Heritage Foundation - Unleashing the U.S. Investor in Africa: A Critique of U.S. Policy Toward the Continent

African investment expert Peter C. Hansen spoke on the future of U.S. investment policy in Africa at The Heritage Foundation on November 2, 2011. Hansen explained that U.S. investors generally avoid Africa because the financial risks are simply too high. Basic legal tools for protecting investors are bilateral investment treaties (BITs) and double tax treaties (DTTs). The U.S. has six BITs and one DTT with sub-Saharan Africa—far fewer than its major economic competitors, including China. The U.S.’s lack of effort to secure such protections reveals that too many U.S. officials are unconcerned with U.S. investor needs in possibly the world’s toughest investment environment. They also do not seem to consider U.S. private investment a critical component of U.S. strategic interests in Africa— a critical strategic error that must be corrected.

Key Points

1. There is a fundamental problem with U.S. government thinking about African development: A mistaken assumption that mainstream U.S. companies are motivated more by higher rewards than by the diminishment of risks in African investments.
2. The reality is that U.S. investors generally avoid Africa because the risks are simply too high.
3. Basic legal tools for protecting investors are bilateral investment treaties (BITs) and double tax treaties (DTTs). The U.S. has six BITs and one DTT with sub-Saharan Africa—far fewer than major competitors, including China.
4. The U.S. should unleash its greatest economic force—U.S. investors—in Africa. Tens of thousands of entrepreneurs, small businesses, and Fortune 500 companies could bring immense know-how and growth to Africa.
5. With basic legal protections, U.S. investors could unleash a flood of development and prosperity in Africa, and send vast revenues to the U.S. that would be just a small part of the wealth created for Africa.

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