General Electric Co. Chairman Jeffrey Immelt addresses a forum Monday at the U.S.-Africa Leaders Summit.

U.S. Can End Its Losing Streak in Africa

Stephen Mihm, an associate professor of history at the University of Georgia, is a contributor to the Bloomberg View. Follow him on Twitter at @smihm.
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The U.S.-Africa Business Forum, which brings together business executives and heads of state, is being held in Washington today. The event -- part of the three-day U.S.-Africa Leaders Summit and co-sponsored by the Department of Commerce and Bloomberg Philanthropies -- is the first such gathering.

There is reason to be optimistic that Africa may be at a turning point, given that seven of the 10 fastest-growing economies in the world are on the continent. Moreover, the conference is consciously designed to move beyond the often condescending and counterproductive efforts to "help" that have defined earlier U.S. interventions in African affairs.

"This is not charity; this is self-interest" is how President Barack Obama described the new approach. In other words, growth in Africa can generate growth in the U.S.

The candor is refreshing. As the participants assemble, though, they should be mindful of the history of self-interested business dealings in Africa. While that history may be lost to Americans, Africans have a longer memory, and some sensitivity to past relationships may pay significant dividends for American business leaders operating now.

QuickTake Into Africa

America has long traded with Africa. That's the good news. The bad news is that for almost two centuries, the commercial connection was largely defined by the slave trade and the commerce it directly and indirectly generated, such as the shipment of sugar and the distillation of rum. Many merchants in New England built vast fortunes by shipping slaves to the New World until the cessation of the trade in 1808, accumulating enough capital to jump-start the U.S.'s industrial revolution.

After the end of the international slave trade, the era of "legitimate" exchanges with Africa commenced, as U.S. merchants, taking advantage of conflicts between European powers, managed to trade with west African countries, exchanging rum, tobacco, brandy and, eventually, manufactured goods in exchange for ivory, dyewood, gold dust and other natural resources.

By this point, the U.S. had a foothold on the continent: the country of Liberia. This nation, which was born out of a racist effort to remove freed slaves from the U.S. and resettle them in Africa, constituted a part of what one historian Abedayo Oyebade has described as the U.S.'s "informal empire." From its base in Liberia, the U.S. could establish trading relationships with Ivory Coast, Gold Coast and Nigeria.

The U.S.'s efforts to open markets in Africa were stymied in the second half of the 19th century. The problem lay with the European's imperial conquest of the continent, which culminated in the Berlin conference of 1884-1885, when Europe's powers effectively divided up the region, inaugurating a brutal period of exploitation that found fictional expression in Joseph Conrad's "Heart of Darkness."

Although the U.S. may have wanted a piece of the action and did what it could to profit from the mad scramble for African resources, it found itself shut out of trade with most of the new colonies, thanks to imperial trade protections. The Americans protested, with the U.S. Chamber of Commerce insisting in 1884 that places such as the Belgian Congo should remain "free from the interference or political control of any one nation." But such entreaties generally fell on deaf ears, and American commerce in Africa dwindled.

By the early 20th century, the U.S. had managed to get a foothold in places such as South Africa, but in general, its trade paled compared with that of Britain. Moreover, it was lopsided. Americans, in other words, didn't actually buy a whole lot from Africa. The continent was instead viewed simply as a dumping ground for U.S. products. In 1901, for instance, goods from Africa constituted a mere 1.2 percent of total U.S. imports. That figure barely budged in the succeeding years.

And actual direct investment in Africa was negligible, with the exception of Firestone's investment in rubber plants in Liberia before the outbreak of World War II. Africa, when it appeared on the radar of U.S. businessmen, was a place to sell, not a place to make long-term investments. That job fell to imperial powers such as Britain, which had little interest in, say, setting up a competing manufacturing power in a colony.

The outbreak of World War II triggered a temporary spike in imports from Africa but little direct investment, a problem that would continue to loom large in the postwar era. South Africa's finance minister complained in 1949 that "while American business has always been keenly interested in South Africa as a market, it has with a few notable exceptions neglected South Africa as a field of investment."

Elswhere, the situation was worse. Investors steered clear of African nations for fear of losing assets to civil wars, nationalization campaigns and other perils that dominated the headlines in the 1950s and 1960s. (It didn't help matters that the U.S. and the Soviet Union fought a series of proxy wars on the continent, further undermining investor confidence.)

In 1969, the book value of American direct investments in Africa totaled a paltry $2 billion. This was a drop in the bucket: The total book value of U.S. foreign direct investment at the time was $65 billion.

Trade imbalances remained a vexing problem throughout the postwar era. In 1979, Leopold Sedar Senghor, president of Senegal, called upon the Organization of Africa Unity to deal with the "scourges" afflicting Africa, in which "trade imbalances" ranked on par with apartheid, racial discrimination and "mercenarism."

Thankfully, there's reason to hope that things are changing. In the 14 years that have elapsed since the passage of the original African Growth and Opportunity Act, non-mineral and non-oil imports from Africa have quadrupled. Now, there's real potential for sustained economic growth that will benefit Africa and the U.S.

But the business leaders now turning their eyes to Africa need to be mindful of precedent, particularly the tendency to view Africa only in terms of exploitation, not investment. Appeals to self-interest are appropriate in discussing business opportunities, but the attendees at this week's conference should ensure that both sides' "self-interest" gets equal representation going forward.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Stephen Mihm at smihm1@bloomberg.net

To contact the editor on this story:
Max Berley at mberley@bloomberg.net