Guest Blog: Reset Africa; Obama Tours the Continent

The following is a guest blog by Asoka Ranaweera, managing partner of Grid2Grid LLC, a company based in Washington, D.C. that advises investors on structuring investments and developing projects in West, East and Central Africa. Ranaweera penned this back in July, and was a source in our upcoming BizVoice story, "Africa Under Construction," set for release in the new edition next week.

I am sitting in a hotel in Dar es Salaam Tanzania. The town is buzzing with anticipation and excitement. Any day now, President Obama will touch down and thousands of Tanzanians will be out to greet him. Everywhere you go and almost everyone you speak to will have something positive to say about our President and Michelle Obama.

By some remarkable coincidence, President George W. Bush and Laura Bush are also in town. President Bush is on a regional tour, and is fondly remembered by many Africans for providing billions of dollars in funding for combating AIDS and for starting the Millennium Challenge Corporation (MCC), which has had a significant impact in countries like Tanzania.

As I ponder the countless hours of traffic jams, security roadblocks and searches to come, my attention wanders toward the hotel bar. I see a large group of Chinese businessmen and women enjoying a drink and chatting animatedly. Dar es Salaam is abuzz not just with Obama’s visit, but also by the sounds of an economy growing at an average of 7% per annum.

Wherever you might look in Tanzania, you will find Africans, Chinese, Indians, Malaysians and Arabs vying for a slice of Tanzania’s economic growth and business. Meanwhile, as I left Washington, D.C. for Dar es Salaam, President Obama was getting some flak for embarking on a weeklong tour of Africa at the expense of U.S. taxpayers.

Rather than thinking about Africa as a place where development is now taking place rapidly, many in the American press still view it from a 1980s perspective. Meanwhile, Brazil, Russia, India, China, Turkey and many other countries are increasingly seeing Africa as a land of opportunity, a place to trade, invest and to develop bilateral relations with African people.

Africa is where all the economic action is taking place these days with 15 of the 20 fastest growing economies and approximately 300 million people attaining middle-class status in the last 20 years, according to the African Development Bank (AFDB). It’s possible that in the years to come, Africa will overtake Asia to become the fastest growing region of the world.

In 2009, President Obama visited Africa for about 20 hours. His election at the time energized many Africans into believing that his Kenyan heritage would lead to greater cooperation between Americans and Africans. Unfortunately, that never panned out; President Obama and his administration had huge domestic challenges to overcome such as the global financial crisis, which we are all still recovering from.

As we entered the recession, many Americans realized that Africa — a continent long associated with starving children, conflict diamonds and corrupt dictators — was growing and that altogether a new dynamic was shaping it. And we also came to the understanding that countries such as China had come to have a profound impact on the continent and that Africa was now a destination for business, trade and investment. Thus after more than four years of being primarily absent from the scene directly, President Obama is finally back, and this time his advisors say it is with the intention to “reset relations with Africa."

Afrophiles hope that this could be the beginning of a more concerted and directed engagement with the continent, especially in light of the fact that many people both at home and in Africa believe that this belated engagement has its roots more in economic competition than anything else.

Interestingly enough, from my experience America is more welcomed and viewed in higher terms in Africa than in any other part of the world. Africans feel a strong affinity for all things American and have been yearning for our support and partnerships. Africans in this generation are more likely to ask for investment and trade projects to promote bilateral investment than that dreaded term, "aid." And so the dynamic today is so much more different than it was.

As I get ready to leave the hotel for a meeting downtown, I hear a few Tanzanians discussing what President Obama will be doing in the country. It turns out he will be visiting Symbion, a U.S. company that is playing a significant role in the power generation sector. I am relieved to hear we as American business people are doing something constructive with the Tanzanian people.

As I am being driven through the streets of downtown Dar es Salaam, we almost collide with a high speed convoy. And I am told that we just saw Sri Lankan President Mahinda Rajapakse on his way to the statehouse. It turns out this is the first official state visit to Africa by a Sri Lankan leader; times have really changed and I hope we hit that Africa relations reset button sooner rather than later.

America Receiving Declining Grades on Education

Not to pile onto the myriad reports of the decline of the American education system, but the New York Times relays one educational expert’s testimony that many nations, including our neighbor Canada, are surpassing America when it comes to educating youth: 

America’s education advantage, unrivaled in the years after World War II, is eroding quickly as a greater proportion of students in more and more countries graduate from high school and college and score higher on achievement tests than students in the United States, said Andreas Schleicher, a senior education official at the Organization for Economic Cooperation and Development in Paris, which helps coordinate policies for 30 of the world’s richest countries.

“Among O.E.C.D. countries, only New Zealand, Spain, Turkey and Mexico now have lower high school completion rates than the U.S.,” Mr. Schleicher said. About 7 in 10 American students get a high school diploma.

Mr. Schleicher’s comments came in testimony before the Senate education committee and in a statement he delivered. The panel plans to rewrite the Elementary and Secondary Education Act, the main law governing federal policy on public schools.

The committee also heard from Dennis Van Roekel, president of the National Education Association, the largest teachers’ union; John Castellani, president of the Business Roundtable, a group that represents corporate executives; and Charles Butt, chief executive of a supermarket chain in Texas, who said employers there faced increasing difficulties in hiring qualified young workers.

The blame for America’s sagging academic achievement does not lie solely with public schools, Mr. Butt said, but also with dysfunctional families and a culture that undervalues education. “Schools are inheriting an overentertained, distracted student,” he said.

For more on the state of education in the Hoosier State, peruse some of the articles in the latest edition of BizVoice.

Hat tip to the Chamber’s Derek Redelman for bringing the NYT article to our attention.

Time to Lower Federal Corporate Income Rate

If tax rates can in fact be said to influence where companies locate and invest, the U.S. has a problem. As our economy becomes increasingly global our combined (federal and provincial/state) income tax rate is higher than every other country in the world, except Japan. Both presidential candidates have recognized the need to do something. Sen. John McCain proposes a significant reduction of the current 35% federal rate to 25%. Although coupled with other proposals and not nearly as definite or assertive, Sen. Barack Obama also indicated he is open to lowering the rates.

The U.S. can’t afford to ignore what most other industrialized countries have already figured out: the corporate income tax rates affect investment. This year China dropped its rate from 33% to 25%; and Taiwan, Hong Kong and Korea, which already had much lower rates than the U.S., dropped theirs even more. And it is not just in Asia. The adjustments swept Europe with Germany, Italy, the U.K. and Spain all making rate reductions. It is truly a global thing. Other countries that are part of the wave of cuts: Turkey, Bulgaria, Israel, South Africa and Colombia.

So with so much talk of change in other contexts, it is important to point out that it is also time for a change to our corporate tax rate. A full listing of the corporate rates in nations belonging to the Organization for Economic Cooperation and Development, along with other revealing information on this subject is available from the Tax Foundation.