. Any effort to revise or alter the FCPA, or its enforcement, needs to be

viewed with great skepticism and with the knowledge of the potential damage to global

efforts in terms of anti-bribery compliance.

2For example, whether one is a foreign official is not relevant under the UK Bribery Act. Private

or commercial bribery is also prohibited. As a consequence, any improper inducement is prohibited in

foreign settings. Compliance officials no longer can focus just on whether the recipient is a foreign official.

It really does not matter if you are also subject to the UK Bribery. Because of the scope of its application,

most U.S. companies also need to be in compliance with the UK Bribery Act.

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CONAL B. DUFFY

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ANDRÉ DU PLESSIS

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C113

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JUMOKE FAJEMIROKUN

C114

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MEMORANDUM

TO: PETER HANSEN

FROM: JUMOKE FAJEMIROKUN

SUBJECT: MEMO FOR ROMNEY CAMPAIGN'S ADVISORY WORKING

GROUP ON U.S. INVESTMENT IN AFRICA

DATE: 11/2/2012

ACTION POINTS FOR HELPING TO TRANSLATE U.S APPROACHES TO AFRICA AND VICE-VERSA

• A Coordinated approach is important. The successful translation of U.S investment

policies to Africans requires a coordinated approach by U.S. governmental entities

engaged in facilitating trade, overseas investment and international development.

• Establish an Africa-focused working group. To achieve a coordinated approach, it is

suggested that an Africa-focused working group, committee or unit be established

(perhaps within the State Department) that will coordinate the activities and programs

of the Office of Commercial and Business Affairs (CBA) and the US Commercial Service

that relate to commercial diplomacy and trade promotion in Africa; as well as the

Activities of USAID that relate to the provision of technical and financial assistance for

economic growth programs in Africa. Such coordination will ensure the success of the

approaches suggested in the Report.

• Keep U.S. investors informed of the investment climate in Africa. It is also important

that investors are kept abreast of the investment climate in Africa and available

investment opportunities. The US Commercial Service currently provides commercial

information and identifies market opportunities for US companies (Country Commercial

Guides and Market Research Reports). It is observed that these reports cover around 34

African Countries. The US Commercial Service should expand the coverage of this report

to include more African countries and provide yearly updates for each country.

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'#(&�1 )( � ) � !"� �( "�() %#()1� �%()('"� �#�0#�) %#(� <�(+"& %(5� �'�#&&� =#�$"�&� ��#."' >�

3!"�"�&!"�'#($�' "$��"&")�'!�#(� !"�1)3&/��"5�1) %#(&�)($�0�)' %'"&�#2�+)�%#�&�'#�( �%"&�

!) �)22"' � !"�)*%1% 4�#2� 2#�"%5(�'#-0)(%"&� #� %(+"& �)'�#&&�&"' #�&/�& )� �*�&%("&&"&�)($�

)''"&&� %($�& �%)1� 1)($���-#6"�!#1$&�)�=)'!"1#��#2�?)3&�2�#-� !"��(%+"�&% 4�#2�?)5#&/�

�%5"�%)� )($� )� �)& "�&� %(� �( "�() %#()1� =�&%("&&� )($��'#(#-%'� ?)3� 2�#-� �"#�5" #3(�

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TAMARA K. GAW

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MEMORANDUM

TO: AMBASSADOR TIBOR NAGY

FROM: TAMARA K GAW, ESQ

SUBJECT: RECOMMENDATIONS FOR A NEW U.S. FOREIGN POLICY ON VULTURE FUNDS

DATE: 11/2/2012

As noted in my prior memorandum, certain governments have shown that they are willing to fight the

Vulture Funds. When the UK law was passed and made permanent, it was done with support from all

three parties (Labour, Conservative, and Liberal Democrat) indicating a non-partisan understanding of

the damages caused by Vulture behavior to HIPC and emerging market countries. It would not be

difficult for the United States government to embrace policies that would curb Vulture Funds’ usurious

tactics while not affecting the global market overall. Suggested solutions include:

• “Sunshine” legislation that would require disclosure of certain interested parties when using

United States courts to pursue debt related claims against these countries. I would anticipate a

fair amount of pushback on this suggestion because Vulture Funds, and the men and women who

manage them, often try to stay hidden and distance themselves from some of the Vulture

litigation, however it is in the interest of U.S. foreign policy, as well as fiscal accountability to

require this minimal disclosure.

• Required disclosure of basic accounting upon which the amount being demanded is based. This

would include, but not be limited to the amount paid to acquire the debt from the previous

stakeholder and a calculation of interest accrued, including the rate at which that total capitalized

interest amount was reached. Requiring that calculations be based on simple, rather than

compounding, interest would also help address this problem. This would not be unlike the

requirements put forth to promote transparency in the debt collection behaviors of the zombie

debt collectors.

• Cap allowable interest rates at a reasonable rate to prevent usurious profiteering. There are many

ways to do this, one of which could be to link it to a rate such as LIBOR. This would allow rates

to fluctuate to reflect times of economic expansion and contraction, in the hopes of preventing

creditors from obtaining windfall profits, but also to allow a fair recovery amount on the debt in

the event that a fixed interest rate was unreasonably low in a given economic scenario.

End

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Peter C. Hansen

Peter C. Hansen is an attorney with 15 years of legal experience who

specializes in public international law and African investment law. He

holds a law degree from Cambridge, has served with the United Nations

and the World Bank, and has taught, lectured and published on United

States and international law topics. Mr. Hansen is a United States national

and fluent in French.

Mr. Hansen advises clients on African investment law and the development

of commercial projects involving Africa. He also conducts trial and

appellate litigation in the courts of the District of Columbia, and has done

appellate work before the D.C. Circuit. Mr. Hansen has served as a

Consultant with the International Centre for Settlement of Investment

Disputes (ICSID), the World Bank Administrative Tribunal (WBAT), and

the World Bank's Office of Evaluation and Suspension (OES), which

handles the debarment of corrupt companies. Mr. Hansen has taught,

lectured and published on international law subjects.

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DAVID HUMPHRIES

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DAVID HUMPHRIES Suggestions for Improving US government management of foreign assistance Principles behind the legislative and policy proposals:

• There are approximately 12 departments, 25 agencies and 60 offices involved in administering foreign assistance. The result is frequently uncoordinated, duplicated efforts.

• There needs to be clear roles and responsibilities, coordinated from the White House level.

• Trade and investment needs to be elevated to a top priority for foreign assistance.

• The US must be able to compete with China and other emerging, major powers in Africa and elsewhere.

• In a time of fiscal tightening and deficits, all assistance must be value for money, ROI-focused and waste is unacceptable.

Executive Policy Changes

• Create a White House level coordinating function to oversee all foreign assistance.

• White House ensures that roles are clearly established, demarcated and duplication eliminated – humanitarian aid; long-term development of partner countries and future markets; investment and trade; diplomacy: each is the distinctive role of a distinctive agency.

• Include US private sector in discussions of international affairs to ensure that trade and investment is reflected in decisions made.

• In these recessionary times of budget cuts, use OPIC and Export-Import Bank aggressively to stimulate investment and trade and to compete more effectively with China. These agencies are profit-making for the US government.

• All aid is branded “From the American People”, not individual departments - we want to focus on our international competition, not competition between federal agencies.

Proposed Legislative Provisions

• Increased Multi-year or permanent authorizations for OPIC and Ex-Im Bank.

• Legislation that frees OPIC to use its profits to fund technical assistance, to reduce reliance on outside agencies and allow it to operate more freely.

• Reduce assistance to multilateral banks and agencies and redirect to US agencies that are accountable to the tax-payer.

• Reduce assistance to frontline states redirecting funds on investment and trade in Africa and Asia-Pacific regions.

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Memorandum

To: Ambassador Tibor Nagy

From: David Humphries

Date: August 29, 2012

The Role of U.S. Aid in Encouraging Investment in Africa

Overview

The following brief memorandum suggests ways in which the U.S. aid system could be adapted to

advance US trade and investment interests in Sub-Saharan Africa. The suggestions in this paper are

evolutionary, rather than revolutionary, and focus on relatively simple changes that could be made

to the existing system quickly and inexpensively by an incoming Administration.

In my career in the USA, I have worked extensively with USAID, OPIC and increasingly with U.S.

multinationals seeking to work in Africa. This paper consequently focuses mostly on those agents

and how they can better interact to form an environment conducive to U.S. investment interests in

Africa. I also focus on some aspects of public opinion relating to these suggested changes. My

recommendations do not seek to undermine the important role that aid plays in, for example,

humanitarian assistance, global health, developing strong civil society or municipal governments.

My recommendations are complementary to these efforts.

Aid, naturally, focuses more on preparing the African market and environment for investment,

which is my main focus in this memorandum, rather than the incentives and methods that the U.S.

government (USG) can employ domestically to encourage U.S. companies to manage risk and

invest in Africa.

The memorandum examines the following issues and provides suggested solutions:

Issues:

1) Is trade and investment a priority for USAID?

2) Is aid creating the right environment for investment?

3) Development Finance is too restrained

4) We are not harnessing the power of U.S. multinationals and major international brands

5) Closing the gap between aid and investment - potential public opinion impacts

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1) Is trade and investment a priority for USAID?

President Obama, Secretary of State Clinton and Administrator Shah of USAID have made many

public statements about the role of the private sector in the U.S.’s aid policies. In May, for example,

the President announced that $3 billion is being invested in food security by the private sector1;

and this April, in Colombia, Secretary Clinton spoke of the important role of multinationals in

increasing entrepreneurial development in Latin America2. This theme is developed further by

USAID. On its primary “What We Do” page of its website, USAID openly states that its role is

economic: “to open new markets for American goods, promote trade overseas, and create jobs at

home.”3 However, the three main Presidential development initiatives – Feed the Future, Global

Climate Change, and the Global Health Initiative – do not address this issue.

This is more than just confused messaging; this is an organization with confused priorities. There is

no explicit strategy in USAID for promoting trade and investment effectively. It is not a major

Presidential concern: the 2010 Presidential Policy Directive on Global Development that spelled

out the three main initiatives above already reads as dated in light of emerging Africa. Despite its

initial prominence in USAID’s self-description, “Economic Growth and Trade” is merely one of the

11 sectors that USAID lists as its work.

While organizations like OPIC, the Export Import Bank, USTDA and the Millennium Challenge

Corporation have clearer missions and strategies, the primary US channel for delivering aid, USAID,

is inherently confused at how it should be meeting the needs of trade and investment. This should

not necessarily be a surprise. Prior to the Obama Administration’s three main foci, the main focus

of aid to Africa under the Bush Administration was HIV and AIDS. Africa’s emerging potential as a

market has grown rapidly and our aid system has not kept up.

How to address this issue

Trade and investment should be elevated to the same level of importance as the other three

Presidential initiatives (while the other three would bear scrutiny from an incoming

Administration). It should be a clearly defined, top level strategic priority for USAID and should be

funded appropriately.

USAID’s focus on trade and investment has to be coordinated with broader USG policy. Along with

the USTDA, OPIC, Export-Import Bank, and other departments involved in investment and aid, the

USG needs to establish an overall strategy for trade and investment with Africa. This should either

be hosted in a department which would take the overall lead or at the White House. This broader

USG policy should be developed with input from US multinationals and SMEs from a wide range of

industries with investment interest in Africa.

1 http://www.huffingtonpost.com/2012/05/18/barack-obama-africa-famine_n_1526871.html 2 http://www.bloomberg.com/news/2012-04-14/goldman-joins-wal-mart-to-boost-women-business-owners.html

3 The full statement reads: “Our assistance develops the markets of the future; long-time aid recipients have become strong trade

partners and are the fastest growing markets for American goods. USAID is developing partnerships with countries committed to

enabling the private sector investment that is the basis of sustained economic growth to open new markets for American goods,

promote trade overseas, and create jobs here at home.” http://www.usaid.gov/what-we-do C154

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This overall strategy would determine priority U.S. industries for investing in Africa (e.g.: energy,

mobile telephony, construction) and priority African industries for growth (e.g.: agriculture,

tourism, energy) and how these can best be aligned. It would have to be done in consciousness of

our major competitors in Africa, such as China, Brazil and Europe.

With the development of clear USG priorities, USAID can and should address the role that

development can play in, for example:

· Developing target African industries

· Developing the right environment for growth and economic stability

· Assisting and guiding US companies seeking to undertake development work relating to

their projects

Other agencies, such as OPIC, can also play an essential role in this, examined below. This

coordinating mechanism and strategy is a concept to which I will return throughout the

memorandum.

2) Is aid creating the right environment for investment?

In spite of its language of trade and economics, USAID has not demonstrated to date a strong focus

on economic and trade issues. There are many programs about governance and democracy, but

not those that consider how it relates to trade and investment. There are many programs focused

on value chains, but these seem to be done discreetly, without consideration of the linkages

between the value chains chosen and how they relate to issues of U.S. investment interests. My

own experience of working with these programs is that they are rarely viewed in broader

international economic terms.

USAID does have some investment related programs. With the Corporate Council on Africa (CCA)

they have started the U.S.-Africa Business Center4, designed to assist two-way trade and

investment between the USA and sub-Saharan African economies; and there are a series of Trade

Hubs for each region in Africa5. These are small investments. In a presentation by USAID to the CCA

in November 2011 “Guide to US Government Export Programs and Resources for Trade and

Investment”6, the overall impression is of a dizzying smorgasbord of limited, uncoordinated

interventions.

How to address this issue

It is important to acknowledge that USAID has a lack of expertise in trade and investment. If it is to

be elevated to one of the key aspects of USAID’s mission, then the agency will need to recruit

appropriately. In light of budget restraints, USAID may need to downsize some of their lower

priority missions (Eastern Europe, for example) and other areas of expertise may need to be

trimmed. A series of secondments between USTDA or Department of Commerce and USAID could

4 http://allafrica.com/stories/201011170693.html 5 For example, the West African Trade Hub http://www.watradehub.com/ 6 http://www.africacncl.org/(enblhz45qe24kr55vrhquw45)/reader.aspx?viewmode=pressrelease&content_id=20612d47-7ccc-42a2-b463-a9513d6a75e9

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also be an effective way of increasing staff capacity and coordination.

Trade and investment should be brought into existing programming. Democracy and Governance

programs, for example, should be aligned with trade and investment aims. When focusing on

governance reform, programs should also focus on creating the systems needed to encourage

investment, such as:

· Creating functional and reliable government institutions

· Promoting free-market principles to attract investment

· Ensuring that governments invest in security, property rights and anti-corruption activities

Economic development projects should be aligned with the overall investment priorities

established centrally by the White House. During project design, value chains should be selected by

a combination of what will work for the African country in question and how they play into U.S.

investment strategy.

There should be greater coordination with the development finance and export credit authorities,

the Overseas Private Investment Corporation and the Export-Import Bank. This may include

providing more technical assistance grants to OPIC lending facilities, if OPIC remains unable to do

so (see below for more details).

3) Development Finance is too restrained

“Development Finance Institutions” are those financial institutions that provide finance and limit

risk in environments where commercial banks do not operate. Their purpose is to make investment

possible where otherwise the market fails to invest sufficiently, and to provide risk mitigation tools

that enable investors to proceed with plans they might otherwise have to abandon. These include

loans, loan guarantees, and investment insurance, among other products. The USG has a number

of development finance institutions, including the Overseas Private Investment Corporation (OPIC),

Export-Import Bank, and USAID’s Development Credit Authority. My focus here is specifically on

OPIC.

OPIC is self-sustaining. It manages a portfolio of $15 billion in more than 100 countries. In 2010,

OPIC generated a net income of $260 million, and over its 40 year history it has generated a net

profit of more than $5 billion for the US Treasury. However, unlike other development finance

institutions, OPIC is unable to use any of its income toward technical assistance in managing its

projects. This means it has to rely on partnerships (such as with USAID or the IFC) to implement its

projects, hugely reducing its speed, effectiveness and potential – and also, consequently, profits for

the USG.

OPIC is also limited by short-term reauthorizing in Congress (it has not had a multi-year

reauthorization since 2007) which hinders its ability to make longer term, strategic investments

with confidence.

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How to address this issue?

A form of aid that costs the taxpayer nothing, that provides income to the USG, and that can help

to stimulate growth in target sectors is of great benefit to trade and investment aims in Africa.

Note especially that OPIC’s main focus is on small and medium enterprises, the engines of growth

in the developing world.

· Allow OPIC to use a percentage of its profits to fund technical assistance. This would enable

the agency to be far more flexible, rapid and effective and would reduce bureaucracy. It

costs, for example, $1 million in technical assistance a year to run a $250 million loan

guarantee facility in the Middle East. Such small investments could have tremendous

impacts among African SMEs and industry sectors.

· Multi-year authorizations. As long as OPIC is legally required to focus on investments in

sectors where commercial banks will not lend (such as the SME market) and does not

compete with the private sector, there is no reason to hold back the agency from

stimulating trade. It costs the tax-payer nothing and makes a profit. It is preferable to set

clear regulations by which it must abide than to submit it to Congress’ annual

peregrinations. It is important to remember that the US competes with China, Europe and

others, who use their finance institutions aggressively. The US could cede market share to

these competitors.

· As discussed above, OPIC’s lending strategy should reflect the overall USG strategy,

focusing on specific sectors of interest within Africa. Traditionally a loan guarantee facility

guarantees 60% to 70% of a commercial bank loan. One variation could be to guarantee

80% of a loan in a target industry and 50% in a non-target industry, encouraging local

commercial banks to lend to target industries.

4) We are not harnessing the power of US multinationals and major international

brands

It is easy enough to quantify how much U.S. aid instruments spend in Africa and how much is

related to investments. It is also relatively easy to quantify how much NGOs spend overall

(although harder to break down into specific regions – InterAction calculates $8.6 billion a year

overall in aid7). But it is very difficult to get a handle on how much aid in Africa is coming from the

U.S. private sector. This is not limited to traditional corporate social responsibility (CSR) funds. The

private sector often spends money out of operation budgets on what are essentially aid projects.

For example, CHF International recently contracted with a US extractive industry company to

provide an urban development plan for a major mine in the Democratic Republic of Congo. This

$1.2 million, three year project, is part of their much larger sustainability program in the area,

which is part of their operations budget – it is not taken from specific CSR budgets.

U.S. multinationals have a huge reach in Africa. They go places that the government does not go.

They run projects where USAID does not. And yet they are representatives of the USA as much as

are the NGOs, contractors and public sector employees. They carry out development projects as do

the others. And their reputation has a huge impact on the reputation of the USA.

7 http://www.interaction.org/sites/default/files/84/InterAction%20-%20A%20New%20Vision%20for%20the%20USAID-NGO%20Relationship.pdf

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Reputation is of the highest importance as the USA increases its trade with Africa. Stephen Hayes,

President and CEO of the Corporate Council on Africa recently testified to Congress that the US

cannot compete with China’s state industries for scale and speed of delivery8. The USG applies

conditions to its aid, conditions relating to human rights, labor rights and so on – and it is right to

do so. As a country we apply these conditions because we believe in these values and our public

believes in these values – we do not believe that a 19th century style approach to exploiting Africa

is acceptable. It can, however, be difficult to compete with a quick-fix approach that asks no

questions in exchange for vital infrastructure.

But the USA has major international brands that China does not. It has companies well-known

around the world, from Caterpillar to Coca-Cola, which bring with them American staff, American

values and American investment. Furthermore, many of these companies have highly developed

CSR functions and other budgets for undertaking development activities.9

While it is difficult to compete with China on scale, the USA can compete on performance (higher

quality infrastructure) and on relationships (greater investment in communities and better

treatment of workers). From a marketing standpoint, relationships ultimately lead to greater client

loyalty and greater spend. And from an investment standpoint we need to consider this. Our

multinationals, our brands, represent the USA as much as does our government. We need

therefore to consider the value of their inputs, to ensure it is done effectively and coordinated with

the USG’s development plans, that it is encouraged and quality-controlled, so that it leads to

greater relationships and therefore greater investment.

How to address this issue?

It is not that major multinationals are not involved in development and do not take advantage of

USAID funding. For example, CHF has built vocational training centers in Indonesia, combining

Chevron and USAID funds, and in Haiti, combining Caterpillar and USAID funds. But these efforts

have been sporadic and initiated by CHF and the corporation in question. In each case, we were

able to access USAID funds, but that has not always been possible. We need to seek ways to make

these relationships stronger, formalized, and to create specific channels to encourage these

partnerships.

· As the USG develops its central investment and aid strategy for Africa, it should involve

companies operating in Africa. It should include a survey of development-style investments

and some evaluation of the most effective approaches. The USG should develop a guide for

companies seeking to invest in the communities around their projects, providing advice and

counsel.

· There should be a specific fund in USAID designed to encourage companies to invest in the

communities around their projects – in, for example, urban planning (where project-related

in-migration issues occur) or vocational training (to create a locally trained, more cost-

effective workforce). The company would be required to put up 50% and USAID would

8 http://www.africacncl.org/(lcbpkw45xaka4g55civn5345)/reader.aspx?viewmode=pressrelease&content_id=e5234350-f834-479a-abcc-1101dae0af9d (March 29, 2012) 9 Caterpillar Foundation, for example, in 2011 had a budget t of $40 million. This is largely dispersed around the USA and beyond, but they are seeking to concentrate larger amounts in emerging markets in the developing world. This comes from my own discussions with Caterpillar.

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positively than the trade argument. While this is only one piece of research, it is important to

realize that promoting this issue above others could reflect badly with voters. As stated in the

beginning of this memorandum, my own propositions are not designed to undermine the other

aspects of aid; they are complementary. Humanitarian assistance, global health and many of the

other aid approaches should not be made secondary to trade and investment and attempts to do

so could backfire.

However, in the same research there was another important question: “Which of the following do

you think is the most effective way of providing aid money to people in developing countries?”

Here are the answers in full.

Answer Engaged audience % response Less engaged audience %

response

Individual people donating money

directly to religious organizations

that carry out aid programs

14 16

Individual people donating money

directly to organizations such as the

Red Cross and Doctors Without

Borders that carry out aid programs

39 38

The U.S. government giving money to

the developing nation’s government 6 6

The U.S. government giving money to

United Nations organizations 16 15

Corporate social responsibility

programs operated by companies

doing business in developing

countries

17 16

Partnerships that bring together

governments, charities, and

corporations

46 42

There is an expected cynicism toward government to government aid, which in the rest of the

research was viewed as the greatest cause of corruption. There was also a lack of enthusiasm

toward UN organizations, corporations and religious organizations. Large international

humanitarian organization maintain strong reputations, but the most striking factor here is that

“partnerships that bring together governments, charities and corporations” are viewed as being

the most effective approach to development. This bears further research, but this is a fruitful

avenue to explore.

It would therefore make sense for an incoming Administration to research this area further. If these

findings are repeated, any trade and investment discussion of aid would be well-advised to be

presented and implemented as a partnership type model, such as I described in section 4 above

and throughout this memorandum.

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JUSTIN MAHWIKIZI

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JUSTIN MAHWIKIZI

Coherent and doable list of action points

1. Points listing proposed legislative

a) The United States will further deepen bilateral and multilateral cooperation on

financial sector development, investment, regulation, and supervision, and

cooperate to support flows of productive capital into, and the efficiency and

stability of, financial markets both in the U.S. and Sub-Saharan Africa.

b) US-Africa banking sector development program: Encourage U.S financial

institutions (banks) to participate in strategic partnerships with African banks and

to provide effective management knowledge transfer, operational efficiency

recommendations, mid-market baking development, technology modernization,

and advice in dealing with international financial security issues (financial

corruption, fighting fraud, robberies, cyber-attacks, money laundering,

counterfeiting of currency, and terrorism financing).

c) U.S. development organizations will have one of their objectives being the

sustained assistance to African governments in developing a financial system that

consists of diverse institutions, provides efficient service, controls risks, and

encourages financial innovation. Africa is and should increase the use of direct

financing channels, including stocks, bonds, and private equity, to better satisfy

the diverse demands in its economy for investment capital and financing.

d) Based on the U.S. aid or Trade relationship we have in place with a particular country; U.S banks should have the ability if interested to enter Africa in one or more

of four ways: by establishing a wholly foreign-owned bank, by opening a branch or

representative office, by entering into a joint venture with a local partner, or by

acquiring an equity share in an existing African bank.

2. Points for executive policy changes

a) Executive order: Appointment an International Development National Director

who will coordinate and oversee all international development-driven agencies’

operating model to achieve the right resource allocation towards meeting the

United States’ objective of helping developing nations grow their markets as well

as provide U.S trade and investment opportunities.

b) Executive declaration: The United States supports African nations’ views that the

promotion of employment as the priority objective for economic development,

and the positive contributions that financial institutions can make to this priority

with the support of open environments for investment in financial services and

cross-border portfolio investment, consistent with prudential and national security

requirements.

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c) The United States strongly encourages African nations to move ahead with

Financial reforms that better serve households, workers, entrepreneurs, and

businesses by reducing systemic risk, raising prudential standards, establishing a

comprehensive regulatory framework for new financial instruments, and ensuring

robust consumer financial protection.

d) The United States affirms it will engage in a more extensive economic

cooperation, from a strategic, long-term, and deep-reaching perspective, to work

together to assemble a comprehensive beneficial economic partnership with

African nations, and add to prosperity and welfare in the countries involved as

well as in the U.S.

3. Points listing the principles behind the legislative and policy proposals.

I. Africa’s expected economic growth, development of its financial system, and extent of

economic integration should not go unnoticed. The U.S. is the best economic player in

the world. As such, it should play a major role in Africa’s growing economies

II. The development agencies must ensure that:

a) Their department assesses from the outset the impact on the U.S of the proposed

legislations and effectively manages the transition in focus and measurements of

accountability.

III. When reviewing the US – Africa policy; the U.S. government will:

a) Endeavour to ensure that U.S. businesses are not put at a competitive

disadvantage compared with their African counterparts;

b) Ensure the necessary implementing measures come into force on (rather than

before) the deadline specified in a directive, unless there are compelling reasons

for earlier implementation; and

c) Include a statutory duty for Congress to review every five years

IV. Economic development decisions should be based on an informed assessment of the

critical needs of communities and the impacts— positive or negative—of proposed

projects on those needs.

V. The individuals and institutions most impacted by economic development decisions

should be meaningfully engaged in every stage of the economic development decision-

making process.

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FRANCIS JOSEPH MILLS IV

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EMEKA NWANKWO

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LABAN OPANDE

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LABAN OPANDE

Addressing Africa’s diversity in U.S. official practice

Proposed legislative provisions

- Creation of new trade treaties targeting specific countries with resources needed in

the American market (e.g. oil and other minerals, agricultural produce etc) and a

market for American products and services (e.g. motor vehicles, trains, electronics,

schools and colleges etc).

- Expansion of AGOA in time as well as more relevant commodities and services with

the aim of not only promoting African trade, but also bridging the gap in trade

imbalance between Africa and US.

- Promote direct engagement, by US government as well as private sector, with

regional trading blocs like ECOWAS, COMESA, EAC, SADC etc.

- Provide tax break/incentives to private businesses engaging in enterprises that

promote direct and sustainable growth in health, technology and science in Africa,

and which impact poverty alleviation, promote self reliance, and fight endemic

diseases like Malaria.

Proposed executive policy changes

- Observe strict compliance and enforcement of the Foreign Corrupt Practices Act

(FCPA).

- Rewarding and recognition of individual governments that engage in clean business

and are in strict compliance of local and international commercial laws.

- Assignment of American personnel to African countries who understand local and

regional laws, politics, religions, and social dynamics.

- Create or promote Public Private Partnerships (PPP) in pertinent sectors which are of

key interest to both the US as well as the African people.

- Engagement of US trained African experts in law, security, science and technology in

championing US presence and relationship with Africa.

Principles behind the legislative and policy proposals.

- Providing a huge ready market (1 billion people) for American goods and services.

- Assisting African people towards self-reliance and weaning them off heavily relying

on foreign aid.

- Recognition of African people as equal partners in trade.

- Utilizing existing organizational structures which are better managed, covers large

populations, and are mostly apolitical.

- Showing an appreciation and understanding of the great diversity of the continent.

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To: Amb. Tibor Nagy

From: Laban Opande

September 1, 2012

US Investment Policy on Africa

I write this memo, largely without critical knowledge of the present US Investment Policy in

Africa. However, through my life journey and experiences, I feel I am in a position to share

candid insights and a humble opinion about what the US Policy ought to be. These are shared

both from first hand encounters, general knowledge and schooling, as well as from trusted

family, friends and the media.

Presently, a great part of my extended family still lives in Kenya. Many of my childhood friends

also reside and work in Kenya and other neighboring countries. I make every effort to visit them

as often as possible, but at least roughly every year or two. In order to have relevant and useful

discussions before, during and after my visits, I follow up with current news and events

happening not only in Kenya, but Africa as a whole.

Through the above-stated sources, I have come to believe that in order to have a solid, effective,

and mutually beneficial investment policy on Africa the US must first analyze, understand, and

appreciate who Africa really is. To do so, I think the following five diverse but pertinent and

crucial areas across the continent must be addressed:

1. The diverse and often complicated political terrain on the continent

2. The present economic challenges and the untapped potential

3. Geographic, Religious, and Socio-cultural differences across the continent

4. Existence of huge infrastructural and technological challenges

5. Legal impediments

The above noted issues are by no-means the only issues to be looked at. Indeed, underneath each

of them are myriads of other problems including terror threats, general insecurity and civil

unrests across the continent, poor education, technological know-how and capacity building by

individual African governments, lack of proper planning, etc. I have attempted to expound on the

five listed issues below, with suggestions on how to approach and resolve the issues.

The diverse and often complicated political terrain on the continent

Africa is home to about 52 distinctively independent countries. At the look of it, they all appear

to experience similar political challenges – existence of dictatorial/extremist regimes, family

dynasties, tribal dominance etc. I think the US approach in dealing with Africa on these

challenges has been a somewhat blanket policy, with a belief that one measure fits all. It must be

recognized that the differences in the political terrain are very distinct and should be approached

in similar manner.

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In some cases, some countries ought to be understood in the context of their internal political

engagements. The internal politics often pose great security/insecurity concerns to that particular

country, and to some extent, a whole region. When issues of security/insecurity exist, then it’s

difficult to even talk about a good investment policy for that country, or region for that matter.

Therefore, investment policy may not be formulated just standing on its own, but in

consideration of the political climate of a particular country or region. This may be done through

US embassies and consulates in or near those countries.

The present economic challenges and the untapped potential

Africa is endowed with massive natural and human resources. Due to inept governance and poor

leadership, these resources continue to be untapped or mismanaged. In recent years, Africans

have recognized the need to exploit the same, forming regional economic blocks among them:

ECOWAS, COMESA, IGAD and SADC. These blocks cover wider areas, large populations, and

are generally better managed compared to individual countries. The US investment policy should

be geared towards engaging them as partners in trade and economic development.

Presently, much of US involvement in Africa is through USAID. There hasn’t been much effort

in encouraging the US private sector in venturing with African governments or businesses.

Through vehicles like Public-Private Partnerships (PPPs), there will be greater participation of

the American private sector resulting in bigger markets for US finished products, and Africa

finding markets in the US as well as gaining in general technical know-how towards industrial

and economic growth. So far, the only recognizable engagement by the US government in

African trade is through AGOA, which while it’s acknowledged to be a step in the direct

direction in terms of trade arrangement, there is a general sense of feeling among Africans that

it’s largely one sided in favor of the US, and too limited in scope to have a meaningful impact on

the African people as a whole. Therefore creating the right perceptions and expectations, as joint

ventures or partnerships with these African countries, will build confidence and rapport, and in

return help in promoting US trade in Africa.

Geographic, Religious, and Socio-cultural differences across the continent

Having a good understanding of the vast geographic terrain, an appreciation of the differences in

culture, language, religion, and deep beliefs and traditions, is important when attempting to

formulate an investment policy on Africa. Indeed, for the purpose of this memo, I wish to note

that my observations and contributions are largely centered on Sub-Saharan Africa. It is well

appreciated that much of North Africa is often associated with Middle and Near East. Perhaps

this is because of the shared religion (mainly Islam), language (largely Arabic), and similarities

in climatic and weather conditions (arid/semi-arid and desert like). Much of Sub-Saharan Africa

is fusion of hundreds if not thousands of ethnic tribes, with distinct histories, traditions, and

beliefs. Many of the Sub-Saharan Africans also exercise different religions and a myriad of

denominations even within the same religions. Therefore, US engagement in Africa must take

cognizance of the above differences, and be able to know how to seek full participation of all or

a majority of the people, without raising any perception of favoritism or partisanship.

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Existence of huge infrastructural and technological challenges

In recent years, many parts of Africa have experienced tremendous economic growth. Some

countries have experienced double-digit numbers in terms of overall percentage growth. But a

vast majority of African countries lag behind in terms of presence of basic infrastructure and

access to technology. Without these, it’s difficult to talk about investment.

At the moment, China has made great strides in asserting their presence in Africa. Many of the

African governments and business people have warmed to China, as well as other emerging

economies like India and Brazil. The US, which among other western countries was at the

forefront in engaging Africa, now lags behind yet it is a brand in itself! It is not too late though,

for Africa is a sleeping giant. When it rises, the US must just want to be with them. The US must

seek to export its technology, and assist in training on the same, to enable the African exploit

their full potential. In return, the US will benefit in the sale of the technology and training to the

African people.

Legal impediments

With the great diversity that exists in Africa, comes complex legal problems, which may pose as

an impediment for US investment in Africa. Each African country has its own set of laws and

legal system. In order to have meaningful engagement with all the 52 countries, then the US as a

government, or any US investor must understand their legal framework. In recent years, through

the African Union (AU) as well as the regional economic blocks, there have been attempts to

harmonize these laws. The task is understandably not easy and the full effect of the

harmonization may not be seen in the near future.

In many of these countries, there are legal experts who have trained, worked or practiced in the

US. Some, if not all of them, have equal access and understanding of the local or regional trade

and business laws. The US may seek to engage them to assist in navigating through any potential

legal issues that may arise.

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RICK ORTH

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RICK ORTH

Somaliland Recognition Action Items

• Get the UN Security Council to remove Somaliland from the UN Arms Embargo

Sanctions for Somalia and out from under the Somalia and Eritrea Monitoring Group’s

domain.

• Open a U.S. Interest Section Office in Hargeisa, Somaliland in advance of full diplomatic

recognition and opening a U.S. Embassy.

• Recognize Somaliland as sovereign country.

• Open a U.S. Embassy in Hargeisa, Somaliland.

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Recognition of Somaliland: A Means to Enhance Private Investment

in the Horn of Africa

Rick Orth

Introduction:

When most people use the term Somalia they actually refer to south central Somalia, as

Somaliland and Puntland do not face the challenges of being a failed state south Central

Somalia does. The United States has been a strong backer of the African Union Mission in

Somalia (AMISOM), providing training, equipment, and logistics (the United Nations now

provides this) to troop contingents. The situation in south central Somalia continues to

improve:

Somalia's political leaders are making encouraging progress toward meeting an August

20 deadline to lay the groundwork for a new constitutional government, US Secretary of

State Hillary Clinton said on Saturday. (Note: The New Parliament sworn in during the

week of August 17.) An African Union force trying to defeat al-Shabaab, an al-Qaida-

linked Islamist insurgent group that seized control of much of central and southern

Somalia, has had some success and driven al-Shabaab out of the capital Mogadishu. But

the rebels remain the strongest of an array of militias that have a history of wrecking

political settlements and perpetuating war, instability and famine. The draft constitution

is expected to be put to a nationwide referendum as soon as the security situation

improves. The AU peacekeeping force in Somalia hopes to drive the insurgents out of

the country’s central and southern regions this month, when the UN-backed

government’s mandate expires.1

However, Somaliland, a de facto independent state lacking international recognition gets

lumped in with Somalia because it is not recognized as an independent state. This negatively

impacts on the ability of U.S. companies to invest and thus contribute to the economic

development of Somaliland. Somaliland falls under the United Nations Arms Embargo and

activity by U.S. companies, especially when it comes to assisting Somaliland in building its

security institutions must be reported by the U.S. Department of State to the U.N. Sanctions

Committee. 2 Recognition of Somaliland would grant it much needed sovereign and open the

door to U.S. private investment.

Somaliland Background

Somaliland, the former British Somaliland, was independent for five days but then decided to

join former Italian Somaliland to former Somalia. After the fall of Siad Barre in 1991, Somaliland

broke away. Since then it has functioned as state but remains unrecognized by the world as

1 Washington Sees Positive Signs In Somalia Progress, Jerusalem Post; 05 Aug 12, Andrew Quinn, Reuters

2 Meeting by author with U.S. Department of State Somalia Desk Officers, August 26, 2012

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sovereign country. Somaliland is a functioning democracy having had three presidential

elections in with changes in leadership. It exhibits what the U.S. would like to see in the Islamic

Middle East and elsewhere in Africa, however, it remains a fragile state because it cannot

garner the support of foreign governments and private businesses face challenges because of

its unrecognized status. As stated previously, any engagement must be reported to the UN

Security Council Sanctions Committee an additional hurdle for constructive engagement by

private business as only countries can report activity to the Sanctions Committee.3 The time has

come for recognition. What makes Somalia so special? The days of upholding the now defunct

Organization of Africa Unity (OAU) notion that African boundaries must remain is over. Eritrea

and South Sudan are new countries formed by national referenda. We should consider the

three presidential and numerous parliamentary elections as a national referendum for

independence. Other parts of world have seen the formation of new countries: the former

Soviet Union when it broke up and Yugoslavia when it broke. Furthermore, Somali irredentism

has led to conflict and supports the agenda of terrorist Al-Itihaad al-Islamiya (AIAI) that

morphed into the al Shabaab. As a World Leader the United States should take the lead on this

issue. Let’s stop hiding behind Department of State lawyers, just an excuse for delaying

independence.

Benefits of Private Investment in Somaliland

Currently, USAID has several small scale projects in Somaliland. Additionally, there is limited

U.S. business presence in Somaliland due to the lack of U.S. Government support for such

activity as licenses are reviewed on case-by-case basis by Department of State, specifically the

Somalia Desk under of rubric of ensure compliance to the U.N. Arms Embargo. However, the

Somalia Desk recognizes the benefit of U.S. private business operating in Somaliland as they

tend to build capacity and capability to local economies as well as compliant with U.S. law.

U.S. private investment seeks secure environments. Somaliland given the turmoil of south

central Somalia is relatively stable and secure. Recognition would afford the Somaliland

government the benefits of a formal U.S. security assistance program thus building effective

security institutions that heretofore have been developed with Ethiopian assistance. Increased

U.S. investment would help build Somaliland institutions but would serve as a counter balance

against Chinese investment that does not build capability and capacity. Additionally, enhanced

Somaliland institutional capability and a vibrant economy provide an alternative to Islamist

extremism.

Recognition of Somaliland would bring a formal U.S. Government presence to Somaliland with

the establishment of a U.S. Embassy. This would enable a formal mechanism for the Somaliland

government to tap into the U.S. Department of Commerce and more importantly U.S. business

to use Economic Officers and the services of the U.S. Department of Commerce to assist private

investment efforts.

3 ibid

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Lastly, increased private investment and its contribution to Somaliland’s economic

development serves as positive example for Puntland and south central Somalia as what can

occur in secure environments that respect the rule of law and have a functioning democratic

political system.

Recommendation: Recognize Somaliland as soon as possible as sovereign country to enhance

U.S. private investment in the Horn of Africa. Many more will do the same if the U.S. takes the

lead as at least a dozen or African countries are waiting for a country to be the first.

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Rick Orth biography:

Rick Orth currently works as the Business Lead for International Defence and Diplomacy (IDD),

SOC LLC, a private security company. His portfolio includes Africa. He travels frequently to Africa

and lived in Nairobi, Kenya from August 2011 until February 2012. He previously worked as

Director, Strategic Plans AECOM Government Services, his portfolio included growing business in

Africa. He retired from the U.S. Army as a Colonel in July 2008. He was commissioned as an Armor

officer in 1982. He was designated a Sub-Sahara Africa Foreign Area (FAO) in 1987. He worked

African issues for the U.S. Army serving as Central Africa Analyst DIA, (1994-1996) covering the

Rwanda Genocide; the first resident Defense Attaché Rwanda (1996-1998); the first Africa Branch

Chief, J-2 (Intelligence), Joints Chief of Staff (1998-2000); Defense Attaché Uganda (2001-2005);

Defense Attaché Ethiopia and non-resident Djibouti (2005-2006); and Military Advisor to the

Assistant Secretary of State for African Affairs 2006-2008).

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JON VANDENHEUVEL

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