The US is worried China has become Africa’s best friend – so what is Trump doing?

Abu Mubarik Sep 18, 2020 at 02:00pm

September 18, 2020 at 02:00 pm | Money Moves

Abu Mubarik

Abu Mubarik

September 18, 2020 at 02:00 pm | Money Moves

President Donald Trump addressing African leaders in Washington in 2018. Photo Credit: Brendan Smialowski

In a recent interview with the BBC, Tibor Nagy, the US assistant secretary of state for African Affairs remarked: “For too long when investors have knocked on the door, and the Africans opened the door, the only person standing there was the Chinese.”

Nagy’s comment captures the waning influence of the US in Africa in the last decade. As US investment in Africa became less and less, China scaled up. But according to Judd Devermont, director of the Africa Program at the Center for Strategic and International Studies, reduced investment in Africa is not peculiar to the US. “Trade between Africa and most European countries declined between 2010 to 2017,” he told CNBC.

The African Growth and Opportunity Act (AGOA) remains the largest trade initiative by the US in Africa. The trade deal was designed to improve the commercial relationship between sub-Saharan Africa and the United States. AGOA provides African countries duty-free access to the US market for more than 6,000 product lines. At its peak in 2008, AGOA showed a trading volume of $80 billion and plummeted to a volume of $23 billion the year after. Many African countries no longer find AGOA suited to promote economic relations as it expires in 2025.

For instance, Kenyan growers are allowed to export only three kinds of vegetables to the US out of the 15 they grow for the export market. Countries like Eritrea, Ivory Coast and the Central African Republic have also had their AGOA eligibility revoked due to human rights abuses or failure to implement political or economic reforms.

African countries are redefining the nature of trade relations with the US. Some are pursuing a bilateral arrangement with the US as they don’t find the US approach of multilateralism useful anymore.

Kenya and the US are negotiating a Free Trade Agreement (FTA). If the FTA goes through, it will be America’s first bilateral trade agreement with a country in sub-Saharan Africa. U.S. Trade Representative (USTR), Ambassador Robert Lighthizer, has said the deal will become a model for future trade agreements with other African nations.

China has been Africa’s biggest trading partner in the last decade, with trade volumes reaching $208 billion in 2019, figures from China’s Ministry of Commerce show. On the other hand, US trade with Africa was around $41 billion in 2018. 

A $1 billion Belt and Road infrastructure fund for Africa has been launched by China, and last year, President Xi pledged a $60 billion African aid package, further strengthening his country’s economic influence on the continent.

The country also continues to be the Africa’s largest lender, hitting US$143 billion between 2000 and 2017, according to China Africa Research Initiative at the Johns Hopkins School of Advanced International Studies. These monies fund projects such as roads, railway, ports, dams and so on.

The US, however, remains the continent’s biggest aid provider. According to the USAID, the US donated US$8.5 billion to sub-Saharan Africa in 2018.

The nuance here is that aid from the US comes in the form of grants, historically with conditions, many African countries find hectic and unappealing. However, Africa countries appear to prefer China’s loans to the continent for project financing due to the lax conditions under which they are given.

In recent times, comments from US government officials and President Donald Trump have not helped the cause of the US in Africa. Trump is reported to have described Africa nations as “shithole countries” although he has in characteristic fashion denied this. And then there was also the time he said his friends only go to Africa to make money.

“The fundamental problem is that you can’t wish away the president – he has described all of Africa in the vilest terms,” says Reuben E Brigety, a former US ambassador to the African Union under President Obama, according to the BBC.

To directly counter China’s influence in Africa, the US has launched the International Development Finance Corporation (DFC) with a seed capital of $60 billion. The DFC seeks to double US investment in low and middle-income countries. Many of the countries to receive investment support from this new agency are in Africa. 

Over the third quarter of 2020, the DFC approved investments to the tune of $3.6 billion worldwide. Nearly half of the money, $1.7 billion went into deals in Mozambique. Another $5 million has been invested as equity to help grow a commerce platform in Kenya known as Copia Global.

Also, an up to $250 million will be invested to support market financial stability in Africa. A further $1 million will go into empowering women in Rwanda and Kenya through digital access to health products.

It’s unclear if US companies will take up DFC offers to also invest in Africa because of the uncertainty Trump has inserted in the global economy. 

DFC builds on already exiting US agencies providing aid to Africa such as USAID, Overseas Private Investment Corporation (OPIC) and the Development Credit Authority (DCA).

However, according to Seifudein Adem, professor of global studies at Doshisha University in

Japan, the USA does not have a coherent policy for Africa. He told the South China Morning Post that, “It may have policies for clusters of African countries or issue areas,” he said. “China’s policy toward Africa seems more coherent, long-term and forward-looking.”

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