US businesses, despite pitfalls, are doing a brisk trade with Africa
Boston — ''We regard Africa,'' said US Commerce Secretary Malcolm Baldrige recently, ''. . . as a new frontier for American business.''
A literal gold rush of American entrepreneurs have been heading to the lands south of the Sahara, where US exports have leaped 92 percent in the past two years (from $3.4 billion in 1979 to $6.6 billion in 1981, according to Commerce Department statistics).
But for these business prospectors, especially investors, the promise of Africa is as yet unfulfilled, forestalled by recurrent problems.
Since the independence of most black African nations in the 1960s, a volatile political climate and chronic economic instability have tarnished the continent's glittering potential. Prospects have been further dimmed in the two biggest markets for US exports to Africa -- South Africa and Nigeria -- whose attractive economies have been dulled by a plunge in world prices of gold and oil, respectively.
US investors, however, have a new guide on the safari to African markets -- the Reagan administration. In January, Agriculture Secretary John Block and Commerce Secretary Baldrige led a trade mission of 26 top business executives to Cameroon, Ivory Coast, Nigeria, and Morocco. ''The mission was a success,'' said Secretary Baldrige, who cited seven agreements for trade signed, and many more under negotiation.
Still, the economic downturn in Nigeria and South Africa will make it difficult to maintain the recent spectacular growth in US trade to Africa, says Gerald Feldman, director of the East-West Africa division at the Commerce Department.
In Nigeria, for instance, plummeting reserves in foreign exchange from lower oil exports caused the country's central bank to place a temporary moratorium on new import commitments in March. The ban has since been lifted, but stiff import rules are now in place.
''If an American businessman has nonessentials going over there now, you'll just have to wait until the balance of trade is corrected,'' says Michael K. Torf, president of Bartex Industrial Corporation and part owner of Polyflex Ltd. , a shoe production plant in eastern Nigeria.
Having weathered the shifting sands of sub-Saharan economics for 12 years, Mr. Torf says such delays are part of an African venture. It's not a get-rich-quick market, he points out. ''You have to be in it for the long run; it requires patience, persistence, and prudence.''
Like many other African nations, Nigeria requires that a significant percentage of the company be owned by indigenous investors. Polyflex is 60 percent Nigerian, and Bartex Industries owns 40 percent. ''But we (as most American investors do) act like 90 percent shareholders in the planning, management, and operation of the company.''
Mr. Torf maintains a bright outlook for his Nigerian shoe company, expecting to meet an estimated demand of 70 million pairs annually during the 1980s. In some ways, he says, ''It's a businessman's dream.'' But Africa demands what he calls ''a psychological sixth sense -- intuition and entrepreneurial spirit.''
Large multinational corporations face similar obstacles to success. Johnson & Johnson, for example, with operations in Zimbabwe, Zambia, Kenya, Ivory Coast, and Nigeria, finds that ''profits are not big now in Africa,'' according to company group chairman John Avery. ''We're planting seeds for the future,'' he says. Mr. Avery then draws a parallel to Latin America, where ''the situation 30 to 40 years ago was similar to investment in Africa today.'' Now, he points out, profits are large and growing in Latin America.
He lists smuggling and graft as two of his company's chief concerns, and ''major problems for any local manufacturer of international brands.'' He explains that, for example, smugglers can buy Johnson & Johnson's products in Britain from cheap wholesalers and slip them into Nigeria without paying duties, undercutting Johnson & Johnson's local manufacturer and slicing up its market. This is possible because many African states cannot police their borders adequately, and bribes get goods through official checkpoints.
Yet despite the pitfalls, US investors continue to trek Africa-ward, not without encouraging signs.
''Increasingly, even socialist African governments are anxious for more US trade and investment,'' said Assistant Secretary of State Chester A. Crocker at a recent trade and investment conference on African business held in Boston. He points out the administration's willingness to help the business community: ''American ambassadors have been instructed to place highest priority on helping US businessmen.''
Mr. Crocker also emphasized the importance of personal contact and cultural sensitivity in dealing with Africa, and related that ''at every stop on the recent high-level trade mission, Africans asked, '' 'Where are the American businessmen? We want to see more of them.' ''