Black Businesses Face Familiar Struggles in Africa

Ron Busby, president of the U.S. Black Chambers, Inc. (Courtesy Photo)

By Freddie Allen
NNPA Washington Correspondent

WASHINGTON (NNPA) – As the United States pivots to strengthen economic ties with Africa, there’s a good chance that Black-owned businesses may be left behind due to some of the same factors that limit their growth in America.

During the recent U.S.–Africa Summit, a historic meeting of nearly 50 African presidents, prime ministers and diplomats in Washington, D.C., Bloomberg Philanthropies and the Department of Commerce hosted a business forum to highlight the need to increase trade and build relationships between firms in the U.S. and African-owned companies.

The African Development Bank reported that more than one-third of the population of Africa is considered middle class and by 2040 the African labor force will be bigger than the labor force in China.

White House officials estimated that the African economy will grow at 5.4 percent this year, expanding at a higher rate than the rest of the world’s economy.

In an effort to encourage U.S. exports and investments in Africa, President Barack Obama pledged $7 billion in new spending under his Doing Business in Africa (DBIA) campaign, a program launched in 2012, and partnered with private firms, the World Bank, and the government of Sweden for an additional $12 billion deal.

In a press statement released during the business forum, the White House said that U.S. firms committed to “new deals in clean energy, aviation, banking, and construction worth more than $14 billion.” The statement continued: “Taken together, these new commitments amount to more than $33 billion, supporting economic growth across Africa and tens of thousands of U.S. jobs.”

Black-owned businesses and Black leaders of major U.S. companies were largely invisible during the business forum, an omission that drew criticism from members of the Black community.

Despite significant contributions to the U.S. economy, Black-owned businesses continue to face significant hurdles that limit their ability to take advantage of opportunities abroad.

Ian Oliver, a senior international trade consultant at the Small Business Development Center in Washington, D.C., said, “One of the biggest challenges, this goes for all entrepreneurs, but it affects minority businesses to a greater extent, is the access to finances and resources,” said Oliver. “There’s a concerted effort, at the federal-level to fix that, but there’s a gap between what they hope to do and what community-based organizations, that have the sole purpose of helping to grow small businesses can do.”

The U.S. Small Business Administration designed the 8(a) Business Development Program to support small, disadvantaged businesses. Companies owned by minorities, women, veterans and people living with disabilities often benefit from the program.

The SBA website said that the overall program goal is to graduate 8(a) firms that will go on to thrive in a competitive business environment.

“There are many successful minority- and women-owned small businesses that participate in the 8(a) programs that provide access to mentors so that small-businesses can partner with larger more sophisticated companies and co-bid on things, but it also opens up a whole world of federal bidding opportunities,” said Oliver.

Small businesses are encouraged to balance their federal and private sector contracts, but what Oliver has found is that the transition from federal contracting to the commercial marketplace can be challenging for 8(a) program minority companies.

And even though President Obama has expressed the need for American companies to increase exports, many Black firms have products and services to offer that would be valuable in other markets, if they had access to capital to increase the scale of their operations. Black participation in the SBA loan program is down under the Obama administration.

According to analysis of FY2013 data by the Wall Street Journal, less than 2 percent of the $23.09 billion in SBA loans went to Black-owned businesses, down from the 8 percent of loans that went to Black-owned businesses in FY2008 under President George W. Bush.

Ron Busby, president of the U.S. Black Chambers, Inc. (USBC), a group that supports the development of Black enterprises, said that the recent U.S.- Africa Business Forum was a good start to that dialogue, adding that he wasn’t sure if the summit addressed many of the issues and concerns of Black-owned businesses, including access to capital and business opportunities in the private sector.

“When you get to the commercial side, it’s more fluid, it’s built off of relationships,” explained Busby. “It’s a different sales process and many times those sales opportunities never go out to the general public to bid. Many Black businesses never get into that private sector because they’re not invited and corporate America doesn’t deem it necessary to include us in those business opportunities. We have to do better in transitioning into the private sector, if we’re going to continue to grow.”

According to the United States Census Bureau, Blacks owned nearly 2 million nonfarm U.S. businesses. Less than 110,000 Black firms had employees, but they accounted for $100 billion annually.

Black firms are not the only ones that struggle to do business overseas. Even though 23 million small businesses operate in the U.S. the International Trade Administration said that about 83,000 U.S. companies exported and imported merchandise in 2011 and roughly 80,000 were small to medium-sized companies.

“Expanding trade and investment is a central part of the Department’s ‘Open for Business Agenda,’ and our overseas presence is one critical way we support U.S. businesses seeking to grow in foreign markets,” said U.S. Secretary of Commerce Penny Pritzker, during a speech at John Hopkins University’s Paul H. Nitze School of Advanced International Studies (SAIS). “With 95 percent of the world’s consumers living outside of our borders, now is the time for U.S. businesses to look beyond the domestic market and take advantage of tremendous opportunities in fast-growing markets, especially in places like Africa and Asia.”

Pritzker said that U.S. exports reached a record $2.3 trillion in 2013, supporting 11.3 million jobs.

The companies that do enter the import-export market also face a whole new class of competition, said Oliver. That means there just not going up against other minority or small disadvantaged businesses, they’re also contending with all the big U.S. players and Nigerian and Chinese firms that are much further along with their investments in Africa compared to the U.S.

Oliver continued: “It just takes more resources. Not only the logistics of it, but you have to build relationships in that market to become more competitive.”

Oliver said that it’s critical to invest in someone local, whether that is an agent or an agency. According to Oliver, the United States Commercial Service (USCS) is the best way to find someone to keep an eye on relationships and steer a company towards the good partnerships. The USCS promotes international trade, operating in more than 100 U.S. cities and in more than 75 countries.

Earlier this year, the Commerce Department announced that it will double the presence of the U.S. Commercial Service in Africa, opening offices in Angola, Tanzania, Ethiopia, and Mozambique, and expanding offices in Kenya, Ghana, Morocco, and Libya.

Busby predicted that over the long term, there were going to be more hotels built on the continent of Africa than anywhere else and that there will be Black hotel owners that will take advantage of that opportunity.

Busby said that Black small and medium-sized Black businesses need to find other large Black businesses that are making investments in Africa and partner with them.

Oliver, who has started charities in Africa, said that a lot of businesses, especially the big ones, overlook the importance of making social investments and caring about the impact that their business will have in the local community.

“It changes the entire dynamic. It shows that you’re not just there to make the money,” said Oliver. “There’s a lot of good happening in Africa and sometimes it’s hard to find because of Ebola, HIV and malaria.”

Oliver said that having patience and building personal relationships have to be top priorities for any successful business venture.

“You gotta go there,” Oliver said.

Busby acknowledged that although, there are many underdeveloped opportunities in Africa, there are also a lot of developed opportunities closer to home.

Busby added: “But if you’re not doing business in Arkansas or Alameda County, you need to consider some of those opportunities first before you jump out there and decide you want to go across the globe.”