US Companies: Five value propositions for Sub-Saharan Africa.

M. Mbems, Accra, Ghana
June 21, 2024

I n Sub-Saharan Africa, U.S. companies compete against emerging economies and also against other industrialized nations. US firms look for an investment climate that is fair and transparent. US Secretary of State Anthony Blinken says that competition is healthy for the economy, therefore, ‟countries in Sub-Saharan Africa will and should engage with a broad array of partners”. But he also said that the goal of US companies is Sub-Saharan Africa is not to replace or prevent non-US companies from doing business in Africa. However, he believes that ‟American companies provide the world’s highest quality products and services”¹. American companies offer five values to Sub-Saharan African, which distinguishes them from the competition.

Job creation

One contribution of US companies in Sub-Saharan Africa is job creation. When US companies invest in or develop projects in Sub-Saharan Africa, they nurse home talents, often into executive positions. US companies have produced generations of home-grown executives who are leading their subsidiaries on the continent. Some of these African executives gained an education and work experience in the United before returning to lead US companies in Sub-Saharan Africa.

For recruits who have little exposure to US business culture, US companies provide in-house training on the African continent². Examples include Sub-Saharan Africa Institute (IBM) and the Healthcare Skills and Training Institute in Kenya (General Electric).

These corporate training institutions contribute to the reduction of the gender gap. Over the past three decades, US companies have nursed more African women in corporate leadership position on the continent than any other developed nations. City Bank, Visa Inc, Procter-and-Gamble and Coca-Cola are shining examples in a non-exhaustive companies that have trained generations of African women executives.

Technology transfer

Technology transfer involves the legal use of someone else’s successful research, development or experience to benefit another company or a country. Technology transfer takes various forms, including limited or unlimited access to inventions, patents rights, licensing and eventually the commercialization of products stemming from that technology. US companies bring world class technology to Sub-Saharan Africa, with their foreign direct investments serving as channels for technology transfer. Over the last decade, the continent has reduced its technology gap through the introduction of disruptive and innovative US inventions³.

Agricultural biotechnology is a case in point. This technology has pioneered technology transfer in Sub-Saharan Africa. US inventions have improved agricultural productivity in the region with high yielding, drought, and disease resistant seeds. DuPont de Nemours and Dow Chemicals are pioneers and have research facilities and manufacturing plants on the continent.

In the transport sector, Boeing Inc, General Electric rail, and Wabtec Inc share their technologies in maintenance and customization. Over the past two decades, these US companies have established 10 transport related Technology Transfer Centers (T2) in Sub-Saharan Africa⁴.

Against competitors, US officials are confident about the value their bring to Sub-Saharan Africa in the field of technology transfer. US Secretary of Commerce, Wilbur Ross hammered this point during an official visit in Ghana in June 2018. He said that ‟U.S. companies can supply both cutting-edge technology and superior know-how regarding corporate governance and project management to emerging markets across Africa”⁵.

Ecosystem of good governance

US companies must comply with US laws, even in countries outside of the United States, where they invest. The host countries also expect them to comply with domestic laws. For example, the 1977 Foreign Corrupt Practices Act prohibits the payment or soliciting of bribe to and from foreign officials. One requirement of the FCPA is that US companies educate their overseas business representatives, agents, distributors, and sub-contractors on how to prevent, detect and respond to FCPA risks⁶.

Empirical research supports the positive impact of US laws on the strengthening of an ecosystem of governance outside of the United States. Researchers from the University of Chicago⁷ examined the effects of the enforcement of the FCPA on economic development in Sub-Saharan Africa. They studied business practices in the extractive industry in 34 Sub-Saharan African countries, including Ghana. The researchers found that the enforcement of U.S. regulation contributes to the transformation of corporate behavior and increases economic growth in these economies.

The same researcher found that in Nigeria, the enforcement of the FCPA did not put US firms at a disadvantage against non-American firms⁸. In short, incorporating the philosophy behind the FCPA into business practices contributes to the levelling of the playing field. American firms that are doing business in Sub-Saharan Africa contribute to the creation of an ecosystem of governance by roping in their sub-contractors, distributors and even consumers into a compliance culture.

Climate change

Five economic sectors generated a large proportion of greenhouse gas (GHG) emissions in the United States in 2020. The industrial sector contributed 24 percent, followed by electricity (25 percent), commercial and residential (13 percent) and agriculture (11 percent). Aggregate industrial activities alone contributed 24 percent of total greenhouse gas emissions⁹.

GHG emissions are becoming an integral part of economic policy. The 2022 Inflation Reduction Act (IRA) links the reduction of domestic inflation to efforts to tackle climate change. On March 21st, 2022, the US Securities and Exchange Commission (SEC)¹⁰ announced plans for climate-related risk and greenhouse gas disclosure requirements for listed companies. The market regulator expects listed companies to disclose information about their climate-related risks management processes.

US companies have acknowledged their damaging contribution to global CO2 emissions and are taking steps to change their practices. In this reorientation, they are also teaming up with foreign countries, the United Nations, scientific bodies and civil society groups to produce credible data on their action against climate change.

In 2021, Amazon Inc set up the Lowering Emissions by Accelerating Forest finance (LEAF) coalition. LEAF is a US$1 billion public-private project to protect tropical rainforests around the world. In November 2021, the coalition signed letters of intent with five tropical forest countries: Ecuador, Costa Rica, Ghana, Vietnam, and Nepal. Another example is Alphabet Inc., which is making available climate change data to institutions, researchers, and universities around the world. The data come from Google Earth Engine, a powerful satellite for climate change observation.

Hewlett Packard has committed to eliminating 75 percent of its single-use plastic packaging by 2025. Johnson & Johnson wants to achieve 100 percent recyclable, reusable or compostable by 2025. Other US companies have joined the United Nations ‟Race to Zero‟, pledging to take rigorous, immediate action to halve global emissions by 2030. These pledges are a recognition that the tide is turning, which means that companies that are not fully committed to emission reduction or who practice ‟green washing”, expose themselves to financial and legal losses or to customer revolt.

Corporate Social Responsibility (CSR)

Corporate Social Responsibility (CSR) allows businesses to exert positive changes in the communities where they do business. CSR activities are not mandatory, but US companies commit to them voluntarily. CSR activities produce a powerful impact when they align with local needs and local laws and also involve local communities. Fair wages to farmers, the fight against child labor and diversity in the workforce are examples of CSR activities of the US companies. Climate change, health, and education are also parts of CSR activities.

Across the continent of Sub-Saharan Africa, US CSR work takes different forms and covers a wide range of activities. In Cameroon, for example, Taylor Guitars developed a new technology for the production of fast-growing ebony seedlings¹¹. The US guitar makers then teamed up with the government, local communities and science organizations for planting and reforestation programs in the rain forest of Cameroon. In guitar manufacturing, Taylor Guitar uses ebony wood to make fret boards and integrated acoustic frame. Once cut, the ebony tree takes decades to grow because seeds have low pollination rates. The CSR program has helped to replace harvested ebony trees since the start of the program.

In Ghana, according to US Embassy Ghana officials, since 2019, the General Electric Foundation has injected over US$20 million in CSR activities. The funds helped the country to rehabilitate aftermarket service centers and to renovate government social facilities around the country. Master Card Foundation is funding entrepreneurship to create three million jobs for young people by 2030.

In Kenya, Caterpillar’s CSR programs provide micro-grids to rural communities. Caterpillar also funds the development of entrepreneurship centers for women and the provision of clean drinkable water in rural areas.

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