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Investing in Africa: New Opportunities and Challenges

Speakers: Donald Gips, Senior Director, Albright Stonebridge Group, Former U.S. Ambassador, Republic of South Africa, Jay Ireland, President and Chief Executive Officer, GE Africa, Bisa Williams, Deputy Assistant Secretary of State, Bureau of African Affairs, U.S. Department of State, Former U.S. Ambassador, Republic of Niger, and Mahesh K. Kotecha, President and Founder, Structured Credit International Corp.
November 5, 2013
Council on Foreign Relations

KOTECHA: Good morning -- good afternoon, actually -- ladies and gentlemen. Welcome to the Council. We are gathered today to talk about investing in Africa.

A decade ago, when I was adjunct senior fellow here at the Council, that was sort of an off-the-beaten-track subject. Today it is attracting all of you to -- to talk about it.

We have a few ground rules, which, from memory I remember cell phones please in their "off" position. And I will do a few introductory comments and introduce the -- the speakers. We have really a great panel.

I'm Mahesh Kotecha. I'm a member of the Council. I was a senior -- adjunct senior fellow on Africa a while back, and I do advisory work in Africa and other places.

We have very fortunate position to have two ambassadors from the U.S. to Africa who are present here. There is Ambassador Donald Gips, who was ambassador in South Africa and has graduated or moved on to advise industry.

Their bios are in full detail here so I will let you read them -- all very impressive -- equally impressive, I would say.

Ambassador Williams has just come from Niger six weeks ago and he is now serving in the administration as the -- as the deputy assistant secretary for -- for Africa in the State Department.

We have also from the private sector, where the rubber meets the road, or shall we say where the -- I was going to say rubber meets the jungle; since I'm from Africa I can say that.

(UNKNOWN): You can say that.

KOTECHA: I'm from Uganda, so it -- any Africans, please excuse me, but I have some license that I can claim to that.

Jay Ireland is president and CEO of GE Africa, based in Nairobi, from where he just came a couple of days ago.

And we are delighted to have the panel over here talk about investing in Africa.

You know, the title is "New Opportunities and Challenges," which is intriguing because it suggests that the opportunities may be new but the challenges aren't. And I think we may see some of that in the discussion.

The Economist famously proclaimed in its December 3, 2011 cover page that Africa is rising -- they said "Africa Rising," no -- no -- no verb. In fact, in six of the top -- six of the top 10 fastest- growing economies over the last 10 years in Africa -- sorry, last 10 years -- they are African economies. Of the top 10 fastest-growing economies in the world, 10 -- six are in Africa: Angola, Niger, Nigeria, Ethiopia, Chad, Mozambique, and Rwanda.

Three of them are projected to remain in the top 10 by 2015 -- Ethiopia, Mozambique, and Nigeria; and four more are supposed to join their ranks -- Tanzania, Congo, Ghana, and Zambia. More may join such fast-paced growth and that is something to celebrate. So Middle Africa is, indeed, on the rise.

What is interesting is that many of the successes are in countries without an abundance of natural resources, such as Burkina Faso, Ethiopia, Mozambique, Rwanda, Tanzania, and Uganda. Two fundamental keys to their success have been political stability and good macroeconomic policies, including low inflation and better tax collections. But Africa is a continent with 55 countries, not 15 or 10 -- including the north, where the Arab Spring of hopeful politics has turned to a winter of harsh economic realities; and farther south -- Mali, South -- Sudan, and Kenya remind us that security and peace remain, for some, a struggle.

While South Africa remains a beacon, its growth has been modest and pace of black empowerment slow. More broadly, African Development -- African Development Bank, which I am advising currently, counts 17 countries in Africa as fragile states and 37 among the least developed, which qualify only for soft loans made by the African Development Fund financed by donor money rather than the bank itself, which funds itself in the capital markets with a triple A that is slightly higher than the U.S. rating.

Oddly enough, some countries that cannot borrow from the bank -- African Development Bank -- can borrow directly in the markets and have done so. Ten countries from Africa have borrowed in the capital markets and raised $8 billion in the recent years in their maiden issues.

So to explore the world of African investments we have three wonderful speakers that I've just briefly introduced. Please do look at their bios, but I want to spare the time to talk about what we're going to discuss.

First, I'd like to start with where I said the rubber meets the road. Jay is CEO of GE Africa.

I'd like us to hear a little bit about where you see opportunities and talk in particular about infrastructure. As you know, the Obama administration has a new Power Africa program, which we will hear about in a moment from Ambassador Williams, but World Bank and others estimate in developing adequate physical infrastructure in Africa will require outwards (ph) of $100 billion or more per annum for the next decade. And even though capital flows to Africa have risen to more than $50 billion and approach $60 billion annually, up from about -- below $20 billion in 2010*, much of that is in direct -- much of that is in extractive industry -- oil and gas and mining. And even with these African countries borrowing, that I mentioned, the gap in financing infrastructure is estimated at $30 billion to $40 billion annually.

So are infrastructure investment opportunities in Africa real? Are they possible to finance with plenty of good, bankable projects? Or is there a little bit of hype here? Are investor return expectations realistic, or are they fairly compensated for the risk, or are Africans paying a premium for such investment? What and where are some of the best new opportunities?

IRELAND: That's a big one question. Pretty much yes to all, to a degree. I guess I would look at it from the standpoint of infrastructure is probably going to be the key for that growth to continue. I think you have an unbelievable demographic dividend in Africa with -- with the youth, but if we don't have the ability to improve the infrastructure which will then create continued economic growth, I think you're going to -- that -- that dividend has a real chance to be a real problem, as we've seen in other -- other countries, especially in North Africa.

So I -- I think the infrastructure -- infrastructure growth is key. When we look at it, what -- what our company's in is in power, health care, transportation, locomotives, and aviation, and really focus in on -- on what we think can really help growth the African continent.

Now, the keys, which you said, is getting financing and getting money into these projects and getting these projects done. So it depends on the country you're in and -- and what -- where the projects are in what sector, but in general there's a continued demand for improved infrastructure.

Now, the key is getting the right -- when I got there 2.5 years ago into Nairobi we -- we had set up this organization to really focus on developing markets. We put a vice chairman in Hong Kong, who I report to, and -- and GE has done this across 10 markets. So I raised my hand to go to Africa and I -- and I got there and I was told by all the bankers that there were -- there's a lot of money but there's not bankable projects; and then I talked to all the project people -- "We got great projects but no money." So there's this divide, if you will.

And in reality it's a little bit of both. I think there's an aspect of what the perceptions of risk are, what the -- what the aspects of what the financial community is asking, as far as enhancements, et cetera, that they wouldn't do other -- other places. And then on the bank -- on the projects side it's also making sure that you have the projects lined up appropriately, you have the -- the appropriate levels of regulatory capability that will mitigate some of the risk that the financial people saw. So I think there was a balance of both.

So as we've gone through this in the last two and a half years and put together a number of projects it's really a factor of really trying to get the bureaucracies and the governments, which typically almost all the infrastructure stuff is still done by government-owned utilities or -- or hospital or health care facilities, et cetera -- railroads, and really work with them and get them to understand what their responsibilities would be as well as understanding what -- what the project developer's responsibilities would be.

So for us, which is different from where we sell anywhere else in the world, we typically like to go in, sell a product -- a turbine, a locomotive, an -- an -- an aircraft engine, a service package along with it, collect our money and we're -- we're your partners. But that doesn't work in Africa, so we continually play more of a middle man. We help arrange financing; we -- we will put money -- our own equity -- into some project developments; we also do debt funding, as well. Anything to get the projects going, because that's really the way we've got to get this going because it's in a nascent stage of really development.

And I think once there's a -- there will be a tipping point that will occur when people will start to see projects that are successful, that pay well, that are profitable, and at the same point in time you see the economies grow at the same point. One of the discussions that I have a lot with heads of state there is, you know, "We have cheaper labor rates. Why can't we be a manufacturing center instead of China or the East?" And I say (ph), the problem is their labor benefits are far outweighed by all the -- all of the costs of logistics, power, all of the -- all of the others stuff that really cuts into the cost of goods.

So when you have to ship a container from -- from Mombasa Port to Kampala it's three times as expensive to get the same container from Guangzhou, China to Mombasa. So that's unsustainable over the long period of time. So that's all related to logistics and that's -- and infrastructure.

So I think that's going to be what unlocks the growth and I think it's a little bit of you need to grease the wheels, from the standpoint of getting the -- the financing and the projects and making sure they understand what each side needs to really get these things going. And that's what, hopefully, we can do.

KOTECHA: Thank you very much.

I wonder if, Ambassador Williams, you'd like to pick up? Because the administration obviously is aware of the difficulties that Jay spoke about, and I wonder if that was -- what was the thinking behind the Africa -- Power Africa initiative? And perhaps you could chime in on the issues that -- that Jay has raised.

WILLIAMS: Thank you. I'd be glad to. Actually, Jay laid a -- a great framework for you to understand the two initiatives that President Obama just announced, actually, this year -- one being Power Africa and the other being Trade Africa.

KOTECHA: Trade Africa.

WILLIAMS: But when you think about this African context, two out of every three people in Africa -- that's about 700 million people -- are without access to electricity in Africa. So what we're talking about, we're talking about an area of space of a billion -- over a billion people, twice the population of our own country, without any access. So the idea of having infrastructure is more than critical; it -- it is vital for any -- for -- for the people in Africa to have any kind of real economic future and it's also vital for our own American companies. Let's talk about -- this is a huge market that we would like to really participate in actively.

The Power Africa initiative is focusing on six countries to start with to help expand -- to reach some of that -- to -- to bring 10,000 megawatts of electricity to over, I want to say -- I should have this if you have the people -- 20 million households. Sorry about that. I've been on the job for two weeks but I'm getting there. But this is really -- it is really critical.

The idea is to say we're going to six countries that already have the basic infrastructure -- fundamental -- in order to expand the electricity access that people have. And the transactional nature of that is the United States is going to -- our government is going to -- is going to leverage our funding. For every U.S. dollar that we're putting towards this initiative we have got commitments for private financing for $2 worth. And we are going to try to -- to work with governments and work with private companies to use all of the -- all of the -- the alternatives as well as basic electricity sources, whether it's geothermal, whether it's your regular electric grid, if we're using -- you don't want to use coal, but some of the African countries will then be freed to use coal, which are in plentiful reserves on the continent; to be able to bridge the urban centers with rural communities and really help establish this foundation that Jay just got through talking about that you need for anything else to grow.

We believe that this is going to create a sort of momentum for there to be other types of investments to come. So the Power Africa initiative is really just starting. The countries that it will be operating in are Ethiopia, Nigeria, Ghana, Kenya, Liberia, and Tanzania.

And we're very, very excited. We're sending trade missions out there. We're talking with our companies here.

I would like to just (inaudible) on this last thing that you said about the -- the cost of transportation and of the logistic -- the problem of logistics in Africa. Africa has many opportunities but there are big challenges.

Aligned with the Power Africa initiative is the Trade Africa initiative, which is going to focus at first on East Africa -- on the East Africa economic community. And what we're -- what we're trying to help the Africans do is to realize that they've got to also invest in intra-Africa African trade in order to -- to have better economic integration and to strengthen their own abilities to be able, then, to export something to us. To deal with the time it takes to truck something from Mombasa to -- to -- to anywhere in -- to Addis (ph), let's say, or from -- from -- from -- going from Uganda into Rwanda, we need to have better roads, they need to have -- they need to have a regulatory system that we're working with them on that will make transportation easier, that -- they need to cut down on all the -- not only the tariffs but the -- the corruption and all that.

So we are investing time and money and expertise and strategizing with them on how to better regionally integrate and -- in order to increase what we hope will be our own exports and -- and their imports of our goods. We are thinking that with the Trade Africa initiative we will be able to double their own -- or double their own trade and bring their exports to the United States up by 40 percent.

So these are initial initiatives. They were announced in June. We have gotten started, but they're -- we're hoping they're show great...

KOTECHA: Well, they are very important. Thank you, Ambassador Williams, for that.

I'm glad you picked East Africa. The East African community has had a long history. You know, it was a community that was together under the British with the colonial administrations gone. It continued and then it fell apart and it has reemerged, so I'm glad we are supporting them. I'm on the advisory board of East African Development Bank, which is an instrument of the East African community, and they are doing well.

You picked up on the issue that Jay raised about costs of doing business in Africa, and I think this is something that Ambassador Gips has also thought about.

From your experience, Ambassador Gips, what -- what is your thinking about what needs to be done by African governments, by -- by those who want to help them, to try to address the constraints that businesses see to make investing more attractive, including costs? But also, how do you then turn around and awaken American interest in Africa to pierce through some of the perceptions of risk that people may still have, notwithstanding the -- some of the good stories that are heard in the media from (inaudible) about Africa?

GIPS: You know, it's a very good question and I think it's starting -- it is changing. American business is awakening to the opportunity. There's GE; I see Coke in the back of the room, American Tower, Symbian (ph), so small and big business are grabbing the opportunities that are growing in Africa. And that may be the most important thing to getting the story told is to have more conversations like this, but it's the word of mouth to those communities that are going to matter. The challenges are still very difficult. Jay hit on a bunch of them. I was on a presentation out in Chicago and one of my colleagues said, "You have to remember the three P's of doing business in Africa," and I'd never heard this; I've been to a lot of these presentations. And it was you have to have passion, you have to have patience, and you have to have a plan B.

And I, you know, I think it's true. It's a complicated place to do business. I had my own version of this, which I called the four C's, which are: it is complicated -- all the logistics that Jay and Bisa both hit on that are starting to improve but it's incredibly difficult and these markets are small. South Africa is 25 percent of the GDP of the continent and its economy is about the size of North Carolina. So if you put them all together you have a big market, but until some of these barriers come down it's individual pockets that you're pursuing, and that makes it harder for U.S. companies to come over and do that.

Second C is capacity. And again, they hit on it a little bit. Many places you can't get power to do business -- water, transportation. But there's also a human capacity challenge, and Jay talked a little bit about this, as well, which is you have this incredible demographic dividend, which could be a demographic disaster.

All these young people coming up. Population is roughly a billion today. It will grow and could grow to 1.5 billion to 2 billion. That's a huge economic opportunity but it's also a challenge to house, feed, and most importantly educate so that those people can go...

(UNKNOWN): And employ.

GIPS: And employ. I was just going to say, so those people can go into the workforce.

It's a global challenge. You know, when I think about national security challenges that exist, this is going to be one of the great challenges not just for Africa but for all of us, to make sure that those young people do have opportunities. Otherwise they'll be migrating to Europe or wherever and it's a huge, huge challenge.

Most of these panels we don't talk about the corruption word, but it's another one of the C's that's a very serious challenge in some countries. But I think it's gotten immeasurably better and I think you're starting to see government after government start to tackle those challenges, put in place rules that improve it.

You know, if you look at any -- you know, South Africa's the market I know the best. People complain about corruption in South Africa all the time. It's better than India; it's better than China; it's better than Brazil; it's better than Russia on any of the -- the metrics that are out there that people look at.

I was at a panel with the Ethiopian prime minister and he said to all -- there were about 20 of us in the room -- he said, "If any of you ever hear of corruption in my country I want you to call me," and he said -- it wasn't -- it wasn't very -- I'm going to overstate what he said, but he basically said, there will not be due process as I investigate it. And the more examples we have like that, the more, I think, the continent -- because they look to their peers and they're also competing with each other, and those who put in place governance and are attracting investment will also start to create that virtuous flow.

KOTECHA: I want to echo what you said about the corruption issue. If you look at Nigeria, for instance, the Central Bank governor has been on record -- a really impressive man. He actually announced a year and a half ago names of people who are deadbeats -- those who were not paying their banks and were directors at companies, and said, "You will not lend to these guys. Any company -- no bank may lend to them." Made it public.

And he went at a -- at a -- at a public discussion in Russia he said, "Seventeen percent of our GDP is being stolen and we're going to tell the -- the world who they are and hold them accountable." This guy is unbelievable and it is not just him; there are many others.

Since you had the floor before, Ambassador, Gips, let me -- you were in South Africa and you mentioned South Africa, so may I ask you why the country is not -- it's a beacon but it's not making as fast growth rates as the countries we talked about, and there are complaints that -- that the promises of anti-apartheid movement were actually not met. We have Nelson Mandela somewhat on the ropes, as it were. His movie's coming out.

Could you talk about South Africa and really, are we looking at a potential problem there or is it still on track and doing well?

GIPS: You know, I -- South Africa has this incredibly vibrant private sector. They have an incredibly vibrant civil society. They have a government that sometimes doesn't quite live up to the expectations of its people. Does that sound familiar to anybody in this room?

It's a young democracy. It is still growing and going through a lot of challenges. It's got a very significant core challenge, though, which is it's got, you know, 25 percent unemployment, and among young people it's up to 35; and it's got a broken education system that's not training those people for the workforce.

So if you ask Jay or others who are doing business there they'll say one of their biggest challenges is hiring qualified people; yet, you've got this high unemployment. To me, if they can fix that challenge their opportunity is quite significant. They have a very strong set of labor regulations that make sort of the path that many other countries have taken -- the growth of cheap manufacturing is not likely to be a part of the South African story.

So they're making a -- a set of tradeoffs but they -- they also have an incredible social welfare state. There are -- I'm not sure what the latest numbers are, but when I left there were about 6 million individual taxpayers. There's 16 million people getting social grants from the government.

So you have a situation where they're -- they've got to use their opportunity now because they have incredible infrastructure, great legal system, great banking system. To figure out how do they grown and how do they maintain their position is a gateway to Africa.

KOTECHA: Thank you, Ambassador.

I want to turn to Jay now and ask a little bit about competition.

We have, in Africa -- do we have in Africa competition with China? Is it a net positive to have China in Africa -- it has grown so phenomenally? Is it a positive Western investment? Surely if they build -- Chinese build a road or a power project in Africa it can be used by factories that we helped build, but of course, their investment comes with less, as it were, strings attached, or fewer -- different strings attached, perhaps.

What is your experience in this area and do you see Chinese corporates even coming or is it still simply the governments?

IRELAND: Well, I think you've seen kind of a change over the last few years. Initially you had a lot of government-to-government arrangements of kind of a loan backed by natural resources. And the loan might be not just -- not just money but also, you know, they'll build so many hospitals or -- or roads and rail, et cetera.

So now you're starting to see, you know, China's development banks are in. You're starting to see companies come in -- the Chinese companies. So it's -- it's a lot different now.

Now, the -- the issue is, which I think has been beneficial, is most of the Chinese investment has been in I will call it the civil infrastructure -- the roads, the rails, the things that -- that is -- that are very necessary and -- for us. I mean, we don't do them but we need them. And so it's been very beneficial.

I think the one that-- the ones that gets concerning -- and it's not just China. It's the Europeans, the Indians, the president or prime minister, whomever comes over with all their businesspeople. There's a bunch of loans that are given and all of a sudden business is awarded to all the French or German or Indian companies. So it's not just China. Something we don't do, but...

WILLIAMS: But we're starting to more.

IRELAND: Right. But, I mean, that's -- so that's really the competition. I mean, Holan (ph) just went down to South Africa, and I think it was a $4 billion to $5 billion loan and got all of the -- Alspin (ph) got all of the electric locomotives for the next, what 10 years? So, you know, so I don't -- I don't look at it just as East; I also look at it in the West. So that's what you're competing against.

And I think, you know, from the standpoint -- what -- what makes that difficult is that typically when we go on to a request for proposal, there is a pretty -- most countries have a pretty stringent process of making sure that you've got enough competition, that, you know, it's competitive and that the award is appropriate. You know, it'll be challenged but, you know, from the corruption standpoint it's -- it's done very publicly.

The problem with these government-to-government deals is it doesn't allow us to go in and bid against it because it's done on -- on a state-to-state thing. So it's away from the RFP process, and that's what it makes very difficult for us because then we don't have the ability to put in a bid to counter whatever might have been done on that.

So, you know, our view is there aren't enough -- there really aren't, still, enough companies in -- in Africa, especially American companies. Europeans have been there principally from the historical colonial connections and the Eastern Indians, especially on East Africa. And we're starting to see a lot of Korean and Japanese interests, especially in the engineering companies, to really get into the power gain.

And so it's a -- you know, it's a global...

KOTECHA: Do you see Turkey? Turkey is...

(CROSSTALK)

WILLIAMS: Turkey came to Niger with a -- the prime minister of Turkey, the highest (inaudible) Niger with a delegation of 300 businesses this year.

KOTECHA: Well, I think the question is coming to you, Ambassador Williams, as to what is the U.S. doing about this?

WILLIAMS: Well, we are -- we are actually going to be having three trade -- trade missions going to Africa before the end of the year. We've got two going in early December to Congo -- we're going to Congo, we're going to Uganda, we are going to Burundi. And we are going to have another one that I think we -- we always pass through South Africa at least once a year. I think (inaudible) South Africa.

We haven't really been behind the curve. It really is a two-way street. The U.S. government likes to promote -- we want to promote American businesses, but American businesses have also got to say, "OK, we're interested. We'll come along."

So we are organizing more and more trade fairs. I think that's going to be -- that will be important.

But I'd also like to say, we don't really look at China as negative competition; we look at it as positive competition. We feel like, obviously, our products are better, our -- our engineering is better, but we do need to have the same kind of access and we need more American businesses to say they're willing to work in a place like Niger.

The other thing that the Chinese have done, at least from my experience -- they will propose projects -- they proposed a sugar refinery that the Nigerians weren't even thinking about. But guess what? They're building it.

And when I went into the government and I said, "You know, an American company could have bid on that. We have experience in this," it was a, "Well, you know, this is what they offered and it seemed to make sense and they had it all laid out and we need something in the middle of the country so we accepted it."

So we would like to have our trade missions -- the initial ones are going to be, of course, we always attract the big companies, but we need to attract some of those companies that have -- that haven't really tasted the waters yet overseas and really need to decide that they want to branch out. We need a little more risk -- people that are a little more adventuresome.

KOTECHA: Well, good. I think that's -- that's a good -- good response to the -- to the issue of how does U.S. government try to help industry, and actually, it's a bit of industry trying to help itself.

GIPS: Can I...

KOTECHA: Do you want to comment on that?

GIPS: Yes. Just how far the government has come from when I first got there to where they are now over the last three or four years, and I think there's been a real emphasis on Department of Commerce's Doing Business in Africa initiative. The agencies are all talking to each other, which they didn't used to. You know, President Obama wanted to combine all of our export promotion agencies into a single group. That didn't go through Congress so they're doing it another way.

But in South Africa, my first team meetings at the embassy, you know, I'd have seven different people representing economic agencies and they weren't talking back in Washington, so we would try and fix things out in the field but in Washington they were going a different way. And I give huge credit to Secretary Clinton and Secretary Blank in getting this initiative started, along with OPEC and EXEM (ph), so low at least the government is coordinated, working together.

And I completely agree with Bisa: U.S. companies have to come. Our system is different. We're never going to be competitive with the Chinese in sort of that government business interface. That's not how we work. That doesn't mean we can't close that gap quite significantly.

WILLIAMS: I think...

KOTECHA: Please do, yes.

WILLIAMS: ... piggyback on that, because we are doing -- thank you for reminding me, Don. We are trying to make things easier, and we are -- we have begun organizing -- and you can just ask for this -- you can call your State Department and ask for the country that you're interested in -- we are having these virtual conversations that are sector-specific. If you're interested in finding out a little bit more about mineral mining in Niger, for example, we set up a -- a -- a DVC, a -- a digital -- digital video conference, with the businesses and government officials in that host country, with a group -- a consortium of companies on this side -- you can either know each other or not know each other, but we'll find a date -- and then allow you to pose the questions back and forth or find out what the environment's like. If you just want to talk to the embassy commercial people first or if you want to say, I want to know who else is out there. Is there another foreign company that's out there that's working in gold mining, let's say, or that's working in energy? And we will arrange those kinds of -- let's -- let's have a conversation to try to woo you to come over and see whether or not there's an investment potential.

IRELAND: To -- oh, go ahead.

WILLIAMS: Yes. So I encourage you to think about that.

IRELAND: To Don's point, I mean, the advocacy of the -- of the embassies and all have been very good for -- any time you ask it's been great, and I think that's the key, because again, what Bisa said is if we can compete with our -- with our -- with our technology and our products and on a -- on an equal financial footing, it's -- really it's not -- it's not really an issue. But overall it's been -- it's been positive and it's been much -- getting much better.

KOTECHA: Well, good.

I had one more question but I think I'll defer that until -- until we have some questions from the -- from the members. So I will recognize you. Please state your name, state a question, and -- one question.

And I'll start with you, please? There'll be a mic coming, yes.

QUESTION: David Helenac (ph). You've all touched on infrastructure and a little bit on by far the most important infrastructure, which is education. Are there things that the U.S. government and perhaps even private industry can do to promote education, and I think in particular higher education, as well, in Africa?

IRELAND: Can I take -- I think, you know, as we look, one of the big things in most of the African countries that we operate in is a continued focus on localization, which is really hiring local people and, you know, building up the -- the economies, et cetera. So we've taken a look and -- and when -- when we look at it there is a responsibility on a large, multinational to go into a country, and it's a combination of, obviously, putting in -- putting in a facility or hiring employees but, you know, we can hire -- we have 300,000 people globally for General Electric. Even if we hired 300,000 in Africa, that's not going to -- that'll -- that's a drop in the bucket of what's needed.

But can we build out a supply chain? You know, we are -- we are investing in the countries that we have facilities in around training. We're going into universities and working with them, establishing curriculums, working even at the high school level to develop leadership. So there's a lot of -- and we have all of the same training programs that we have here in the U.S. for GE we have in Africa.

It's a responsibility for us because if we don't build that out we're not going to be able to compete -- we're not even going to be able to do business there because we can't hire local people. It's what Don said in South Africa; it's the same in Angola and Nigeria and Kenya, wherever we are.

And so I view it as it's not a -- I don't view it as a government issue. I view it as something we need to do to make sure we have the people.

And there's a huge Diaspora of Africans that are getting educated and -- and employed outside of the region that are willing to come back, and I think that's another one that companies can tap, as well.

KOTECHA: Do you want to add on that...

(CROSSTALK)

KOTECHA: ... both of you do, so please go ahead?

WILLIAMS: OK, on the same thing? Yes. I have two things to say on that.

Yes. There are things that the government can do and we are. President Obama also announced the Young African Leaders initiative, and this year there's going to be -- this coming year there'll be a special aspect called Washington Fellows.

Their idea is to bring back this first year about 500 Africans who will then be immersed in an intense leadership program at a series of universities throughout -- in the country to talk about leadership and management and all that and then also have added onto that a type of apprenticeship or some kind of a work experience in whatever their sector is. These can be people even from government or they can be from NGOs or any of the -- any of the private sector business -- business elements.

Our idea is to give intense exposure, send them back to their country, back to whatever industry or position they had before as sort of especially anointed (ph), specially trained, somebody that has already gotten a good sense of how the Americans do business and what's needed, who will become a model. That's one thing that we are doing.

We also, of course, have all kinds of fellowship programs.

But I want to also say that, you know, GE is not the only company that is realizing you have to invest in -- you have to build the labor force that you want. In Niger, which has a -- which is -- always ranks low on the development scale but has really -- has an economy that is really growing, Orange Telecom decided that they were going to create a management incubator, and they -- they came to us because we had -- we are very active on the -- in the -- in the economy, basically, in the private sector there.

And they came to certain other companies in the city to say, "Would you like to participate in this incubator, because what we're trying to do is realize -- eventually we're going to turn over management to the Nigerians and we want them to manage our company the way we do." Therefore, they're -- they're setting school right there in place, and that kind of -- that kind of initiative, I think, is very important and something that the private sector is going to have to participate in.

GIPS: Just three things to that: one, really emphasize that I think the strongest selling advantage that American business has, and I hear this from African leaders and businesspeople all the time, is we want American businesses over because you train our people. So the GEs -- every company I've dealt with in America -- they're not bringing in their own -- they're trying to grow local management.

Tell a quick story: Ford in South Africa came in and the plant that was there was one of Ford's lowest-performing plants. Jeff Mammoth (ph), who ran Ford, took all of the middle managers not to the United States for training, but to India to one of Ford's best plants in India. Those guys came back, took that training, felt so empowered that Ford had invested in them that that's now Ford's second-highest performing plant in the world. So that's a big part of the American story and what we need to sell as American businesses go in.

Number two -- I can't not talk about this because I'm so passionate about it -- there's a great organization in Johannesburg called the African Leadership Academy that is training the -- and I see a bunch of you nodding -- training the next generation of African leaders. GE has made a big commitment to it. It's an example of the type of indigenous training and leadership that's going on and it's very exciting. And if any of you want to get involved, come see me later on that.

And then third, we talked about the -- the growth of the population, and I think your question around universities -- I think one of the greatest opportunities that is out there is whoever's going to figure out how to invent -- reinvent university education and technical training for this -- for this continent. With new technologies -- now, African invented mobile money to transform the banking sector -- this is going to happen in education. It has to, and the market demand is there. And I think it's a huge opportunity for somebody who's much smarter than I am to figure out how to reinvent this.

KOTECHA: Well, obviously a great question.

Let's take another one.

Yes, please? Please identify yourself and a mic is coming.

QUESTION: Odi Aburdeen (ph), the Capital Trust Group. One topic that none of you mentioned: food security in Africa. With increasing population, and when we talk about food security we're talking first about humanitarian grounds, but also as people move into urban cities they require more food, and it's a -- having food security also means having stability.

Now, we in the U.S. have a super advantage when it comes to agriculture. How can U.S. companies, how can the U.S. government work with African entrepreneurs and states to increase food production in Africa?

KOTECHA: Who would like to take that?

GIPS: Do you want to start with the food security...

WILLIAMS: I'll start. I'll start and then you can chime in.

You know, we are working on food security in Africa, and we do that through various kinds of ways. We used to, of course, just send over P.L. 480 rice and oils and things like that. We do that much less now because we have found that the -- the vagaries -- the food -- a lot of the causes of food security once you deal with climate change have to do with really poor infrastructure, poor governance, and poor -- the inability to get the produce to where it needs to be.

And so we are working with local governments and local farmers not only on technologies and crops that -- that take a lot shorter growth period and all that, but we're -- we're -- we are working on the logistics of -- of moving food around. My example, because I just left there six weeks ago, is Niger, which has been chronically food insecure, but each -- what we find each year is that they are -- they are reducing that gap. They are eating a little bit more or having a little bit less of a hunger period. Part of that has to do with -- with -- with all kinds of training that we do in our -- in our assistance program.

So I think if we deal with the notion of not just roads and railroads to get -- to get -- to export items, but if we deal with infrastructure and if we deal with the way that rural farmers can communicate to the cities to get things from down from the mountains or from out of the dessert, that will -- it really -- the problem will actually start to take care of itself a little bit more.

Corruption, good management, and technology is what we're working on.

GIPS: I've been amazed as I've sort of hear who's doing what in Africa how much of the new private equity investment is actually into this agricultural value chain. Venture (ph) funds have started; there's more coming, because this is an economic opportunity. And by the way, if you come back to that -- not just -- your -- your point is exactly right. People are going to move to the cities.

But part of this also has to be -- because the cities will get swamped with that growing population. If people can't figure out how to earn a livelihood by not all moving to Nairobi or to Kinshasa, we're going to have a huge challenge. So part of this is making -- making it clear that there is an economic opportunity through agriculture by building out these value chains.

IRELAND: There's a couple of technology enhancements that have occurred because of the mobile technology and the strength of that in -- especially in East Africa and Ethiopia and Kenya, really allowing the -- the farmers to understand what the -- or the price is, so you eliminate some of the middle men and all of the disparities that occur. So all of a sudden it does become economic for them to grow the food and, you know, similar -- it's the stuff that, you know, the free market of understanding what -- what's really happening. So that's very helpful, as well.

KOTECHA: Yes. Great question.

So let's go to gentleman there, the...

QUESTION: Dan Christman, from the U.S. Chamber of Commerce.

Bisa, we have taken many delegations to Africa and I couldn't agree with you more. To quote Secretary Powell, U.S. capital is a coward. We look very, very carefully at the risk, and except for iconic countries -- companies like GE and Coke and others that you mentioned, Jay, it's very, very difficult to induce American companies to go there.

And one of the reasons is physical security, is the issue of growth of the -- at least the perception of the growth of extremist elements in the Maghreb, in Eastern Africa, et cetera. And American companies have a very, very different footprint in that regard from a Turkish company or a Japanese company.

So can you just comment on the issue of physical security in Africa and how that's progressing, what the impact is on American companies, in particular, eager to go there?

WILLIAMS: Well, you know, thank you very much for that question, and clearly now you're -- you're proving to me it really depends on who you're talking to. I went on a road trip in the U.S. -- I went to Houston; I went to L.A.; I was talking to people in New York and D.C. about looking at Niger as an obstacle -- I mean, as -- as an opportunity and finding -- trying to find out what their issues were going to be. And we were really talking about the oil -- oil sector.

And I asked right off, is it security? And those business told me, "No. If we're interested we'll bring our security." So there is that component that you don't really have to worry about.

But then for the other -- for the other types of investors, for example, who don't know anything about Africa and really, you know, who are more afraid, then you really do have to do a country-by- country study.

All I can say is you should be able to judge by who else is there and what else they're doing. And in most instances they African countries do want American business. Sit down and talk to the leadership and tell them, this is what I think I'm going to require. Go out and do your risk assessment. Go out and ask your embassy.

We have regional security officers at all of our embassies, and in addition to being involved with the security of the American government personnel, the American private people who are in town -- they provide, you know, guidance and seminars and things like that -- they're there to advise businesses. Almost every embassy should have what's called an OSAC, and overseas security awareness council -- advisory council -- O-S-A-C. And you can tap into that council to find out what is the security setting there?

KOTECHA: And there are -- there are alerts -- alerts on the Internet.

WILLIAMS: That, as well.

GIPS: Can I give a slightly different take, which is doing business in Africa is not for everybody. It, you know, it -- not everyone is going to be cut out for this. And, you know, right now you get a very high risk premium for doing business in Africa -- I would argue probably too high. But, you know, for those who are afraid of their physical security -- I was at dinner last night with somebody who said, "I feel safer in downtown Nairobi than I do in Detroit."

So I think, you know, it -- it sort of is a perception thing, to Bisa's point. Different people are going to have different views.

KOTECHA: Well, there are lots of hands so I suggest we take three questions so that we can get them -- let's take four. One, two, there's one at the back there, three, and four. There's five. So let's take them all five, because we're going to run out of time. We'll have to remember them. I'll try to remember those.

QUESTION: (OFF-MIKE) I'll try to be loud. Agility seems to be the problem with OPEC, EXEM (ph) (inaudible) I've been doing transactions there. I was head of Marsh & McLennan in Africa. I was head of Marsh & McLennan in Africa and ran our country restructuring business at Mercer, so I've worked everywhere. I'm currently developing power plants in Africa.

Immediately upon the president's announcement went to meet with everybody from Power Africa. The problem is that it takes forever -- it would take 18 months to get most of this stuff approved. If I do a deal with Siemens in Germany I get 90 percent guarantees; I get my equity guaranteed; they also make grants through the supply chain and they do it fast; I get my phone calls returned.

We don't have enough people who have experience at the agencies like OPEC or EXEM (ph) who've been investment bankers, who've been strategy consultants. We have to have a volunteer core at a senior level in these agencies and we have to -- must fundamental issue to Africa Power initiative: It will fail if deals cannot be approved in six months.

That means that the environmental studies have to be done, outsourced to expert one-stop-shop entities, and we can't even get them on the list, by the way, at OPEC. I've tried to get Marsh on the list; I've tried to get Berger (ph) on the list; I've -- none of these major companies are on the list and we can't get decisions made. We can't get phone calls returned. So I'm very pleased that you're there, Bisa, because having some new energy that all of you invest -- it's going to take that. Because I don't want anybody to have any illusions -- the chamber guys are frustrated, too. People try to do deals and they can't wait 18 months with their capital.

KOTECHA: I think we got your question.

Let's go to the next.

(CROSSTALK)

WILLIAMS: Don't answer?

(CROSSTALK)

KOTECHA: We're going to run out of time, so I want to just take others because that's a tough one.

Yes? There were some in the back. Yes, go ahead?

QUESTION: Mont (ph) from Control Risks. Thanks.

Just curious about infrastructure bonds, be them sovereign or institutional, such as the AFDB's, developing themselves, and how do you see that trend towards large -- large kind of (ph) projects in Africa? And what is the position or capacity that the U.S. government and/or leading private sector companies can do to -- to help this along?

KOTECHA: OK. The third one. Anyone else there? There was -- yes?

QUESTION: Yes. Claire Casey from Garten Rothkopf. I've spent a lot of time working on energy access and I'm curious, particularly from the private sector perspective, in Kenya, where they have new PPAs being set up, do you see a real opportunity in off-grid rather than grid extension power generation and distribution?

KOTECHA: Let's take -- there was one more, that's it. And then we go to answers.

Please go ahead?

QUESTION: Hi. I'm Dan Rose (ph), and in Africa I'm chairman of a company building -- an American company building American style regional shopping malls in Ghana. And we have the best sights (ph) in the country; we have signed up anchors like ShopRite and are waiting to hear from Walmart imminently, and everything is -- the numbers are heroic and we're in the process of looking for financing and it's not entirely clear what the best possible sources, the most effective sources for financing are.

And the Council has been a wonderful source of contact for that sort of thing. Should the government be making more active use of groups like the Council, like the Chamber, to serve as -- as conduits for financing information? Because there are -- there may very well be more American activities that would take place in Africa if the financing were clearer.

KOTECHA: So, let's give an opportunity to the panel to respond. The question about more volunteers and more capacity to respond.

Maybe you can take that, Ambassador Williams?

WILLIAMS: OK. I want to say this: Thank you very much for your suggestions on -- your advice about the Power Africa. I will take some of that back. We have a working group at the White House in which I participate that's talking about Power Africa right now.

You should call the State Department more than OPEC because we do return your calls and we do answer the phone.

(LAUGHTER)

(UNKNOWN): And you'll call OPEC.

KOTECHA: But you can't do the guarantees.

WILLIAMS: We can guarantee that we'll answer the phone.

(LAUGHTER)

But I -- I want to say this, also: This -- the Power Africa initiative really is a high priority for the president, so I -- I am -- I am almost willing -- I am willing to put my 25 cents to say...

KOTECHA: To set aside the due process.

WILLIAMS: ... that's the limit of my bets -- that these transactions are not going to take 18 months to be completed. And I've taken that -- this notion -- this -- Cassandra's (ph) advice that if it doesn't get done in six months the whole thing's going to fail. This cannot fail. It will not fail. So we will make sure that we -- that we have to build into our process a mechanism that's going to expedite this. That's one thing.

Can I just...

KOTECHA: Yes, please. Yes, please do.

WILLIAMS: Infrastructure bonds, what can you do to help? I'll leave that to somebody else that knows that better.

Kenya. Off-grid solutions. That's a very important -- yes is the short answer, and we've got a whole section of our working group that's going to -- that we hope will focus on off-grid solutions. We were just talking about that three days ago.

So not just for Kenya but in all these projects, the idea is to diversify what's available. We talked about the populations in these countries. They're spread out, they're not that big, and they'll need various types of energy. So yes, off-grid solutions are going to be a big part of the Power Africa initiative.

And the shopping mall. We are here. We are taking advantage. And the other thing I would recommend is the Corporate Council for Africa...

(UNKNOWN): Exactly.

WILLIAMS: ... which is -- which has been for years the name -- the -- the largest consortium of businesses involved in Africa with African experience who are trying to attract other American businesses to invest in Africa and to trade with Africa.

KOTECHA: Do you want to talk about the infrastructure bonds?

IRELAND: Sure. I'll talk about the financing, too. I mean, there's a lot of private equity money that's going into shopping and retail in Africa. It's mostly local, private equity companies that have feet -- feet on the ground, and it's a real estate play as well as the retail piece. And CCA, Corporate Council of Africa, is a -- is a big potential as far as a connector.

I think the infrastructure bonds -- I think the financing piece -- the -- the lack of -- or the, you know, the -- the limited access of local capital is -- is one of the hindrances in -- in Africa financing. So we're seeing bonds -- you mentioned them earlier, the financing that's occurring. I think the infrastructure bonds are something that would make a lot of sense.

I think there's a tremendous amount of opportunity to invest in long-term assets -- power plants, et cetera -- that -- that pension funds don't have the ability to do here but they could. You know, you -- you sit there and you go, they -- they view Africa as this huge risk but these same pension funds are the guys that just -- you mentioned Detroit.

So, I mean, it's all a factor of risk, you know, and -- and I think that's -- it's a dynamic that has to -- has to change. And I think there's a lot of long-term, high-return business on the financial side that if you -- if you have feet on the ground and you understand what's going on there's a lot of -- a lot of potential.

And then to the off-grid piece, yes. Absolutely. There's no way that the off-grid people are going to get served by the grid. It's too expensive. And so there have to be off-grid solutions.

We're working on a number of them. It's biomass, one-to-five megawatt kind of mini grid solutions. We just announced and we're going to announce winners in two weeks in Legos (ph) with the U.S. African Development Fund a $2 million project for off-grid solutions around innovation -- small stuff that we're going to award $100,000 grants to.

So that's a big focus for us because it's a combination of those grids as well as the strengthening of the grid. And the key is to get power to the urban areas where the economy can flourish. It's not going to be trying to get it out to the villages, from the standpoint of the grid. It's just too expensive and doesn't...

KOTECHA: Ambassador Gips, you have any...

GIPS: Just two quick points. One, in terms of financing, too, if you actually look who the largest investor into Africa is, it's South Africa. And more and more, I think, what we're starting to see is African capital investing in Africa. So as people are looking at projects, partnering with African finance -- private sector African finance institutions is a great way to both get local knowledge and capability and find funding.

I want to make one other point, though, too, which is there's been a little bit of a theme that the government should do more here, and I'm -- now I can say this now that I'm out of government -- we all get the government we deserve. And if people care enough about Africa or care about EXEM (ph) playing a bigger role or care about OPEC playing a bigger role, you've got to speak up because Congress is not hearing that.

EXEM (ph) barely got reauthorized. It was a fight to the death. By the way, EXEM (ph) and OPEC are the only two organizations in the United States government that make money for the government, but they're almost shut down.

So this is, you know, this is an influential group. I hope you'll use some of your influence to say, one, that Africa matters and the U.S. government should play an important, proactive role in...

KOTECHA: That's a very good final comment.

Let me just mention one footnote on infrastructure bonds. To address that, African Development Bank has started an initiative called Africa50. They want to raise $10 billion for African money -- African songwealth (ph) funds and pension funds and the like -- to address the need of infrastructure, and they will be rated and they will issue bonds.

I am actually going to Nigeria to advise Africa Finance Corporation, which wants to get also in the capital markets, and their job is to finance infrastructure. So there will be institutions that will raise bonds for infrastructure, but individual bonds could be also raised, as has been mentioned -- typically the local markets, because otherwise foreign consumers (ph) tend to be rather large, although some deals might be done offshore.

Anyhow, very good question. I'll be delighted to talk to you more later about that if you wish.

I'd like to thank everyone for -- for having come to this session. I'd like to thank the speakers.

(APPLAUSE)

KOTECHA: Until next time, continue investing.

*Editor's Note: Capital flows to Africa were below $20 billion in 2000, not 2010.

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