By Julian Pecquet
Posted on Thursday, 22 September 2022 16:30, updated on Monday, 10 October 2022 17:22
To hear the Joe Biden administration tell it, the US government is convinced Africa will be the next global economic powerhouse.
With a quarter of earth’s population by 2050 and a median age under 20, Africa appears poised to replace China as both a giant consumer market for American goods and services and as the world’s factory. Washington insists the US and Africa are a natural fit and has made trade a centrepiece of its US-Africa Leaders Summit in mid-December.
“Our administration’s goal is to promote inclusive and sustainable economic growth and development across the continent, to expand capital flows, and to promote the vibrant spirit of entrepreneurship and innovation that is so prevalent across Africa,” Vice President Kamala Harris said when announcing the summit.
As global supply chains for everything from critical minerals to food and fertiliser come under threat from intensifying competition with China and Russia’s invasion of Ukraine, US investment in Africa is expected to be a key focus of the three-day summit. On 14 December, the US Chamber of Commerce and the Corporate Council on Africa (CCA) will co-host the Africa Business Forum, the official private sector stakeholder event of the summit.
READ MORE US-Africa: Biden announces Africa summit for mid-December
Africa has a role to play “not just as a market for US exports, but as a major partner in key value chains,” former US trade official and current CCA President and CEO Florizelle Liser tells The Africa Report.” US producers and manufacturers will use Africa as a place to manufacture products as they do in other parts of the world already, like China.”
But the US private sector doesn’t seem to have received the memo.
US exports of goods to the continent barely topped $26.7bn in 2021, down 30% from a high of $38.1bn in 2014, the year of President Barack Obama’s inaugural US-Africa summit. Two-way trade was $64.3bn – barely more than 1% of US global commerce – down from a high of $141.9bn in 2008.
“The facts are very, very stubborn,” says Aloysius Ordu, the Nigerian-born director of the Africa Growth Initiative at the Brookings Institution in Washington.
READ MORE Standard Bank: Russia-Ukraine war makes African free trade more urgent
“Has the US lost competitive ground in Africa? Absolutely. When you talk about trade flows, when you talk about lending, when you talk about investments … all have decreased in real terms if you compare the period from 2010 to 2017.”
Worse, he says, US trade is trending in the wrong direction while countries such as India, Turkey and the United Arab Emirates are seeing their trade flows with Africa grow at a rapid clip.
Meanwhile, China has been the continent’s top trading partner since 2009, with two-way trade reaching a historic high of $254bn last year. Driven in part by Chinese exports of pandemic-related essential goods including pharmaceuticals and protective equipment, the deepening trade relationship has only reinforced African impatience at being lectured by the West about who it can trade with.
“If the alternatives are not forthcoming, we’re going to see more pushback from African countries,” says Nigerian economist Zainab Usman, who heads the Carnegie Endowment’s Africa programme in Washington.
The Biden administration is well aware of the challenge.
“It’s hard to tell African leaders (that) we’re not really showing up with anything meaningful, but (Africans) definitely shouldn’t take that other choice,” says Akunna Cook, who served as a deputy assistant secretary for Southern African and economic affairs in the State Department’s Africa bureau until leaving for the private sector in early September. “I mean, that’s just not a conversation that’s realistic or that’s going to get you very far.”
Much of the collapse in bilateral trade has been driven by a collapse in African oil and gas sales as shale drilling turned the US into an energy exporter over the past decade. Still, Ordu says, the US retains a competitive advantage in key areas including refined fuels, machinery, transport equipment, technology and food.
Enter the Joe Biden administration.
Last year, the administration announced it was doubling down on former President Donald Trump’s signature African initiative, Prosper Africa, and asked for a $160m annual budget, twice the previous level.
The initiative, which mobilises 17 US agencies and departments to help identify and facilitate trade and investment opportunities, says it helped close some 800 deals across 45 African countries for an estimated total value of $50bn over the past three years.
READ MORE US-Africa Business Summit: Chance to offset China’s influence?
Since then, the administration has launched several new initiatives to ease Africa’s shift to clean energy, jumpstart digital transformation and help fill the continent’s massive infrastructure deficit.
In its budget blueprint for Fiscal Year 2023 released in March, the Biden administration is seeking $249m for climate change programmes – a $174m increase over FY 2021. Some $100m would go to the US Agency for International Development’s Power Africa initiative, continuing the new team’s trend of reclassifying the public-private capacity-building programme as “clean energy” assistance as opposed to “modern energy services” under Trump, according to the Congressional Research Service.
We will use our influence, development assistance, and financing to help African partners adapt and build resilience to climate impacts and promote mitigation strategies to achieve a sustainable and low-carbon future.
At the same time, growing African blowback against efforts to restrict international funding for fossil fuel projects on the continent has prompted DC to reframe its discussion of climate change mitigation around the notion of a “just energy transition,” especially after Russia’s invasion of Ukraine sparked a global rush for new energy sources. Sub-Saharan Africans account for 75% of all people without access to electricity, and the number keeps growing by millions every year as population growth outpaces electrification.
“As Africa’s energy demands increase to support economic growth,” the Biden administration’s new strategy for sub-Saharan Africa states, “we will use our influence, development assistance, and financing to help African partners adapt and build resilience to climate impacts and promote mitigation strategies to achieve a sustainable and low-carbon future.”
The issue featured highly on Special Presidential Envoy for Climate John Kerry’s mid-September visit to Nigeria and Senegal.
READ MORE US – Africa: Deputy Special Envoy for Climate Pershing launches climate ‘listening tour’
“The departure from the last administration, in terms of pretending that climate change doesn’t exist — we’ve gotten away from that,” Cook says. “But now it’s how do you have a conversation that’s really truly about, one, addressing the impact of climate change on African countries, and two, investing in this transition in a way that doesn’t short-change development.”
The new budget also seeks $20m for a “Digital Africa” programme at USAID. The effort aims to “foster the growth of an inclusive and resilient African digital ecosystem led by African communities and built on an open, interoperable, reliable, and secure Internet.”
While the “Digital Africa” line item doesn’t mention China, the proliferation of Chinese telecommunications technology on the continent, from cell phones to 5G infrastructure, is clearly front of mind for the administration. Western companies largely missed the mobile revolution in Africa on the continent over the past 20 years, failing to compete with cheaper Chinese models, and the US is now trying to wean Africans off Huawei – with limited success.
READ MORE Tanzania becomes the latest African country to launch 5G
Much of that competition revolves around access to Africa’s so-called critical minerals, which are crucial components of mobile phones and electric vehicle batteries. Indeed, the most valuable single good in the US-African trade relationship last year was South Africa’s export of $3.5bn worth of platinum, which is used in the manufacture of zero-carbon emitting power plants.
Under the Biden administration, the official line has been to insist that the exploitation of Africa’s mineral wealth be conducted transparently to the benefit of local communities, rather than as a free-for-all between competing outside powers.
READ MORE US urges ‘race to the top’ for critical minerals at Africa Indaba mining conference
The administration pressed for the development of “robust, sustainable, and transparent supply chains for critical minerals” at South Africa’s Mining Indaba – the world’s largest mining investment conference – in May, and dispatched Secretary of State Antony Blinken to DRC in July as the US pressed Kinshasa to review its deals with China passed under President Joseph Kabila’s corrupt administration.
The administration’s announcement of a $600bn public-private infrastructure fund for the developing world at the G7 summit in June is another transparent effort to compete with China, this time with regards to the decade-old Belt and Road Initiative. The Partnership for Global Infrastructure and Investment (PGII), a rebranding of last year’s stillborn Build Back Better World (B3W), offers heady promises – but little funding to date.
READ MORE G7’s $600bn infrastructure plan aims to compete with China in Africa
The need is clear: The African Development Bank estimates the continent could need up to $170bn per year for infrastructure by 2025, with the estimated annual shortfall at around $100bn. But some experts question the logic of trying to go head-to-head with China.
“Because US policy on Africa is linked to the administration’s effort to curb China’s rise, there will be a strong impetus to match China’s investment in building high-speed railways, airports, and power plants,” Usman wrote in a recent article in Foreign Affairs. “(…) Yet similar infrastructure investments would not be the best use of US public resources because those initiatives play to Beijing’s strengths. Instead, Washington should build on the United States’ strengths in advanced technologies and private capital, thereby aligning US interests with the economic development needs of African countries.”
Blinken alluded to US interest in backing such high-tech investments when he unveiled the administration’s new strategy for Africa during his visit to South Africa this summer. The strategy “reframes the region’s importance to US national security interests” and seeks to recast the United States as the continent’s partner of choice, especially compared to China and Russia.
“So the United States is partnering with African governments, businesses, and entrepreneurs to build and adapt the infrastructure that enables that connectivity – an open, reliable, interoperable, secure internet; data centres; cloud computing,” said Blinken.
READ MORE Blinken unveils four-pronged US strategy for Africa
The Millennium Challenge Corporation (MCC) is just one of the agencies helping on that front. To date, the agency has provided more than $9bn in infrastructure grants across 25 African countries and is now working on a regional development grant with Benin and Niger designed to reduce the cost of transportation along the road corridor between the port of Cotonou and the capital city of Niamey.
“From transportation and agriculture to energy and digital, infrastructure development is fundamental to alleviating poverty and fostering sustainable economic growth,” says MCC Deputy CEO Mahmoud Bah. “From MCC’s perspective, we define infrastructure broadly to include hard infrastructure — such as roads, bridges, power plants, etc. — as well as soft infrastructure such as digital technology. Reliable infrastructure enables trade, enhances health and productivity, and catalyzes public-private partnerships.”
Ordu says one area where the US can use its expertise is to help with preparing and de-risking projects, including conducting analyses of financial and economic risks as well as social and environmental safeguards to get them ready for funding.
“We get carried away by who builds what,” says Ordu. ”And what we’re talking about is to bake a bigger cake, you need grand financing, and you need concession financing, to get the materials and ingredients ready. And then all of a sudden, everybody can compete in the actual construction.”
While the US is forging ahead with new initiatives, old programmes are getting a rethink.
Top among them is the African Growth and Opportunity Act (AGOA), which grants duty-free access to the US market to select countries in sub-Saharan Africa.
READ MORE US-Africa trade pact AGOA at risk? African leaders raise alarm
Indeed, the leaders summit will kick off on 13 December with the annual AGOA forum during which the programme’s goals and accomplishments will come under thorough review.
The programme has been the cornerstone of the US government’s economic policy toward Africa since President Bill Clinton signed it into law in 2000. But it is coming under heavy scrutiny as it comes up for renewal in 2025 by policymakers who want to end non-reciprocal trade benefits to the rapidly developing continent.
READ MORE US lobbying: Ethiopia fights to reverse AGOA trade suspension
Currently 36 countries are eligible for AGOA benefits after Ethiopia, Guinea and Mali were suspended for 2022 over human rights abuses and democratic backsliding. But nearly 80% of $6.7bn in exports under the programme came from just five countries last year, according to the US government, and only 16 have bothered to put in place a strategy to take full advantage of its benefits.
“Much has changed in the 21 years since AGOA was created, and as we think more broadly about the future of the programme, my goal as the U.S. Trade Representative is to help create the conditions necessary for a long-term, durable trade and investment relationship between the U.S. and Africa.” Katherine Tai said at least year’s virtual AGOA ministerial meeting.
Likewise, the US is rethinking its proposed trade deal with Kenya, which is seen as a possible blueprint for engagement with the fledgling African Continental Free Trade Area (AfCFTA).
READ MORE Africa free trade chief kicks off global engagement with Washington visit
The Donald Trump administration launched negotiations with Kenya in 2020 around a free trade agreement, America’s first with sub-Saharan Africa (the US has had an FTA with Morocco since 2006). The Biden administration has avoided the FTA language, instead launching in July a United States-Kenya Strategic Trade and Investment Partnership that calls for roadmap for enhanced cooperation around key issues including agriculture, digital trade and customs procedures.
“We … hope that this initiative can serve as a model for trade policy engagement in Africa, one of the most dynamic and fastest-growing regions in the world,” Tai said in a statement.
In a telling sign of the trade relationship’s primacy, Tai was chosen to lead the US delegation to President-elect William Ruto’s 13 September inauguration.
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