How the world’s third fastest growing economy is attracting U.S. investors and creating jobs
The United States is the world’s third largest exporter, shipping capital goods, industrial supplies and consumer goods such as cars, foods and beverages around the world every year. Yet exports account for only a small fraction of its GDP—13 percent in 2014—and exports to traditional customers such as Canada and Europe are falling. In addition, according to the U.S. Commerce Department, America’s trade deficit widened by 7.6 percent in September 2014 to $43 billion, largely due to a slump in exports to Europe, Latin America and Japan.
Slowing exports to the developed economies and a widening trade gap are bad news for American businesses and jobs and American manufacturing firms. Beneath the headlines, however, is a glimmer of hope, which comes in the form of sub-Saharan Africa. For several years the United States has been nurturing its diplomatic and economic ties with countries on the continent, particularly Kenya which has seen its economy grow at around 5 percent annually over the recent years. The World Bank forecasts growth of 6 percent in 2015 and almost 7 percent in 2016. The IMF is actually more bullish, forecasting 7 percent growth in 2015.
Interestingly, unlike its oil-rich continental counter parts Angola and Nigeria, Kenya is a petroleum-importing nation and as such is benefitting from the slump in oil prices; boosting private investment, particularly in the manufacturing sector and in business-critical infrastructure. It is also likely to trigger significant growth in private consumption, which is the engine of Kenya’s economy.
These developments are very good news for American manufacturing jobs and for U.S. companies looking to expand abroad. Growing private consumption means that the U.S. can increase its exports—not just consumer goods but also raw materials to support infrastructure development. This is exactly what America needs—booming foreign countries with an appetite for American goods and services. Kenya’s growth also brings opportunities for American firms that are looking to expand their operations overseas. There are investment opportunities across most sectors in Kenya, which form part of the country’s ‘Vision 2030’ program. These include agriculture, transport, real estate development, tourism, ICT, pharmaceutical, energy, oil and mining. As with many emerging markets, Kenya can offer U.S. firms financial incentives and market initiation services to make setting up shop significantly more attractive and easier.
Kenya’s growth is perfect timing for the United States. Jobs in manufacturing, mining and the goods producing sector dropped in the U.S. from around 22.5 million in 2002 to 18.3 million in 2012. Recent statistics from the US Trade Office show that American exports to Africa directly support more than 120,000 jobs, numbers that will be buoyed by the strong growth of African exports seen over recent years. This creates jobs whilst providing investment opportunities for U.S. firms. It is a harmonious arrangement – America needs Africa and Africa needs America.
In July 2015, U.S. President Barack Obama is scheduled to visit Nairobi in Kenya to host the Global Entrepreneurship Summit (GES). The summit brings together business-owners, educators, policymakers and investors to support the growth of new enterprises in developing regions. This is the first time that it will take place in Africa. Choosing Kenya underscores the importance of the country as a centre for innovation and entrepreneurship and further draws attention to the fact that American firms have much to gain by investing in Kenya. With projected strong growth of above 6 per cent for the coming years and a diversified, non-oil economy; investing in Kenya is a sensible business decision.
It is unsurprising then that the U.S. Government has focused so heavily on Africa and Kenya during recent years. It signed Trade and Investment Framework Agreements (TIFA) with the East African Community (EAC) in 2008, and with the Common Market for Eastern and Southern Africa (COMESA) in 2001. Kenya is a member of both regional organizations. The United States Trade Representative is also leading U.S. efforts to forge a new trade and investment partnership with the EAC and the diplomatic efforts are set to continue in 2015. A special trade mission is scheduled to visit Kenya in late June and a further ‘Trade Winds Mission’ to Kenya in mid-September. The free trade area (FTA) between EAC, COMESA and the Southern African Development Community (SADC) is expected to be signed in Egypt in June, 2015, further establishing a large market of 600 million people and making the continent an even more exciting place for American business.
America has also taken a lead in making it easier for Kenyan companies to export to the U.S. by introducing the African Growth and Opportunity Act (AGOA), a U.S. trade program that provides duty-free imports of certain products from sub-Saharan Africa. This program further strengthens this important bilateral relationship; providing job growth and wealth creation opportunities for both nations.
America is shrewd to direct resources to building its trade links with the economy recently identified as world’s third fastest growing in 2015 and East Africa’s economic powerhouse. A strong relationship between the two is certainly in America’s best interests; in the interests of closing the country’s trade gap, helping U.S. firms to enter Kenya and the region’s booming market and in supporting American manufacturing jobs for the future.