Can Africa and the United States Cooporate to Collectively Invest in the Future of Oil?

Desireé Duffy  |

Image Source: NJ Ayuk


Or Is It Too Late for the US?

A Market Opportunity Analysis

When Americans think about investing in Africa, thoughts of corruption, concerns about adversely impacting the environment, issues with public-private partnerships and the difficulties in making sure the people of Africa are truly being helped, come to mind. But is the US missing out on incredible opportunities?

Africa Is Mischaracterized as a “Continent of Despair”

Despite the fact that African markets hold great potential for growth for the US, particularly in the private sector for businesses and investing, the continent is dealing with a bad reputation that is no longer warranted.

According to the US Economic Engagement in Africa: Making Prosper Africa a Reality report by the Center for Strategic and International Studies, “Despite evidence of the significant economic opportunities present in the region, Africa has been mischaracterized by the American media as a continent of despair, and U.S. engagement with Africa has, for the most part, been a foreign assistance relationship.”

Is It Time to Get Over Our Prejudices and Take Advantage of Opportunities before It’s too Late?

Other countries like Russia and China are already working with Africa. They are building infrastructure, creating deals, and investing in the future while the US dallies.

The US Economic Engagement in Africa: Making Prosper Africa a Reality report also states that, “While other countries have ramped up their economic engagement with Africa via trade, investments, and private sector financing, the United States has remained, for the most part, disengaged. Though decades-long U.S. government initiatives in Africa are indicative of longstanding relations, the reality is that these initiatives have not been enough for the United States to compete in the changing development landscape.”

The burning question is, why does the US allow itself to be outmaneuvered? NJ Ayuk, the Executive Chairman of the African Energy Chamber has a practical approach and the answers in his book Billions at Play: The Future of African Energy and Doing Deals, releasing October 22, 2019. Simply stated, African’s petroleum industry can build competitive economies. He says, “If African governments, businesses, and organizations manage Africa’s oil and gas revenues wisely, we can make meaningful changes across the continent.”

True Collaboration

USAID administrator Mark Green stresses the importance of true collaboration. In the American Enterprise Institute live stream conversation about private sector engagement late last year, he said, “In public-private partnerships, which USAID and others have done for a long time, [they] are largely about contractual grants, contracting. Now, we'll still do contracting and grant-making. But what we're really talking about with public sector engagement is true collaboration.”

NJ Ayuk also makes the case for the petroleum industry having the power to support and transform emerging economies in Billions at Play. Africa is more than capable to learn from itself. The role of natural gas in Africa’s energy future, effective and sustainable investment strategies, strategic oil and gas revenue management, and the role of women in the African petroleum sector, are all key factors addressed in the book.

Speaking on U.S.-Africa relations specifically, Ayuk stresses that Africa needs companies that are willing to share knowledge, technology and best practices, and businesses that are willing to form positive relationships in areas where they work.

Green also says, “…when USAID was formed, all the capital flows going from the U.S. to, say, Africa, about 87 percent was traditional development assistance. Now, it's below 10 percent. And the rest is large scale philanthropy, you know, almost call it family philanthropy. We see the good work of parishes and congregations and synagogues around the country. But the largest piece is commerce. America has commercial interest, investment interests, and investment relationships in the developing world; that's a fundamental difference. And if we're going to accomplish all of our goals, we have to tap into that.”

Meanwhile, the Clock Is Ticking

The clock is ticking, and it has been ticking for some time. Now is the time for the US to become more proactively involved before it is too late.

In December of 2018 the Trump administration launched the African policy for primacy and partnerships. Then the outlook was hopeful that the administration would promote US business development on the continent. The goal was to inspire Africa to choose the US instead of Russia and China regarding commercial and political relationships.

Then ambassador John Bolton announced the Prosperity, Security and Stability strategy on December 13, 2018 and it was centered around the idea of advancing prosperity by “advancing U.S. trade and commercial ties with nations across the region to benefit both the United States and Africa;” security, through “countering the threat from radical Islamic terrorism and violent conflict;” and stability, through foreign aid, while ensuring that U.S. taxpayer dollars for aid are used efficiently.

Africa could go it alone, and Ayuk says that, “Africans are more than capable of making our continent successful. However, global participation in the African energy landscape can produce better results for all."

Billions Are at Play

NJ Ayuk knows a thing or two about the billions that are literally at play here. As one of the leading energy attorneys in Africa, his optimistic outlook on making Africa more equitable might be what we need. I spoke to him to get his thoughts.

Ayuk says, “Africa is rich in resources. By partnering with the U.S., we create cleaner, greener, cheaper energy sources, and create jobs, which has the potential to put those dollars back into the global economy, namely our partners in the US.”

There is an investment to be made and infrastructure is crucial. Roads need to be built, plus railroads and pipelines need to be put in place. It is estimated by Ayuk that this is a $700B investment. Manufacturing jobs, education, and implementing the technology are all important. The US has always made such investments, but China’s involvement is growing, meaning that now, more than ever, American investment in Africa’s future is poised to ensure fair trade through regulation and cooperation.

Ayuk stresses that “We need to look at Washington as a partner in investment and not just aid. If we create the jobs, the need for aid will be replaced with self-sufficient people.”

Click to enlarge

Image Source: NJ Ayuk

What about Accountability and Trust?

American investment must come with the requirement to keep everyone involved accountable. Governments know that they need to cooperate to have success. There is opportunity for American business to get in early and help Africa grow and prosper, which ultimately grows U.S. investment.

Ayuk advocates for trust and transparency. “Transparency is no longer a catch phrase. It’s the future of doing business. Trust in people and the community means more gets done.”

DISCLOSURE: The author of this article has no financial interest in the companies discussed in this article.


The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer.

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