A Vision Beyond Africa’s Problems

Can anything really come out of President Bush’s visit to Africa, a continent so poor that it accounts for only 2% of the world’s economic output even though it holds 13% of the world’s population?

The short answer -- counterintuitive, perhaps, given Africa’s image in many circles as long-suffering and forever destined to be left behind -- is yes. The president’s trip could mark a significant turning point for the ravaged economies of Africa.

“The Bush administration is more serious about Africa than any U.S. government in recent memory,” says economist William Cline of the Washington-based Center for Global Development, which focuses on poor nations.

Indeed, a panoply of ideas and measures on foreign aid, trade and investment surround the presidential journey. It’s important to recognize that this economic agenda isn’t being driven by a desire to promote market forces and alleviate poverty for its own sake. Rather, notes Cline, “it is the result of Sept. 11 and the need to reduce the conditions that foster terrorism.”

But whatever the motive, the result is bound to be the same: Some serious money may finally begin flowing to a continent sorely in need of the funds.

On the aid front, the president’s visit is set to free up the first of the $15 billion he has pledged for the fight against HIV and AIDS, the scourge devastating so many African countries.

In addition, in a new kind of foreign-aid program called the Millennium Challenge Account, $10 billion will be directed to the poorest nations -- those with annual incomes per person of less than $1,500. To qualify, countries such as Ghana, Malawi and Senegal will have to operate their economies free of crippling corruption. But they and some other African countries already are doing that.

The economic stability that this increased aid promises to bring may, in turn, help open the way for badly needed foreign investment.

At present, the world’s biggest companies tend to pass over Africa when building factories and opening offices. At the same time, the vast landscape of 48 countries south of the Sahara Desert attracts only a few million dollars in mutual-fund-style portfolio investments.

But that is likely to change in the years ahead.

The Bush journey might make its biggest contribution by simply changing the tone of discussions about Africa from a constant lament that nothing can be done for the misruled continent to purposeful studies of how economic and social development can bring African countries into the main of the global economy.

Africa, after all, is no unmitigated disaster area. It can be helped by specific steps that are being debated in Washington, including a tax exemption for the profits that companies earn on investments in the sub-Saharan part of the continent.

“If the exemption were for a 10-year period, it would attract some major corporations,” predicts James Harmon, an investment banker and former head of the Export Import Bank who last month chaired a high-level Commission on Capital Flows to Africa.

U.S. and African bankers and business leaders, including executives from Caterpillar Inc., Citigroup Inc. and Boeing Co., served on Harmon’s panel. “They looked on Africa as an opportunity,” he says, not just a sinkhole for capital.

And so it could be. South Africa, the largest economy on the continent at $135 billion in output, has an industrial workforce and infrastructure that has lured General Motors Corp., DaimlerChrysler and Volkswagen to its eastern areas near Port Elizabeth.

Smaller investments already are trickling in through such organizations as Reinvest in South Africa, a Philadelphia-based charitable trust that has helped finance new home building in poor areas near Johannesburg.

“We give loan guarantees to the builders and back the guarantees with dollar-denominated South African government bonds to protect our investors’ money,” explains Elena Pullen-Venema, executive director. Her group is looking for more such projects so that it can have a portfolio of “grass-roots ventures” to offer investors.

Certain African countries, of course, have vast economic potential -- but, at least at this point, don’t seem ripe for development. Nigeria, the most populous country on the continent with 115 million people, boasts abundant oil resources. But, unfortunately, it is roiled by political strife. The same holds true for Angola, another oil-rich nation on Africa’s West Coast.

More likely, investment income is going to find its way to countries that have pulled their economies and societies together. Among them: Namibia, the onetime German colony of Southwest Africa; Uganda, the former lair of dictator Idi Amin, which has revived its copious agricultural economy while containing the plague of AIDS; and the tiny Indian Ocean island of Mauritius, which specializes in producing apparel and offering offshore financial services.

Consider, too, Mozambique, a country of 17 million people that was left penniless and illiterate by departing Portuguese colonialists just a generation ago. It has brought literacy to a majority of the population and has spurred its economy to some $15 billion in annual output.

That said, Mozambique clearly has a long way to go. Though its population is comparable to that of Southern California, its economic output is only one-fortieth as large. In that lone statistical comparison, you can at once glimpse Africa’s tremendous needs -- and its tremendous promise.

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James Flanigan can be reached at jim.flanigan@latimes.com.