2>f^,#/*2. Mfc=*=»J£- A SUPPLEMENT TO Interna A SPECIAL REPORT ON S. DEPARTMENT COMMERCE PUBLICATION ^ A Supplement to International Commerce AFRICA sales frontier for U.S. business U.S. DEPARTMENT OF COMMERCE Luther H. Hodges, Secretary Jack N. Behrman Assistant Secretary for Domestic and International Business Eugene M. Braderman Director, Bureau of International Commerce This report was prepared under the direction of Bernard Blankenheimer, Director, Africa Division, Office of Inter- national Regional Economics, Bureau of International Commerce. Material was arranged for publication by William J. Bushwaller, Chief, Southern and East African Section, Africa Division. For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington 25, D.C. - Price $1.00 Foreword T HE EMEKGENCE of 23 new countries in Africa within the past 3 years has catapulted this vast continent into the center of the world arena. There are few Americans who have not become familiar with certain African place names or political leaders. Popular attention, indeed, has focused very largely on political changes; but changes in present-day Africa are many sided — economic, social, and demographic as well as political. Past patterns of African production and trade are being drastically altered. New urban communities are springing up and large-scale development projects in mining, industry, and agriculture are under way in many parts of the conti- nent under the impetus of sustained infusions of foreign funds — both from public and private sources. Extreme variations in human and material resources and stages of economic growth are encountered in the various African countries. In some, promising immediate prospects exist for expanded United States exports, while in others, such possibilities are less dramatic and longer term in nature. To meet the challenges and opportunities afforded by this continent in transition, the United States business community needs to be kept informed on all aspects of African development. This report provides a basic guide to American businessmen regarding the general outlook for expansion of United States exports and private investments in the separate African areas. Commercial Attaches and Economic Officer personnel of our Embassies and Consular posts in selected African countries were asked to furnish their own on-the-spot candid assessments of the practical problems to be encountered by United States exporters and investors in their respective countries. Supplemental material, prepared by staff officers of the Bureau of International Commerce and other agencies, it is hoped, will make this report a useful current reference source for all United States businessmen interested in tapping the new frontier for trade and investment which Africa represents. ^/£ju4JMA. rft- EUGENE M. BRADERMAN March 1963. Director, Bureau of International Commerce i The new face of Africa — a manganese miner in Gabon. Introduction IHE ECONOMIC setting in Africa is difficult to assess because of the invalidity of generali- zations applied to the continent as a whole. Popu- lar attitudes towards Africa's economic resources and potentialities stand in sharp contrast. The optimist is attracted to the rich and still underdeveloped natural resources of a continent containing nearly one-fourth of the world's total land area. He points to Africa's present produc- tion of nearly one-seventh of the world's mineral output and its significant, resources of energy, es- pecially in hydropower. The pessimist, conversely, is attracted to the disabilities-of contemporary Africa; to the prev- alence of illiteracy and disease; to the ramifica- tions of political or racial tension in some areas; and above all, to the general poverty of its peoples. Subsistence agriculture accounts for about one-third of the continent's output and, at its present stage of economic development, Africa accounts for only 2 percent of the value of goods and services produced in the world annually. Both the pessimist and the optimist can find support for his contentions in contemporary Africa. However, most observers agree that, while economic gains have been much less spectacu- lar than political development, considerable eco- nomic growth has taken place and that Africa has steadily advanced its role in the world's economy. Estimates compiled by the United Nations show that Africa annually exports commodities worth $6.6 billion, while its imports are valued at ap- proximately $8 billion. These figures reflect Africa's heavy dependence on foreign trade and its overall reliance on foreign capital inflows to meet the net import deficit. According to these United Nations data, gross output for all of Africa is valued at $26 billion, but one country alone, the Republic of South Africa, accounts for nearly one- fifth of this amount. Per capita income for all of Africa is estimated at $110 per year. If the highly developed Republic of South Africa is excluded, however, per capita income would be about $90 per year. These figures illustrate the enormity of the general problem of bridging the gap of centuries in African economic development, but, as one United Nations report concludes — "The transformation of the traditional and mainly sub- sistence economy to a modern economy constitutes a basic characteristic of economic development in most of Africa. This process has gone on rapidly in recent years, and indications are that it will continue at an accelerating pace in the near future under the pressure both of outside in- fluences and of the cumulative forces of growth set in motion within the African economy. Especially for newly independent countries, rapid economic development is both a necessity and a problem." 1 TRADE IMPACT The impact of Africa's economic development has been manifest in expanded foreign trade. African exports are increasingly diversified as more and more local processing of raw materials for export is being undertaken. Similarly, the composition of Africa's imports is changing. Capital goods figure more heavily at present than a decade ago, and this trend is likely to continue. As living standards rise, a broader variety of consumer goods imports in a wider price range also has been in evidence. These develop- 1 Economic Survey of Africa Since 1950, United Nations, De- partment of Economic and Social Affairs. 1959. ments provide greater opportunities for expansion of U.S. exports to Africa. On the other hand, competition lias stiffened for this market. In parts of Africa, particularly in the sterling area, trade and exchange controls have heen liberalized and more aggressive sales- manship there by American suppliers should pro- duce effective results. In many areas, however, formidable barriers, in the form of preferential tariff and/or quantitative restrictions still exist against U.S. exports. As the separate country commentaries in this publication indicate, the outlook for American exports contrasts sharply from country to coun- try. Indeed, the countries, themselves, were selected to illustrate these differences. For ex- ample, a promising competitive situation such as in Nigeria, contrasts with the situation in Upper Volt a or in Angola and Mozambique, where either quantitative restrictions or limited resources are among barriers to trade with the United States. However, few of the obstacles to trade can be considered as permanently insurmountable. Coun- tries with poor resources now may suddenly dis- cover natural resources providing new stimulus for foreign trade. Libya, for example, was re- garded as one of the poorer countries in Africa scarcely a decade ago. Today, petroleum explora- tion and development have given the country a booming economy. Over the long term, the newly independent coun- tries will continue to follow policies which increas- ingly diversify foreign trade relationships and break away from traditional commercial and fi- nancial patterns. This trend can be expected to continue as productive capacity expands. The country situations described in this book demonstrate that the African market today offers both immediate and' longer term possibilities for an increasingly diversified range of American products, but that American exporters will need to devote necessary attention to Africa as a spe- cialized market. Expanding African Trade: Secretary of Commerce Luther H. Hodges discusses trade and investment opportunities with two officials of Ethiopia. At right is Ambassador Birhanou Dinke, and in center is Lidj Endalkatchen Makon- nen, Ethiopia's Minister of Commerce and Industry. VI Contents Page Foreword iii Introduction v CHAPTERS I. Economic Policy in Changing Africa 1 II. Present U.S. Business Interests in Africa 7 III. The AID Program: Implications for U.S. Business in Africa n IV. Export Outlook Contrasts in Selected Countries 15 Part 1 . Export Outlook : West Africa 17 Nigeria 19 Upper Volta 23 Part 2. Export Outlook: Central Africa 25 Republic of the Congo (Leopoldville) 27 Angola and Mozambique 31 Part 3. Export Outlook: East Africa 33 East Africa (An Overview) 37 Problems of Trading With East Africa 39 Malagasy Republic 41 Part 4. Export Outlook: North Africa and the Horn 45 The United Kingdom of Libya 47 The Republic of the Sudan 49 Kingdom of Morocco 53 Part 5. Export Outlook: Southern Africa 57 The Republic of South Africa 59 V. Soviet Bloc Economic Offensive: Ghana, A Case Study 63 VI. African Regional Groupings 67 VII. Private Investment utlook Contrasts in Selected Countries 73 Why Invest in Africa 75 Part 1. Private Investment Outlook: Newly Developing Countries 77 Sierra Leone 79 Republic of Togo 81 Ivory Coast 83 Part 2. Private Investment Outlook: A "Developed" Area 85 Republic of South Africa 87 APPENDIXES A. Market Indicators for Africa 91 1. Area and Population 92 2. Major Cities. 92 3. Transportation 93 4. Education and Communication 94 5. Expenditure on GNP 95 6. Origin of Gross Domestic Product 95 VII Page 7. Electricity and Gas 96 8. Production of Industrial Raw Materials 96 9. Share of Free World Commodity Output 97 10. Agriculture and Food 97 11. Agricultural Production 98 12. Direction of Trade 99 13. Exports of Principal Commodities 101 14. Imports of Selected Commodities 103 Index Numbers of Foreign Trade: 15. Value 104 16. Volume and Price 104 17. Balance of Payments 105 18. Economic Assistance 106 19. Reserves, Money, and Exchange Rates 107 Sources Used for Statistical Data 108 B. African Embassies and Government Offices in the United States 111 C. Independent States of Africa 113 D. Bibliography 115 TABLES 1. U.S. Trade with Africa, by Country, 1961-62 8 2. Principal U.S. Exports to Africa, Excluding Egypt, 1960-61, January-June 1961 and 1962 8 3. Principal U.S. Imports from Africa, Excluding Egypt, 1960-62 8 4. Value of U.S. Direct Investments in Africa, by Region, 1950, 1960-61 10 5. Value of U.S. Direct Investments in Africa, by Type of Activity, 1950 and 1961_ _ 10 6. Plant and Equipment Expenditures of U.S. Direct Investments in Africa, by Region and Type of Activity, 1961-63 10 7. Aid Obligations for Fiscal Years (Ending June 30) 1961 and 1962 and Estimated Obligations for Fiscal Year 1963 11 8. U.S. Government Economic Assistance to Africa, Fiscal Year 1962 12 9. American Share of Congo Market, 1950-62 29 MAPS Administrative Divisions of Africa x West and Equatorial Africa 16 Nigeria 18 Republic of the Congo 26 East Africa 34 Malagasy Republic 43 The Horn 44 Libya 46 Sudan 50 Republic of South Africa 58 Ghana 62 Principal U.S. Markets in Africa 90 Foreign Service Posts in Africa HO VII PHOTOGRAPHS Page 1. The new face of Africa — a manganese miner in Gabon IV 2. Secretary of Commerce Luther H. Hodges discusses trade and investment oppor- tunities with two Ethiopian officials vi 3. M. Lazare Mpakaniye, Ambassador of the Republic of Rwanda, calls on Assist- ant Secretary of Commerce Jack N. Behrman 2 4. American oil companies assist in development of a new resource and industry 5 5. Port Sudan harbor 6 6. Sketch of Volta River hydroelectric project now under construction near Akosombo, Ghana 13 7. U.S. Department of Commerce officials discuss trade problems with a Nigerian delegation 15 8. Modern geodesic dome which housed U.S. Exhibition at Lagos, Nigeria, 1962 — 2o 9. American products shown at International Trade Fairs in Southern Rhodesia, Nigeria, and Libya, 1962 21 10. Director of Bureau of International Commerce shows recently revamped weekly magazine, "International Commerce," to Nigerian officials 22 11. Nigeria's leading harbor — Lagos 24 12. Tracklaying equipment for new railways in West Africa 28 13. Urban development, Leopoldville, Republic of the Congo 29 14. Modern technology employed in railroad construction, Gabon, Equatorial Africa. 30 15. Port of Mombasa 35 16. Final recovery building at Williamson Diamond Mine, Mwandui, Tanganyika 36 17. Railroad connecting Kasese, Uganda, with the Indian Ocean port of Mombasa 36 18. Mechanized equipment for Kenya's agricultural output 38 19. Entrance to the Port of Tripoli 40 20. Road construction in Kenya 42 21. Cotton farmer in Sudan's Gezira area 51 22. Khartoum, capital of the Republic of Sudan 52 23. The old and the new 54 24. Thermal powerplant in Southern Rhodesia, and hydroelectric plant and irriga- tion system in Morocco , 56 25. A shoe factory in Southern Rhodesia 60 26. Urban telephone exchange system in Asmara, Ethiopia 61 27. Kumasi Central Hospital, Ghana 64 28. Leather goods factory in Ghana 65 29. Accra, chief city and capital of Ghana 66 30. M. Lazare Mpakaniye, Ambassador of the Republic of Rwanda, and George Donat, Deputy Director, BIC, discuss foreign trade activities of U.S. Department of Commerce 68 31. Imports being unloaded at Port Sudan harbor 69 32. Power feeds growing industrial park in Lagos, Nigeria 71 33. A Mauritanian learns new skills "3 34. Heavy equipment for manganese mine development in Gabon 76 35. Presidential Hotel at Enugu, Eastern Region of Nigeria 76 36. Artist's impression of New Hall and Municipal Offices planned in Freetown, Sierra Leone 78 37. Phosphate plant in Togo, West Africa 80 38. Ayame hydroelectric project on Bia River, Ivory Coast 82 39. Open pit extraction of manganese ore, Republic of Ivory Coast 84 40. Aerial view of Johannesburg, South Africa 86 41. Zelten No. 1 well in Libya 89 42. Kano Airport, Northern Region, Nigeria 89 43. Africa in transition 109 IX AFRICA ADMINISTRATIVE DIVISIONS 1 November 1962 GAMBIA Bisji- PORT. GUINEA" Conskry Frtotow: SIERRA LEO: INDEPENDENT COUNTRY 500 1000 KilomXeis Boundotin at* not n»c»uortly ^o> mcognind by th* U.S. Gavrnmtr CHAPTER Economic Policy in Changing Africa By Bernard Blankenheimer Director, Africa Division Office of International Regional Economics Bernard Blankenheimer is a graduate of Brooklyn College and hold* a masters degree in Economics from George Washington University. Since joining the Department of Commerce in 1941, he has trav- eled extensively in Africa. A Fellow of the Afri- can Studies Association, he is a lecturer at Howard University and at the School of Advanced Inter- national Studies of Johns HopkUis University. THE AFRICAN CONTINENT, with its vast untapped resources and bewildering- array of peoples, cultures, and new nations, is in process of dramatic economic transition. Everywhere there is preoccupation and emphasis on the problems of economic development. Pri- vate enterprise and, in particular, foreign private enterprise, is generally recognized as an important contributor to such development, but African Gov- ernment attitudes and policies, with respect to the role of private enterprise, vary considerably. Proper assessment of African economic and com- mercial policy requires an understanding of the vital interrelationships that exist between eco- nomic, political, social, and cultural patterns. Certain development projects undertaken by African governments, such as land resettlement schemes, have proved to be disastrous failures be- cause too little account was taken beforehand of particular social and/or environmental factors regarding the African's attitude toward land, the tribe or extended family units, or property, such as cattle. For example, the nomadic Masai of proud warrior traditions in Kenya or the wander- ing Fulani of Northern Nigeria have generally resisted efforts to settle them permanently or to domesticate their cattle for commercial meat pro- duction. Cattle are slaughtered only out of sheer necessity, because they are more important on the hoof, as a symbol of wealth and status, and be- cause of their most useful function as a type of dowry or "bride, price." Similarly, some contem- porary economic developments in Africa may be motivated primarily by political considerations and the projects may be quite illogical when as- sessed on economic grounds alone. The thin and often obscure dividing line be- tween politically and economically inspired de- velopments is not in itself unique to the African continent — but there is, perhaps, one unique characteristic in African policy not found to the same extent in other continents — and that is the all-embracing and pervading preoccupation with colonialism which colors a good deal of African thinking and policy decisions. 1 While occasionally African leaders may grant that certain residual "benefits" were derived from colonial associations with the European powers, e.g., language, religion, bridges, roads, etc., they contend that these "benefits" were only incidental to the process of "colonial imperialism" which embodied political domination and economic ex- ploitation. Consequently, it is important to under- stand that the traditional concept of colonialism is universally repugnant to Africans and that the new African states, so soon emerged from a colo- nial or dependent status, do not feel themselves either secure or entirely free from colonial vestiges or neo-colonial influences. Because of the role that foreign private enterprise, predominantly of metropolitan, or mother country, origin, played during the colonial period, the task of the leader- ship of the new African states, as a first impulse, was to safeguard the country's newfound sover- eignty by controlling the role and scope of foreign private interests in the country's economy so as to prevent resurgence of "economic imperialism." a Weighed against this impulse was the tacit rec- ognition of the realities of the situation ; that for the most part foreign private enterprise, in fact, accounted for much of the activity in the produc- tive sector of the economy and that future eco- 1 This theme ran through many of the speeches hy participants in the Second Conference of Independent African States held in Addis Ababa in June 1960, and appeared even in speeches before economic forums, such as plenary sessions of the United Nations Economic Commission for Africa. M. Lazare Mpakaniye, Ambassador of the Republic of Rwanda, one of Africa's newest nations, calls on Assistant Secretary of Commerce Jack N. Behrman following the Am- bassador's arrival in Washington, D.C., to open his country's Embassy. nomic growth necessarily had to lean heavily on the faith, confidence, and continued investment of foreign enterprise. This situation has given rise to confusing and sometimes outright contra- dictions between policy pronouncements, regula- tions, and/or actions by African leaders. 2 Does this imply an ideological antipathy to pri- vate enterprise? No — not yet — but the danger exists that such hostility may develop in many of the emergent countries because of the deepening disappointment of African leaders over the hesi- tancy of foreign private enterprise to take more speculative risks. Such frustration, if unrelieved, may drive, these leaders into a more precipitous attachment to "statism" as a means of achieving economic development goals. This danger is clearly indicated in a speech made before the Commerce and Industry Association of New York in the middle of 1960 by the Honorable Chief Festus Okotie-Eboh, Federal Minister of Finance of the Government of Nigeria, in which he appealed to American businessmen to make their contribution to the economic development of Nigeria by investments there. He said: This is a call from Macedonia that you should come and help us. We hope that this call will not fall on deaf ears. We believe that you are sympathetic to our cause. 2 At a time when one West African country was embarked on an advertising campaign in the United States to induce private capital investment, public statements were made by high officials in that country implying future nationalization of certain existing foreign enterprises. These statements were immediately followed by official disclaimers of any such intentions. Some of you are already there. Those of you who are already there and icho have had investments have a com- mon purpose and a common touch with us . . . In his candid extemporaneous manner, the Minister spoke of the wonderful reception ac- corded him and his mission everywhere by com- mercial interests and by officials of the United States Government but, he cautioned, If ire go home and report, they will take our report for what it is, but they will wait to see. As it is said in my tribe, that the blind man says that he is only con- vinced that his son has caught game during the hunting only when he tastes of the venison. . . . They will say 'Yes' but they will wait and if they are going to wait for the moon, then you are running into a difficult situation. A similar warning was sounded by Dr. H. K. Banda, outspoken Nationalist leader in Nyasa- land : / would rather have the dollars and the pounds, but if the dollars and pounds are not forthcoming, I am not going to let my people starve and I am going to take the rubles. What then are the prospects and problems for foreign private enterprise in Africa? To answer this adequately we should have an appreciation of certain underlying background facts. STRUCTURE OF THE AFRICAN ECONOMY Africa consists of some 60 political entities rang- ing from ancient sovereign states such as Ethiopia to dependencies such as Basutoland. Their state of development varies from relatively advanced mineral-industrial economies, such as the Republic of South Africa to the marginal agro-pastoral economy of the Somali Republic, and from under- developed but potentially rich Nigeria, a populous country of some 40 million people, to poorer and more sparsely settled areas in East and North Africa. Prior to 1950, only 3 countries (excluding Egypt) were independent. In a single year — 1960 — 17 countries achieved their independence. The total today stands at 33. Still others are preparing for independence. African states form more than one-fourth of the total membership of the United Nations and are, therefore, in a posi- tion to exert considerable influence in international forums. Notwithstanding this startling upsurge in the political stature of Africa, the continent has achieved only limited economic growth in relation to its resource potentials. In no other continent does so large a proportion of the population de- pend on subsistence-productive activities carried on within the framework of the traditional tribal economy. Substantial progress has been made to- ward the transformation of this traditional sub- sistence economy to a modern produetion-for-ex- change economy, but such activities in much of Africa are directed to the output of primary prod- ucts for exportation rather than production for home consumption. Intra- African trade, there- fore, is of minor importance in relation to Africa's global trade. Africa's general prosperity depends directly on demand and price levels in industrial countries for these primary products, notably in- cluding timber, coffee, cocoa, and various metals and minerals. In the past, the capital, technol- ogy, and motivation for much of the development in Africa, came, not from within Africa, but from external sources and predominantly from the metropolitan countries. Such capital was in the form of both public loans and grants, but heavy reliance was placed also on private foreign capital inflows. It is esti- mated that from World War II to 1957, some $10 billion — half public, half private — was in- vested in Africa, and that the great bulk of it came from Western Europe. 3 In summary, the structural nature of the Afri- can economies — e.g., dual subsistence-exchange activities, dependence on primary output for export, low income, and limited internal capital formation capabilities — all have combined to make economic development heavily contingent on ex- ternal sources. THE TECHNOLOGICAL GAP IN AFRICA A fundamental deficiency in the African econ- omy stemming from this dependency on external forces is the "technological gap" and the all too glaring absence or shortage of indigenous entre- preneurial skills and managerial talent. Generally, the African is either employed in agricultural pursuits or is a laborer in commerce and industry. There are relatively few indige- nous self-employed entrepreneurs, and private in- digenously owned limited liability companies are rare in tropical Africa. Where Africans are 3 "The African Economy and International Trade," Andrew M. Kamarck in The United States and Africa, American Assembly, Columbia University, 1958. entrepreneurs, they are usually small traders, in- dividual proprietorships, or partnerships rather than corporations. In economic life perhaps this, more than any other factor, has motivated direct government or government-sponsored activities around a frame- work of some sort of centralized or state-inspired blueprint or plan for development. In almost all of the newly independent African states, there is a definite trend for the public sector to play an important role in economic and social develop- ment. As one United Nations report observed : The fact is, given the lack of conditions necessary for a more spontaneous growth, many African Governments have no choice out to perform the functions of an entre- preneur in diverting savings into productive investments and even in assuming the responsibilities of management. Many of the facilities, such as transport, water supply, and power, the so-called infrastructure, are in urgent need of development — and in these fields government initiative is essential * * * ' The report also points out that government has a key role in agricultural research and improve- ment and "in the provision for technical and vocational training for industry." The extension of government in African econo- mies into activities that in the United States are not normally in the public sector has caused many observers to express concern that such actions by African governments constitute an ideological commitment to state socialism and, as a corollary, definite opposition to capitalism. Governments are placed into specific categories and are labeled "pro" or "con."' Rather, it would seem that most emergent African states, independent only for from 1 to 10 years, have not yet developed a fixed or firm political or economic ideology, and that the wide variants and admixtures of free and controlled economies found in different parts of Africa are based more on experimental prag- matic considerations and an impatience to speed economic growth than on theoretical ideology. In this situation throughout Africa, there is much scope for private foreign enterprise, pro- vided this enterprise, as the Assistant Secretary of State for African Affairs, the Honorable G. Mennen Williams, has said, accepts Africa "on its own terms." In a speech 5 before a group of American businessmen, Governor Williams stated : 4 Economic Survey of Africa Since 1950, United Nations, 1959, p. 3 ff . ''Africa's Challenge to American Enterprise, by G. Mennen Williams, Assistant Secretary of State for African Affairs ; ad- dress made before National Conference on Small Business at Washington, D.C., December 1, 1961. We must, of course, eyieourage the African nations to develop the plurality of institutions that we have found to be the greatest bulwark of freedom. In particular, we must help them find a place for private enterprise but we would be remiss if we did not say very candidly that private enterprise, itself, must be prepared to make major adjustments. These adjustments, he went on, included more emphasis on management and less on ownership; and similarly, more emphasis on obligations for training to employ surplus African labor rather than on capital intensive investment. Africans want "Africanization" — which should not be confused with "nationalization." Africans want to see African labor trained and employed, African resources used, and Africans encouraged and given an opportunity to participate in enterprise. Unfortunately, many of the established expatri- ate or foreign-based enterprises in Africa have not changed their policies in these respects fast enough or soon enough to suit African leaders, and as a result less and less reliance is being placed on the very institution of private enter- prise. If Africa is to develop a healthy respect for the benefits of private enterprise, the process of Africanization in entrepreneurial activities must be speeded up. In this context, private enter- prise itself should take the initiative. It is noteworthy that in contrast with some old- line enterprises, the pattern for new private foreign investment activity in Africa is for joint ventures with local interests, both public and/or private. Moreover, enlightened private foreign enterprises in Africa are supporting in-service training activities, education, and other com- munity activities. This is particularly true of American private capital which has gone into Africa. American oil companies in West Africa, for example, have taken the lead in developing private entrepreneurships in gasoline station operators, while one American mining company in Liberia has made possible local stock participa- tion on an installment basis, to be paid out of eventual earnings. All African states keenly seek the contribution of American business to African development, and it is encouraging that a number of these states have established specialized trade and in- vestment promotion offices in the United States aimed at attracting U.S. businessmen to their country. Many official African missions have Courtesy Esso Libya American oil companies, such as this one in Libya, have assisted in the development of a new resource and industry. visited the United States in specific search for U.S. capital and technology, and in many conn- tries specific investment codes or legislation have been introduced to induce new private capital inflows. A typical example is the new Investment Code enacted June 1961 by the Republic of Congo (Brazzaville) which aims at encouraging both foreign and domestic private investment by put- ting forth certain guarantees for qualified busi- ness ventures. These benefits — similar to those provided for in the investment laws of several other French-speaking African states — include the free transfer of profits and capital realized from the sale of assets, identical treatment of foreign enterprises and their employees with those enjoyed by Congolese counterparts, certain basic fiscal and tax advantages, liberalization of import restric- tions for the construction and outfitting of plant and equipment, limitation on the importation of competing products and provision for necessary tariff protection, and preferential treatment on exportation of products from the Congo by virtue of export tax remissions. Similar investment codes or laws designed to encourage foreign and domestic investment have been enacted by many African countries, while in still others such laws are under consideration. The United States Government, itself, through the various programs of the Agency for Interna- tional Development, the Export-Import Bank of Washington, and the U.S. Department of Com- merce, has attempted to stimulate active partici- pation of American capital, technology, and management in African economic development. Under the Investment Guaranty Program, ad- ministered by AID, insurance is provided against various kinds of political and economic risks, e.g., expropriation and nationalization, war risk, and exchange convertibility. Loan finance can be pro- vided from various sources such as the Develop- ment Loan Fund, administered by AID, and the Export-Import Bank, while information and ad- vice and on-the-spot help is available to Ameri- can businessmen from the U.S. Department of Commerce in cooperation with the U.S. Foreign Service. The present extent and geographic distribution of American private investments in Africa are limited. Out of a total of $34.7 billion of Amer- ican direct investments around the world, the amount in Africa totaled only $1.04 billion at the end of 1961; of this total, $231 million was in North Africa, $56 million in East Africa, $341 mil- lion in West Africa, and $413 million in Central and Southern Africa. Although manufacturing and industrial activities were rather well repre- sented in U.S. investment in South Africa, most U.S. investments in West and Inter-tropical Africa were in extractive operations and petroleum dis- tribution. These figures do reveal a satisfying rate of growth in investments in tropical Africa as compared with Southern Africa, however. The $341 million total of U.S. direct investments in West Africa in 1961 represents an increase of more than 700 percent over 1950, when such invest- ments totaled only $42 million. Efforts to increase our investment position in Africa are in the best interests not only of the American businessman but also of both the United States and the African Governments. The future of Africa is in the hands of Africans, but they need help. Help that modern Ameri- can and other foreign private enterprises can pro- vide. For private foreign enterprise carries with it its own technology and managerial capacity, provides added sources of revenues so desperately needed by African governments, assists in the training and employment of African indigenous peoples, and contributes to the emergence of an entrepreneurial class so vital to the future sta- bility of Africa. Courtesy World Ban!; Port Sudan harbor, Sudan's gateway on the Red Sea. CHAPTER II Present U.S. Business Interests in Africa By A. A. Wilken, Jr. Africa Division Office of International Regional Economics Following 4- years of service with the U.S. Air Force, Mr. Wilken graduated from the University of California at Los Angeles with B.A. and 31. A. degrees in Economics, and subsequently studied at the University of Michigan. He is now serving as Desk Officer for the tropical^ French-speaking Afri- can countries. TRADE WITH AFRICA United States trade with Africa — a relatively small part of total U.S. trade — is expanding con- siderably. During the past decade, growth of ex- ports to and imports from Africa has been at an accelerating rate. U.S. exports to the continent (excluding Egypt) in 1962, shown in table 1, in- creased 12.1 percent over the preceding year. This compares with an 8.2 percent increase between 1960 and 1961 and with an average annual rate of increase of 1.79 percent from 1956 through 1960. At the same time, the value of U.S. imports from Africa increased by 15.4 percent from 1961 to 1962, and by 8.9 percent from 1960 to 1961, contrasting sharply with an average annual decrease of 3 per- cent from 1956 through 1960. Major Products As a general group, machinery items have con- stituted the most important category of U.S. ex- ports to Africa. Food products other than fats and oils hold second place among U.S. exports to Africa ; and sales during the first half of last year were 62.7 percent greater than in the comparable period of 1961. A large part of these exports, however, were financed under U.S. Food for Peace programs. Other major exports to Africa, shown in table 2, are finished and semifinished textile manufactures ; automobiles, parts, and accessories ; chemicals and related products; iron, steel, and manufactured metal items; and petroleum products. Largest relative gains in the first 6 months of 1962 were made in exports of iron, steel, and metal manufac- tures; these sales were 68.1 percent over the first- half 1961 level. Principal U.S. imports from Africa, shown in table 3, continue to be minerals, coffee, and cocoa, although purchases of cocoa declined slightly from the 1961 level. Ferroalloys, ores, and metals were replaced by coffee as the first-ranking import in 1962 as U.S. purchases of coffee from Angola and East Africa increased substantially. Precious and semiprecious stones showed the greatest percentage rise among products purchased from Africa. A large part of this increase was accounted for by imports from the Republic of 679455 O— 63- Table 1. — U.S. Trade With Africa, by Country, 7 967-62 lln thousands of dollars] Table 2. — Principal U.S. Exports to Africa, Exclud- ing Egypt, 7 960-67 , January-June 1961 and 7 962 [Id thousands of dollars] Area and country Total Africa Percent of U.S. total United Arab Republic (Egypt) Total Africa, excluding United Arab Republic North Africa and the Horn, total Morocco Algeria Tunisia Libya Sudan Somali Republic French Somaliland Ethiopia.. Canary Islands Spanish Africa, n.e.e Middle Africa, total Cameroon, Federal Republic of 2 _ Western Equatorial Africa, n.e.c, (former French Equatorial \frica) Western Africa, n.e.e. (former French West Africa and Re- public of Togo) Ghana. Nigeria 3 British West Africa and Sierra Leone Madeira Islands Liberia Seychelles and dependencies Mauritius and dependencies East Africa (Kenya, Uganda, Tanganyika, and Zanzibar) Republic of the Congo (former Belgian Congo), Rwanda, and Burundi Malagasy Republic Southern Africa, total Angola Mozambique Western Portuguese Africa, n.e.c. Rhodesia and Nyasaland, Fed- eration of Republic of South Africa <__ U.S. exports, in- cluding reexports 19til 82S, 819 4.3 161.874 664, 945 218, 855 65. 989 42. 116 39. 512 30,308 11.601 1,063 794 10, 892 11,878 4,702 184, 158 4,119 . 626 19,917 21,163 26, 779 3,027 879 49, 634 38 735 18,872 29, 475 1,894 261,932 9,773 9,995 432 13. 649 228,083 1962 979, 883 5.0 234, 390 745, 493 245, 302 52. 638 49, 879 45. 856 43, 892 12, 897 4, 582 665 23.236 9,614 2, 043 244, 252 4,266 4,481 29. 95S 22, 831 33, 666 3. 073 916 50, 993 7 1,054 21,360 6S. SSS 2.759 255, 938 11,437 7, 582 360 13, 634 222, 925 General U.S. imports 669, 443 4.5 34, 229 635, 214 50, 309 11,347 259 683 457 5, 099 436 248 31,406 174 200 329, 007 6, 196 1,713 35. 872 74, 749 49. 073 4, 547 2,214 31,847 90 S46 52, 430 55, 932 13, 498 255, 899 28, 037 5.373 2,964 10, 279 209, 246 1962 758, 884 4.6 25, 586 733, 298 68, 763 1(1,739 5. 328 1,638 11.934 6, 953 656 585 29, 508 1,407 15 332. 145 6,947 40, 485 62, 503 47,732 9.875 3,013 31,323 103 2,863 57, 174 47, 516 16,014 332, 390 38. 169 6, 456 1,419 29,612 256, 734 1 Data exclude "special category" exports: percentages are based on U.S. totals, excluding "special category." "Special category" exports are those exports on which Information is withheld for security reasons. - Data for 1961 refer to former Republic of Cameroun; figures for 1962 include former British Southern CamerooDS. 3 Data for 1962 include former Northern British Cameroons. 4 South-West Africa and British High Commission Territories of Bechu- analand, Basutoland, and Swaziland are included. n.e.c. Not elsewhere classified. Source: International Trade Analysis Division, Bureau of International Commerce, U.S. Department of Commerce, from basic data furnished by the Bureau of the Census. South Africa and significantly greater purchases from Sierra Leone, Congo (Leopoldville), Ghana, and French-speaking West, Africa. On a regional basis, imports from North Africa and the Horn 1 increased by 36.7 percent in 1962 compared with 1961; imports from Southern Africa rose by 29.9 percent and those from Middle Africa by slightly less than 1 percent. Product Total U.S. exports to Africa Foodstuffs, except fats and oils Grains and preparations Other Machinery. ___ __ Industrial machinery _, Construction, excavating, and mining Electrical machinery and apparatus Tractors, parts, and accessories Textile semi- and finished manufac- tures Manmade (synthetic fibers and manu- factures) Automobiles, parts, and accessories. _ Chemicals and related products Iron and steel and metal manufactures Petroleum and products Wood and paper Tobacco and manufactures Rubber and manufactures 1960 1961 Janu- ary- June 19G1 614, 514 664, 945 311, 270 54,971 46, 898 8,073 139. 249 128. 487 10. 762 53.909 49, 029 4,880 193,008 118,908 192. 213 128,771 92, 087 58, 359 64,317 23, 622 38. 173 72, 292 20. 110 32, 681 31.934 11,083 16, 613 55, 246 54, 519 27, 922 21,936 19, 914 9,936 65 249 41,471 29, 640 23, 347 19. 086 11,076 12,018 46,912 40,119 25. 915 19,155 17,204 14,902 11,849 24, 481 19. 888 10, 059 9,227 8,369 7.194 5,710 Janu- ary- June i 1962 363, 256 87, 724 79. 386 8,338 98, 883 67, 918 37, 527 11,943 13,849 28, 939 11,680 26. 675 22, 157 16. 908 10, 580 9,892 7.277 7, 705 1 At time of publication, year figures for 1962 by commodity were not available. Source: International Trade Analysis Division, Bureau of International Commerce, U.S. Department of Commerce, from basic data furnished by the Bureau of the Census. Table 3. — Principal U.S. Imports From Africa, Ex- cluding Egypt, 7960-62 |In thousands of dollars] Product Total U.S. imports from Africa Agricultural Coffee, total East Africa > Ethiopia Angola Congo (Leopoldville) 2 _._ Western Africa, n.e.c. 3 Cocoa and cocoa beans, total Ghana Nigeria Western Africa, n.e.c Crude rubber, total Liberia.. Nigeria Wool, unmanufactured, total (chiefly Repub- lic of South Africa) Nonagricultural Ferroalloys, ores and metals, total Republic of South Africa (primarily ura- nium) Gh ana (manganese ) Xonferrous ores and metals, total Republic of South Africa (mostly copper). Congo (Leopoldville), mostly cobalt and zinc Precious stones, total Republic of South Africa 196(1 594, 970 123, 193 29, 618 24, 668 23, 727 25, 631 18, 889 66, 473 35,837 19,536 6,969 49, 451 29,583 11,518 17, 923 147, 607 106,031 14, 045 54, 102 27, 945 10, 783 18, 270 15, 856 1961 635,214 136, 380 36, 872 29, 456 24, 436 21,959 16, 905 113,085 60, 773 31,710 13, 058 39, 209 23, 755 9,706 24, 949 138, 564 102, 645 13, 076 33.714 21. 672 10,001 24, 566 20, 744 733, 298 145,811 39,321 26, 606 36,819 17,943 13, 737 94, 014 48, 127 27,214 14,925 39, 189 20, 947 10, 439 28,906 141,226 110.299 8,742 28, 045 17,236 5,828 63, 459 35,780 1 The Horn is that area of Africa comprising Ethiopia, French Somaliland, and) the Somali Republic. See map, p. 44. 1 Kenya, Uganda, Tanganyika, and Zanzibar. - Includes Rwanda and Burundi. 3 Former French West Africa and Togo. Source: International Trade Analysis Division, Bureau of International Commerce, U.S. Department of Commerce, from basic data furnished by the Bureau of the Census. Regional Developments Long-Term Regional Changes Gains in U.S. export sales have not been evenly distributed within Africa. Greatest percentage increases were made in Middle Africa (an area where the T T .S. business community has only re- cently begun to undertake more vigorous promo- tional activity) and a substantial rise was shown in sales to North Africa and the Horn. Exports to Southern Africa, however, declined slightly from 1961 to 1962. A number of factors contrib- uted to this varied pattern. In North Africa, for example, a major part of the sharp rise in exports was accounted for by increased shipments of grains and foodstuffs, largely under U.S. Food for Peace programs, as a result of prolonged drought conditions and poor harvests throughout the area. Sales to Sudan and countries in the Horn of Africa rose in connection with a general acceler- ation of economic development which was given some impetus by TT.S. assistance programs. Ex- ports to Ethiopia more than doubled in 1962, pri- marily as a result of the sale of two U.S. jet, transport aircraft. In Ghana, Nigeria, Liberia, and French-speak- ing West Africa, as well as in English-speaking East Africa, particularly large increases were made in sales of iron, steel, metal manufactures, and machinery. This trend reflects advances which have been made in industrialization and economic development over much of Middle Africa — bolstered by U.S. and other foreign aid programs — and a rising level of investment activity. Expansion. of U.S. exports to French-speaking Equatorial Africa and Cameroon was limited by the continuance of strictly enforced import licens- ing and control systems and by the introduction, in mid-1962, of a Common External Tariff which provides preferential treatment to imports from France and European Common Market countries. A decrease in sales to the Republic of South Africa last year was attributed mainly to reduced governmental expenditures for railway transpor- tation equipment and aircraft. The decline in exports to Mozambique resulted directly from strict import controls which were instituted to combat a severe balance-of-payments problem. Changes in sales to various African areas last year are consistent with long-run patterns which have taken shape in U.S. -African trade over the past few years. The newly independent countries in tropical and northern Africa have assumed steadily growing importance as markets for U.S. products. Ambitious economic development programs have been launched in the majority of countries in these regions and several states have taken deliberate steps to broaden and diversify the geographical base of their foreign trade. Sales to some of the established and tradition- ally more important African markets, in contrast, have increased at distinctly slower rates or have leveled off. As a result, U.S. sales to each of the three regions in 1962 were almost equal, in rough figures. Although Southern Africa still accounted for the largest part of U.S. exports to Africa, the situation has changed markedly from that which existed as recently as 1959, when nearly half of total U.S. exports to the continent went to South- ern Africa, and Middle and North Africa ac- counted for only about one-quarter each. INVESTMENT IN AFRICA The value of U.S. direct investments in Africa, as shown in table 4, increased by more than 300 percent from 1950 through 1961 and amounted to over $1 billion in 1961. This expansion is particu- larly impressive when compared with the growth of U.S. direct investments over the world during the same period. The rate of increase in Africa was more than 50 percent higher than the global rate over the period from 1950 through 1961 and over three times greater from 1960 to 1961. Regionally, the increase in American invest- ments in Africa over the past several years has been unevenly distributed. Greatest percentage gains have been made in North and Middle Africa and, as a result; significant changes have occurred in the geographic distribution of these invest- ments on the continent. Southern Africa in 1950 accounted for over 70 percent of the value of U.S. direct investments in Africa, and North Africa for less than 7 percent; in 1961 the regional dis- tribution was more nearly equal, with Southern. Africa representing only 10 percent of the total. Table 4. — Value of U.S. Direct Investments in Africa, by Region, 1 7950,7960-6? 1950 1960 1961 1950-61 1960-61 Region Value » Percent Africa total Value 2 Percent Africa total Value 2 Percent Africa total Percent increase Percent increase North Africa 16 54 12 42 177 140 26 248 11,788 6.5 21.7 4.8 16.9 71.4 56.5 10.5 99.6 137 336 46 290 394 286 82 867 32, 778 15.8 38.7 5.3 33.4 45.4 33.0 9.5 99.9 231 397 56 341 413 304 87 1,041 34, 684 22.2 38.2 5.4 32.8 39.7 29.2 8.4 100.1 1, 343. 8 635.2 366.7 711.9 133.3 177.1 234.6 319.8 194.2 68.6 18.2 21.7 17.6 4.8 6.3 6.1 20.1 5.8 Middle Africa .. .. East Africa West Africa Central and Southern Africa, total . . . Republic of South Africa Rhodesia, and Nya.sa1a.nrl Total Africa Total World _ 1 Excluding United Arab Republic (Egypt). 2 In millions of dollars. Sources: Survey of Current Business. August 1961 and August 1962 issues, U.S. Department of Commerce, Washington. U.S. Business Investments in Foreign Countries, U.S. Department of Commerce, Washington, 1960. Notwithstanding this encouraging increase in U.S. investments in lesser developed areas in Africa, the bulk of this increase was in extractive activities. As shown in table 5, while in absolute terms, the value of investment in manufacturing increased significantly, the proportional share of U.S. investment in manufacturing in Africa has declined in the past decade and increased in min- ing and petroleum exploration. This trend is especially evident in North Africa, where nearly all of the increase in U.S. direct in- vestment over the past 10 years has been in petro- leum exploration and exploitation, and in West Africa, where the bulk of the increase has taken place in mining and smelting. Most of the invest- ment in manufacturing has been confined to Cen- tral and Southern Africa where substantial and established local markets exist. Data on investment plans of U.S. firms indicate that these trends will continue into the immediate future. Projected 1962 and 1963 expenditures for plant and equipment of direct U.S. investments in Africa, shown in table 6, are predominantly for projects in the petroleum industry and, to a lesser extent, in the mining industry. Planned investments in manufacturing operations are rel- atively small and, again, limited almost entirely to Southern Africa, Table 5. — Value of U.S. Direct Investments in Africa, 1 by Type of Activity, 1950 and 7 967 [In millions of dollars] 1950 1961 Type of activity Amount Percent of total Amount Percent of total Mining and smelting 64 98 47 21 19 248 25.8 39.5 18 9 8.4 7.6 100.2 285 474 109 59 113 1.041 27 4 Petroleum 45 5 Manufacturing 10. 5 Trade ___ _ 5 7 Other.. 10 9 Total, Africa _ 100.0 ' Excluding United Arab Republic (Egypt). Sources: See table 1. Table 6. — Plant and Equipment Expenditures of U.S. Direct Investments in Africa, 1 by Region and Type of Activity, 7 967-63 [In millions of dollars] Region Mining and smelting Petroleum Manufacturing 1961 1962 2 1963» 1961 1962 2 1963 2 1961 1962 2 1963 2 Africa, total 47 ( 3 ) ( 3 ) 22 25 10 15 67 ( 3 ) ( 3 ) 37 30 10 20 56 ( 3 ) ( 3 ) 26 30 10 20 171 111 9 34 17 (<) (<) 188 134 12 30 11 (<) 0) 169 116 13 29 12 ( 4 ) (*) 10 ( 3 ) ( 3 ) ( 3 ) 10 8 2 12 ( 3 ) ( 3 ) ( 3 ) 12 11 1 12 North Africa ( 3 ) ( 3 ) East Africa.. _ West Africa (3) Central and South Africa, total Republic of South Africa... 12 11 Other countries 1 1 Includes United Arab Republic (Egypt). 2 Estimated on the basis of company projections. 3 Less than $500,000. 4 Included in area total. Source: Cutler, F., Foreign Capital Outlays and Sales of U.S. Companies, Survey of Current Business. September 1962, U.S. Department of Commerce, Washington. 10 CHAPTER III The AID Program: Implications for U.S. Business in Africa By Lloyd D. Black Office of Development Planning Bureau for Africa and Europe Agency for International Development Lloyd D. Black, a graduate of the University of Toronto, holds a masters degree from Clark Uni- versity and a doctorate in Economics from the Uni- versity of Michigan. Before entering the Agency for International Development, he was Professor of Geography at the State Departments Foreign Serv- ice Institute and Chief of the Program Evaluation Division, Area Redevelopment Administration. I HE PROBLEMS of applying AID procure- ment policies to maximize purchases of U.S. goods and services because of balance-of-payments rea- sons are particularly acute in the economic assist- ance programs now being conducted in 34 African countries. Numerous factors make it difficult to operate these programs without a net drain on our balance of payments. It is therefore essential that AID, Commerce, and State, in cooperation with private enterprise, endeavor to expand U.S. trade with Africa. The AID program in Africa presents an oppor- tunity to U.S. business firms because current poli- cies require that AID funds be expended for U.S. goods and services to the maximum extent possible and also because the pace of economic develop- ment is creating new markets. For AID, the fiscal year ending June 30, 1962, was a period of examination, reorganization, and redirection of the economic assistance program. All programs in Africa were carefully reviewed to assure that their goals were well-conceived, capa- ble of accomplishment, and responsive to the prin- cipal needs of the countries being assisted. The pattern for the allocation of AID resources in Africa was evaluated, as were the planning and "self-help" measures undertaken by the Africans themselves. (See table 7.) Table 7. — Aid Obligations for Fiscal Years [Ending June 30) 1961 and 1962 and Estimated Obliga- tions for Fiscal Year 1963 [In millions of dollars] Type of assistance Obligations FY 1961 69.7 53.2 81.8 204.7 Preliminary obligations FY 1962 Estimated obligations FY 1963 Development grants 1 166. 2 85.6 61.1 312.9 ' 126. 8 Development loans.. 100.0 Supporting assistance 40.3 Total' 267.1 i Country figures are presented in table 8. - Includes $60-65 million for U.N. operations in the Congo and $1-2 million for international organizations in Africa in FY 1962 and about $35 million for both categories in FY 1963. Source: Agency for International Development. 11 AID requests to Congress for fiscal year 1963 were predicated upon five main principles : • Economic growth is a long-term process; pri- mary responsibility rests on the aid-receiving countries whose governments are encouraged by AID to engage in comprehensive development planning and to institute "self-help" measures. • AID must direct and limit its aid so as to sup- plement and complement the funds annually pro- vided by former metropole and other free world donors (about $1.2 billion in fiscal year 1962) as well as by other U.S. programs such as Public Law 480 surplus food transactions ($150 to $200 mil- lion) and Export-Import Bank loans ($50 to $100 million). See table 8. • The AID program should be concentrated in those countries best equipped to make economic progress. For example, about half of the pro- posed fiscal year 1963 development program is concentrated in Nigeria, Sudan, and Tunisia. (Multiyear commitments of $225 million, $180 million, and $10 million have been made to finance the development plans of Nigeria, Tunisia, and Tanganyika, respectively.) Furthermore, activi- ties essential to economic advance should have pri- ority over those that are not, regardless of their merit. • Loans should be made in preference to grants, wherever possible. Almost half of the proposed program is for loans. • The percentage of AID funds for U.S. goods and services should be as high as possible. It is this principle that has the most direct implications for expansion of U.S. business interests. AID currently administers about 400 develop- ment grant projects in diverse fields. Major em- phasis, however, is placed on providing the trained manpower necessary for efficient government and increased productivity. Thus, education, public administration, and agriculture are accorded high priority. Infrastructure projects are financed by long- term, low-interest development loans. Most of the 60-odd loans now under consideration or previ- ously authorized relate to transportation, electric power, industrial development, and water resource development. The need for financing of local currency (or the indirect foreign exchange impact), as well as di- rect foreign exchange costs of development proj- ects, is common to many African programs. This need arises from the very limited capacity for domestic savings and taxation and a pressing need to undertake internal impi-ovements, such as roads and schools, having a high local cost component. Such local cost financing poses problems of secur- ing maximum identification of U.S. dollar aid with U.S. exports of goods and services, as Afri- can imports from the United States generally are very low and special trade arrangements with the former metropole still prevail. A number of means of dealing with this prob- lem, including the use of special segregated dollar accounts, are being explored and tried. The cur- rent technique is to issue special letters of credit after prior agreement with cooperating countries. Each agreement specifies the limitations placed upon the expenditure of the dollars thus made available to finance imports of eligible goods and services from the United States. Table 8. — U.S. Government Economic Assistance to Africa, Fiscal Year 7 962 1 [Obligations and loan authorizations in millions of dollars] Country Re- Algeria Cameroon Central African public. Chad Congo (Brazzaville) Congo ( Leopold ville).. Dahomey Ethiopia Gabon Ghana Guinea Ivory Coast. Kenya Liberia Libya Malagasy Rep Mali Mauritania Morocco Niger Nigeria Rhodesia and Nyasa- land Rwanda and Burundi.. Senegal Sierra Leone.. Somali Republic Sudan Tanganyika Togo Tunisia Uganda Upper Volta Zanzibar Regional Total. U.A.R. (Egypt). Total FY 1962 AID Public Law 480 Export- Import Bank Peace Corps and other 10.4 13.1 0.2 0.3 1.2 83.7 2.5 8.9 0.4 130.2 10.3 2.5 11.4 14.1 13.1 0.7 2.6 0.1 50.0 1.2 24.3 2.8 6.1 1.0 2.5 14.2 13.8 13.4 3.8 48. 7 4.2 1.2 0.1 8.0 501.1 224.3 0.3 12.6 0.2 0.3 1.2 67.0 0.7 6.4 0.4 64.0 6 2.1 3.2 10.6 11.4 0.7 2.6 31.0 1.2 20.1 2.8 0.6 1.5 10.5 10.3 2.5 1.2 28.7 3.6 1.1 0.1 8.0 312. 9 42.0 10.1 0.1 0.4 16.7 1.8 2.0 0.5 0.7 4.3 65.0 0.5 0.4 8.2 3.0 0.7 0.5 1.0 0.1 19.0 ( 2 ) 2.0 0.2 2.0 6.1 0.4 0.2 3.3 3.5 10.6 2.5 19.1 0.6 0.1 ( 2 ) 0.8 0.4 0.6 0.3 0.1 0.3 113.3 182.3 67.6 7.3 Cumu- lative total FY 1946-62 15.0 15.3 0.2 0.4 1.3 94.6 5.6 117.8 0.5 156.5 14.3 4.6 18.5 127.2 187.2 1.3 5.1 1.6 352.0 3.2 43.6 36.1 6.1 4.6 3.5 27.4 65.0 17.6 5.8 293.3 5.2 3.2 0.1 11.1 '1,664.7 628.6 1 Includes Republic of South Africa, French, Portuguese, Spanish, and smaller United Kingdom dependencies. « Less than $50,000. 3 Includes $19.7 million in assistance (mostly under the Marshall Plan) to dependencies of Portugal ($12.8), France ($6.0), and the United Kingdom ($0.9). 12 Courtesy World Bank Sketch of $200 million Volta River hydroelectric project now under construction near Akosombo, Ghana, with financial assistance from the United States. This complex will furnish power for an aluminum smelting plant near the coastal city of Tema to be built by the Volta Aluminum Co. (VALCO). Two American aluminum companies, Kaiser and Reynolds, will have important interests in VALCO. Although AID finances contracts with U.S. firms for engineering feasibility studies, manage- ment assistance, industrial development analysis, economic planning guidance, and other services, the greatest potential for U.S. business lies in the exporting of manufactured articles and com- modities and in the identification and pursuit of investment opportunities. There are many deter- rents to the expansion of U.S. exports to Africa, however — relatively small markets in individual countries, ignorance of U.S. firms about trade techniques in African areas, traditional trading patterns with former metropoles, African unfam- iliarity with U.S. products, and inexperience of African personnel in procurement procedures. Efforts are being made to shift the burden of procurement and contracting to the host govern- ment to the extent legally possible. Because of the general unfamiliarity of African Government personnel with U.S. specifications, equipment, and techniques, AID is expanding and strengthening its assistance in the procurement and supply man- agement field through training programs, estab- lishment of technical and catalog libraries and information centers, and other facilities. This program also could assist private sector loan reci- pients and local contractors in purchasing U.S. goods. In the investment field, AID has several tools, the more important of which are direct dollar de- velopment loans to private enterprise; investment guarantees; local currency (or u Cooley") loans, feasibility and investment surveys; and support for development banks and investment centers. The Development Finance and Private Enter- prise staff of AID has been directed to encourage aggressively the formation of joint-venture ar- rangements between American firms and business- men of the host countries. As a starter, one pilot country was selected in each major region of the underdeveloped world for special emphasis in the private enterprise field. In Nigeria — the pilot country chosen in Africa — at least five industries are being selected in which significant contribu- tions to economic growth may be expected. AID and the U.S. Department of Commerce will ac- tively encourage appropriate U.S. firms within these industries to consider new investments. 13 International Marketing Services for Traders in Africa The Department of Commerce provides a host of practical international marketing aids for the new or experienced exporter. For example: In 1962, the Department of Commerce di- rected more than 13,000 specific Export Op- portunities to American companies. These "offers to purchase" U.S. goods are gathered by commercial officers at U.S. Foreign Service posts overseas. If you are not being advised of opportunities in your field — and want to be — notify your Commerce Department Field Office right away. Trade Lists are compiled by Foreign Serv- ice officers to help U.S. manufacturers and exporters find customers, agents, distributors, licensees, and sources of supply abroad. Each list gives names, addresses, and basic infor- mation on firms handling a specific commodity in one foreign country. A summary of per- tinent marketing data also is included. Single lists of "Business Firms," covering all types of commodities and services, are published for most of the new African republics instead of separate commodity lists. Trade Lists may be purchased from any Field Office of the De- partment of Commerce, or from the Bureau of International Commerce, U.S. Department of Commerce, Washington 25, D.C., for $1 each. International Commerce, the Depart- ment's weekly magazine for export -minded businessmen, reports each week on hundreds of opportunities for export sales of specific U.S. products. The subscription price of this magazine is $16 a year. Checks should go to the Superintendent of Documents, U.S. Gov- ernment Printing Office, Washington 25, D.C. World Trade Directory Reports are avail- able on any firm in any free-world country. Prepared by U.S. Foreign Service officers overseas, they describe the operations of the company and list products handled, firms it represents, size and reputation of the com- pany, its capital, and other pertinent facts. Reports are available from the Field Offices or from the Bureau of International Commerce, Department of Commerce, Washington 25, D.C. Price : $1 each. Trade Contact Surveys also are made for American business firms by Foreign Service posts to help them find aggressive sales agents and representatives overseas. On request, a canvass of a particular foreign city will be made and a report obtained on at least three companies which meet an American firm's spe- cific requirements. A charge of $50 is made for each survey. The Agency Index, maintained in most Foreign Service posts, enables commercial of- ficers abroad to put prospective foreign buyers in prompt touch with local sources of supply for U.S. products and services. The Index contains information supplied voluntarily by U.S. manufacturers and exporters about their agents, distributors, and licensees in foreign countries. Special Agency Index cards (form IA-30) are available to all U.S. firms inter- ested in supplying data on their representa- tives abroad for use by commercial officers in answering inquiries from foreign businessmen. The forms are obtainable without charge from Department of Commerce Field Offices or from the Bureau of International Commerce, U.S. Department of Commerce, Washington 25, D.C, and will be sent to appropriate Foreign Service posts when completed. Other sources of overseas leads for U.S. businessmen are the reports of business pro- posals received by U.S. Trade Missions, Trade Centers, and international Trade Fairs. All leads are available through the Department's Field Offices. With the aid of their extensive files and new data received daily, Field Offices can help U.S. manufacturers to determine which coun- tries are the best potential customers for their products, provide information on any coun- try's import regulations and tariffs, exchange controls and other regulations that may be ap- plicable to a company's products, and arrange for U.S. businessmen to consult specialists in Washington. CHAPTER IV Export Outlook Contrasts in Selected Countries B •ECAUSE AFRICA consists of a number of countries in various stages of economic, political, and social development, the U.S. exporter is of- fered many distinct export markets, with a wide range of needs and potentialities. Problems which hamper efforts to increase U.S. exports to specific countries include such factors as legislative impediments, discriminatory trade controls, monetary controls, inexperience of Afri- cans in foreign trading, predominance of large ex- patriate companies favoring European sources, state enterprise orientation, limited internal dis- tributional systems, and the one-crop economy. Some of these problems are institutional in na- ture and cannot easily be overcome by individual exporters ; others, however, simply require aggres- sive sales promotional efforts for effective results. This chapter discusses these problems in coun- tries specifically selected not only to highlight sharp contrasts in overall export outlooks but also to illustrate the various marketing techniques which might be required on the part of individual exporters to minimize or overcome these problems. Trade problems are discussed at a meeting with a Nigerian delegation headed by Michael A. Buba, Minister of Trade and Industry, Northern Region, and U.S. Department of Commerce officials. 15 Part 1 EXPORT OUTLOOK: WEST AFRICA FEDERATION OF NIGERIA By Arthur C. Lillig Former Commercial Attache, American Embassy, Lagos Arthur C. Lillig is a graduate of the University of Washington. Prior to his service as a Naval Lieu- tenant in World War II, he served in the, U.S. Im- migration and Naturalization Service. Since joining the Foreign Service in J947, he has served in diplo- matic and consular assignments in Poland, Germany, Malaya, the United Kingdom, and Nigeria. N IGERIA, WITH its 40 million people, repre- sents about one-sixth of the total population of the African continent. It is a large country — about 356,669 square miles — and possesses a wide variety of natural resources ranging from petroleum, tin, and columbite to palm oil, timber, cotton, hides, and spices. During the postwar period the main- tenance of import restrictions on dollar goods greatly limited our exports to that market. These restrictions now have been lifted, however, and U.S. goods face the problem of being introduced into a competitive market where many types and brands have not had previous exposure. THE MARKET In 1961, Nigeria imported a wide variety of goods, valued at over $622 million 1 — a figure roughly equivalent in that year to three-fourths of the total value of U.S. exports to the entire African continent, excluding the United Arab Republic (Egypt). Yet Nigeria's imports from the United States in 1961 amounted to only $26.8 million. This did not compare favorably with the figures for other countries — United Kingdom, 1 Nigeria Federal Ministry of Commerce and Industry figures, converted at the rate of US$2.80 to the Nigerian pound. $238.5 million ; Japan, $85 million, the Federal Republic of Germany, $46 milion. Total Nigerian exports from all countries in 1961 amounted to $486 million— a $10.6 million increase over the preceding year, and an impres- sive $138 million over the 1957 figure. Nigeria's per capita income is still relatively low — probably about $85. Consequently, as a mass market for consumer goods, Nigeria must be treated as a low- or medium-priced market. Nev- ertheless, the diversity of its imports and future prospects for sustained growth make it a market worthy of attention and greater aggressiveness on the part of U.S. businessmen. Although the market for U.S. consumer prod- ucts in Nigeria is wide, there is little direct con- tact or experience with American goods and services. There is a high regard for the "Made in U.S.A.'' label among African businessmen and consumers, but this label is rarely seen in Nigeria. OBSTACLES Some 60 agents (large non-Nigerian com- panies) account for most of Nigeria's imports, and one-fourth of this group, alone, accounts for ap- proximately 75 percent. Relatively few of the companies have proper facilities for technical re- pairs of industrial goods. Most of these expatriate 19 Nigeria — gateway to African markets — hold: Modern geodesic domi European representatives are heavily loaded with accounts and cannot devote as much time to each account as they should. Commercial ties with Eu- ropean suppliers are strong — and it will require special efforts to untie these traditional bonds. Expatriate houses are beginning- to show greater interest in U.S. products, particularly those which might be sold in connection with AID-financed 2 projects, however. In contrast to these large trading companies, some of the smaller firms (both African and non- African) which have only one or a few agency lines often do a more aggressive sales-promotion job. Many of them desire to buy directly from American exporters and bypass the large ex- patriate houses. Unfortunately however, many are inexperienced in foreign trade and have limited financing:. PROSPECTS United States capital goods of most types enjoy a good reputation in the country, although the United States faces some difficulties in competing with the United Kingdom and European exporters because of traditional trade patterns, higher orig- inal costs, transportation costs, and relative in- accessibility to the Nigerian market. American heavy earthmoving equipment and mining ma- 2 See Chapter III. chinery are particularly well known and used in Nigeria, although much of it comes from the U.K. branches of American manufacturers. As with some types of consumer goods, a selling job is re- quired to convince buyers that the higher initial cost of some U.S. goods is more than compensated for by their superior quality and durability. Ade- quate servicing and spare parts must be made available, of course. Some of the capital goods which have great potential in Nigeria are road construction and earthmoving machinery, agricul- tural equipment, machine tools, construction mate- rials, and machinery to process Nigeria's primary products. Consumer items for which there are good sales prospects include inexpensive lightweight cloth- ing, small refrigerators and room air conditioners (230 volts, 50 cycles), canned and frozen foods, compact passenger cars, pharmaceuticals and cos- metics, office supplies and equipment, inexpensive jewelry, and cotton and washable synthetic textiles. Many countries have greatly increased their ex- ports to Nigeria during the past 5 years. Canada, Belgium, France, Italy, and Japan, for example, have virtually doubled their trade with this mar- ket during that period. The growing Nigerian market offers an equally challenging opportunity for aggressive American exporters and a vigorous and persistent sales approach will bring rewarding; results. 20 first international fair at Lagos, 1962. used U.S. Exhibition. American products arouse interest at International Trade Fairs in Bulawayo, Southern Rhodesia; Lagos, Nigeria; and Tripoli, Libya, 1962. 4h l-l Eugene M. Braderman, Director of the Bureau of International Commerce, discusses the Department's recently revamped weekly magazine, International Commerce, with Michael A. Buba, Minister of Trade and Industry, Northern Region, Nigeria. Far right is Mr. Goodwin Onyegbula, Counselor of the Nigerian Embassy in Washington, and on the far left is Mr. Y. Gobir, Permanent Secretary of the Nigerian Ministry of Trade and Industry. 22 REPUBLIC OF UPPER VOLTA By Anthony S. Do/simer Vice Consul, American Embassy, Ouagadougou A nthony S. Dalsimer is a graduate of Grinnell College and holds a masters degree from the Fletcher School of Law and Diplomacy . After serving as a Foreign Affairs Officer in the Department of State's Bureau of Economic Affairs, he icas assigned to Ouagadougou in early 1961. IN CONSIDERING the problem of expanding sales of U.S. products in Upper Volta we are tak- ing, in some respects, a limited case. Upper Volta is a small country, and any expansion of exports is obviously limited by the size of the market — in terms of effective purchasing power, Upper Volta might equal a U.S. city of 100,000 to 200,000. Consider, by way of illustration, a few of the coun- try's vital statistics : Population: 4.25 million Size: 120,000 square miles Per capita income: under $10 Annual budget : $28 million x Annual imports: $28 million Annual exports: $3.5 million Although Upper Volta may not represent a typical case, general market conditions are analo- gous to those found in many other former French colonies. TRADE FACTORS ENCOUNTERED One of the most evident problems facing U.S. exporters in Upper Volta is that of legislative im- pediments in the form of discriminatory tariffs and quantitative restrictions. 2 Leaving aside ob- 1 Rate of exchange : 246.8 CFA francs=US.$l. 2 The United States Government is fully aware of the impedi- ments to the American businessman created !jy some of the regu- lations obtaining in a number of African countries which were formerly French overseas territories. As in the past, the U.S. Government will continue to press by all appropriate means for the elimination of such barriers. vious non- Voltaic legislation such as FAC and FED (French and European Economic Commu- nity development agencies, respectively) rules that one may equate with AID "Buy American" policies, a considerable number of regulations act to the disfavor of American trade. A French commission annually allocates the limited foreign exchange availabilities, which are expressed in New Francs and divided into Common Market and "other" categories for sources of purchases. The latter group includes two subdivisions — (1) countries with which bilateral accords are in effect and from which only specified merchandise may be imported, and (2) a "global quota" which in- cludes all other countries and for which no precise breakdown is made of available funds. There is also a list of "freed" items which may be imported without restriction. United States exports may compete for only a share of -this global quota and, even then, there are quantitative limits on certain items, such as vehicles. Additional handicaps for U.S. firms are the 30-percent reduction in customs duty granted to goods originating in EEC countries, and the complete exemption from this charge granted to franc zone goods. Certain non-French imports are further discriminated against by being singled out for exceptional entry charges (e.g., cigarettes) . A second characteristic problem in tropical Africa, which applies in Upper Volta, is the short- age of indigenous personnel experienced in for- eign trade. There are almost no Voltaic entre- preneurs. 679455 0—63- 23 Aerial view across north end of Nigeria's leading harbor, Lagos. Courtesy Embassy of Nigeria Another typical problem is the dominance in the commercial sector of large expatriate firms favoring European sources. In Upper Volta, a "Big 3" 3 control an estimated 60 to 70 percent of all trade ; with the inclusion of a few of the other large, European-oriented houses, the figure begins to approach 90 percent of the import, market. A number of related problems complicate the expansion of U.S. sales. 'The most important, is the fact that the majority of these commercial houses are French and obviously favor handling traditional lines of goods and maintaining tradi- tional supply channels. Moreover, the local or- ganizations have very little autonomy or decision- making power. Control is centralized in the head office in Paris or elsewhere and it is there, not at the local branches, that action is taken on matters such as acceptance of a new line or representation. Because of their near monopoly status, these firms represent so many manufacturers that no partic- ular effort on behalf of any one company is neces- sary. That which we would consider normal serv- 3 CompaKnie Francaise de L'Afrique Occidentals (CFAO), So- ciete Commereiale de L'Quest Africaine (SCOA), and Compapnie Francaise de la Cote D'lvoire (CFCI). ice is unavailable — almost no parts are stocked, no attempt is made to develop sales, and, of course, prices range from high to exorbitant in a sort of alliance against open competition. State enterprise orientation, a fourth element often observed in less developed economies, is no problem in Upper Volta. Rather, the Govern- ment's orientation is strongly in favor of private enterprise. The fifth typical problem is a limited distribu- tion system, which in Upper Volta is further ag- gravated by the lack of developed internal markets. The most noticeable problem area in Upper Volta, and the one in which a given effort would provide the greatest return at present, concerns an interrelated group of miscellanea of which the keystone may well be doing business in French. Encompassed here are sales promotion, dealer con- tacts, advertising, service and maintenance, prod- uct labeling, and identification. Other factors such as spare parts availability and adaptation of goods to local market conditions are areas where U.S. businesses often have a good deal of room for improvement. 24 Part 2 EXPORT OUTLOOK: CENTRAL AFRICA CAMEROON REPUBLIC OF THE CONGO REPUBLIC OF THE CONGO (LEOPOLDVILLE) By Michael P. Hoyt Commercial Officer, American Embassy, Leopoldville Following 4 years of service in the U.S. Air Force, Michael P. Hoyt graduated from the University of Chicago and subsequently obtained his M.A. from the University of Illinois. He entered the Foreign Service in 1956 and' has served at Karachi, Casa- blanca, Tel Aviv, and Leopoldville. PREINDEPENDENCE TRADING PATTERNS The Republic of the Congo, formerly known as the Belgian Congo, became independent in June 1960. The area occupied by the new nation was first organized as one political and administrative entity by the Treaty of Berlin of 1885, which pro- vided for economic and commercial equality of treatment in the Congo for goods and services from all countries. This "open-door" policy was reiterated by the Treaty of St. German en Laye of 1919, to which the United States was a signatory. Historically, however, trade in the Congo was dominated by large, expatriate Belgian firms, which undoubtedly benefited from the fact that Belgium was responsible for the administration of the Congo. In spite of the official "open-door" policy, institutional arrangements in the import- ing field tended to favor Belgian firms and made it necessary for foreign investment to be made generally through Belgian interests. The Belgians created one of the largest and most efficient distribution systems in Africa. Goods were imported from Europe mainly for workers on plantations and for factories — often owned by a single firm or financial, group in Europe — which produced for export. The United States was able to establish itself as the second largest supplier to the Congo market, though far behind Belgium. American goods which found their way into this market were normally im- ported by these European companies. The local companies, although supplied primarily from Europe, traditionally imported those commodi- ties from the United States which they found most suitable and most economical. In the years after World War II, imports from the United States averaged 20 percent of total Congolese imports, although immediately prior to independence the American share of the market was declining rapidly (see table 9). American investment during this period was not large in comparison to European investment but, neverthe- less, was important in some sectors. CURRENT ECONOMIC SITUATION With the achievement of independence in June 1960, the Congo Government was in a position to advocate a diversification of foreign investment. An Investment Guaranty Agreement between the Congo and the United States was signed in No- vember 1962. The breakdown of public administration that occurred after independence caused a disruption of the finely structured import distribution and export production system. Foreign exchange reserves were depleted rapidly, and exports de- clined drastically. The United Nations was in- 27 . V Courtesy World Bank Modern tracklaying equipment speeds the construction of new railways in West Africa. vited in with the primary task of restoring order and political stability. The United States began a large-scale assistance program consisting of AID grants through the United Nations for sup- port of imports (approximately $81 million com- mitted as of March 1963, of which nearly $76 million was tied to procurement in the United States) and sales for local currency of surplus agricultural commodities, for an amount equal to $42.8 million. The extreme scarcity of foreign exchange available to the Government of the Congo led to the institution of a strict system of licensing for all imports, and licensing of goods not tied to U.S. aid was curtailed drastically. This resulted in a relative increase of American exports to the Congo. OBSTACLES TO U.S. TRADE EXPANSION There remain serious impediments to the expan- sion of American investment and trade with the Congo. In spite of American financial assistance, scarcity of foreign exchange persists. This has considerably reduced total importations into the country. Although the relative American share of the market increased greatly, the absolute in- crease was not substantial. Other obstacles to the expansion of American trade in the Congo stem from the presence in the country of large, expatriate, European-oriented trading firms. The American commercial pres- ence is still inadequate and purchases from the United States are sometimes made through the Belgian home office. American investments are extremely small in comparison with European ones, which naturally affects the orientation and control of imports. There are few American com- mercial import agents with long-term interests in maintaining ties with suppliers in the United States. Under the present system, many com- modities imported into the Congo must be pur- chased in the United States regardless of price considerations. Some of the traditional import- ers are taking up American representation which may be dropped or allowed to remain inactive when AID funds are no longer available. 28 Table 9. — American Share of Congo Market, 1950-62 Item 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 ' 1961 1962 2 Total Congolese imports 3 _. y.3 2.4 25.6 15.2 3.5 22. 7 19.8 5.0 25.1 18.1 3.5 19.3 17.8 4.2 23.fi 18.5 3.6 19.4 20.1 4.2 20.9 21.4 3.8 17.8 17.6 2.6 14.8 15.0 1.9 12.7 6.5 1.0 15.4 2.9 Imports from the United States 3 .6 20.7 1 Official figures for 1960 not available. 2 First 3 months of 1962. 3 In billions of Congolese francs. Official rate of exchange: from 1950 to November 1961. 50 franes=US$l; from November 1961 to present, 65 francs=US$l. Source: Data compiled by American Embassy, Leopoldville. METHODS OF U.S. TRADE EXPANSION The dominance of the traditional firms has al- lowed few Africans to penetrate the import and distribution trade in the past. The African now is being encouraged to enter international trade, but his inexperience presents a serious obstacle. To increase their share of the Congo market, American companies should: (1) Provide the African businessman with technical services and advice: and (2) establish sound American repre- sentation lasting beyond AID grants, by concen- trating on American commodities which are suit- able for the market and competitve with those from European sources. PROSPECTS The AID assistance program and Public Law 480 sales are promoting the expansion of Ameri- can exports both directly and indirectly, and con- tributing to the reactivation of the economy. Such programs as imports of trucks and the use of counterpart funds for road maintenance are directed to the reconstruction of the transporta- tion and distribution system. The importation of goods and industrial equipment contributes to the resurgence of exports, resulting in increased foreign exchange earnings and increased ability to purchase American products. Expansion of trade also should result from the reunification of Katanga with the rest of the country, since Ka- tanga previously provided about half the foreign exchange earnings of the former Belgian Con