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Management in Practice

Can diplomacy benefit business?

The days of U.S. boycotts of South Africa are long gone. The country is an economic powerhouse in Africa and a key economic partner for the U.S. In four years as U.S. ambassador to South Africa, Donald Gips ’89 worked to increase investment and trade flows between the countries.

South Africa has always been two nations: one white, one black; one rich, one poor. Two decades after the end of apartheid, the disparities still exist. Spend time in the major cities and you could be in any Western metropolis, where a diverse, globally connected economy helps generate wealth and privilege. Just a few miles away, the townships, created during apartheid to separate blacks from whites, are a very different world, one in great need of development and new investment.

But South Africa’s economy is changing fast. Thirty years ago, the state owned nearly 50% of the country’s physical capital. In just the last 10 years, the number of people employed by state-run enterprises has fallen by half. In recent years, a vibrant entrepreneurial culture has bloomed; in particular, micro-organizations are thriving, with 94% of the nation’s small businesses employing fewer than five people, according to Dalberg Global Development Advisors. The U.S. Department of Commerce estimates that South Africa comprises a third of sub-Saharan Africa’s GDP; as a result, South Africa acts as a magnet for entrepreneurs throughout the continent.

When Donald Gips ’89 was named by President Obama to be the U.S. Ambassador to South Africa, he was tasked with forging stronger ties to the country, particularly among businesses.

“In Africa, the opportunities are huge, and they need investment,” he said. “The Chinese are investing, others are investing, and we need more American competition just to make sure the playing field is even.”


Q: How important was working with business interests to your role as ambassador?

Donald Gips: Under Secretary Clinton, even before it became an official program, a big part of what I was trying to do was promote more economic interest in South Africa and through South Africa, Africa, on the part of U.S. companies. So it was very much an enabler… Part of my mission was actually to increase that. Africa…the opportunities are huge. The risks are very large, but the opportunities are huge and they need investment.

The Chinese are investing, others are investing, and we need more American competition just to make sure that the playing field is even and that…it’s good for Africa to have choices about who they’re picking and the American way of doing business and things like Foreign Corrupt Practices Act help make sure that business is done in an transparent way, an open way and reduce corruption on the continent as well.

It was one of those wonderful opportunities where the alignment between what the private sector was interested in doing and what I, as ambassador, and the United States through the State Department wanted to see happen were perfectly aligned and so we spent a lot of time promoting trade, not just in South Africa, but in the continent more broadly and Secretary Clinton introduced the notion of economic statecraft as a big part of the State Department’s mission I think in the second year of my being ambassador, so the stuff we were already doing got encompassed in a statewide program to try and promote more trade work together. I’m not sure what I’m doing next, but the one thing I’ve agreed to do is chair the U.S.-South Africa Business Council. It’s a voluntary job, but because I believe so strongly in this idea that we need more American companies investing in Africa, competing in Africa, and that will help create jobs back here and it will help create jobs in Africa and South Africa. So, I’m a passionate believer in this and it was a big part of what we tried to do.

Q: How successful were these initiatives?

Gips: We’ve set new records for trade both ways. Just last year, we were up 12% over the previous high, so it’s growing. The opportunities are huge both…South Africa is growing a little less slow than the rest of the continent, but the rest of the continent, the opportunities are 6%, 8% percent growth. Lots of risks. You’ve got to know what you’re doing. Each country is different, but I think that it’s a great opportunity for American business and I think we were successful in laying that groundwork and, hopefully, it will keep getting built on over the next few years.

Q: Is economic growth helping to change the perceptions people in the United States have of Africa?

Gips: Sub-Saharan Africa is 49 different countries and each country has its own story. But if you go to Ghana, if you go to Kenya, and, assuming their elections go well, you go to Ethiopia, they’re growing 6%, 8% a year, their government seems like it’s coming together. Huge opportunities. You go to Sudan, little less clear if we’re going to get through that. Mali is a mess. So, different stories around the continent.

The interesting this is that in the U.S., we only hear the bad stories. We don’t hear the stories about if you go to Ghana, the economy is growing 9% a year. They’ve just discovered oil. They have a working legal system. Part of what I think is important and was important in my role at the State Department was to tell the other side of the story, because the media was, in my mind, only telling half the story and we’ve got to tell the other half so that Americans realize there’s both challenges but opportunities on the continent and that they can contribute to the growth of Africa.

This is actually critical too because the youth bulge in Africa…Africa will have the majority of the world’s population. It’s growing much faster than anywhere else in the world. There’s almost a billion people now in sub-Saharan Africa. Some forecasts have the going to 2 billion or 2.5 billion. So if we don’t find ways to create economic activity on the continent, we’re going to have social instability, we’re going to have failed states. When you have failed states, you have bad actors come in, and we’re seeing that today in Mali. We saw it in Somalia with Al-Shabaab. So I think it’s both in our economic interest, our national interest, and it’s the right thing to do to make sure that Africa realizes its potential and the way to do that is to create more jobs through more investment and build up the economic infrastructure on the continent.