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US takes cue from China in Africa

Publication Date : 20-08-2014

 

Spurred by China's economic success in Africa, the United States this month held its first-ever summit with the leaders of the continent. Presidents and prime ministers streamed into Washington for three days of discussions with President Barack Obama and participation in the first U.S.-Africa business forum with business leaders.

Distracted for years by the Middle East and Asia, the U.S. is finally focusing on Africa, where its position as the continent's biggest trading partner was replaced by China in 2009. There is a strong feeling that the U.S. needs to grasp opportunities in a continent that hosts six of the 10th fastest growing economies.

Ironically, it was disclosed during the summit that the U.S. and China may decide to work together in Africa. The Financial Times reported that China had invited the U.S. to cooperate on a US$12 billion dam project in the Democratic Republic of Congo.

Obama injected a personal note to bind together the U.S. and Africa, saying in a toast: “I stand before you as the president of the United States and a proud American. I also stand before you as the son of a man from Africa. The blood of Africa runs through our family.”

In addition to trade and job creation, the agenda included governance, including rule of law, civil society and human rights as well as security issues, such as transnational threats and peacekeeping.

By all accounts, the summit was a success. Investment pledges, private and public, totaled US$33 billion. Private investment pledges exceeded US$14 billion, including US$2 billion by General Electric.

Obama announced US$7 billion in new financing under the “Doing Business in Africa” campaign, which will promote American exports to Africa.

According to a chairman's statement, the leaders “decided to intensify joint efforts to double access to electricity in Africa.” Obama announced that the initiative known as Power Africa, set up last year during Obama's Africa visit, has now mobilised more than US$26 billion.

The U.S. and African leaders agreed on the importance of the “prompt, long-term renewal of an enhanced African Growth and Opportunity Act.” The legislation gives privileged access to the American market for African goods. However, it is scheduled to expire next year and its renewal depends on the U.S. congress.

Another issue that will affect trade with Africa and that requires congressional action is the future of the Export-Import Bank, which provides credit to foreign importers of American products. Its charter will expire next month and proposed reauthorisation has met with opposition from conservative Republicans.

Jeff Immelt, chairman of General Electric, has warned that discontinuation of ExIm Bank would damage American companies trying to do business in Africa. Shutting down the ExImBank, he said, would mean “we are basically making a statement as a country that we do not think that exports are important.”

China isn't the only other country scrambling for a bigger stake in Africa. The European Union, Japan, India, Brazil and other emerging economies are also in the game. In fact, trade between Africa and the rest of the world has tripled in the last decade. But China is clearly the most important competitor from America's perspective.

The U.S. has steadily lost ground in Africa to China. By 2013, China's trade with Africa was US$200 billion, more than double that of the U.S., at US$85 billion.

While many Africans viewed the summit positively, what is needed now is follow-up action by the U.S.

Obama has promised that he will urge his successor to continue holding summits with Africa but that is not within his control.

“The great boundary to business between the United States and Africa is in the ignorance of Americans about Africa and Africans in general,” the Vanguard of Nigeria said, echoing a widely held sentiment. The president of Tanzania, Jakaya Kikwete, took pains to point out while in Washington that his country was situated in eastern Africa while the current ebola outbreak was on the other side of the continent.

As for cooperation with China, no decision has been made on whether to proceed with the dam but the World Bank has approved a US$70 million grant to the Democratic Republic of the Congo to conduct a technical evaluation.

The idea of U.S.-China cooperation is worth exploring. If the pilot project goes off well, there are likely to be other instances where China and the U.S. can join hands in the financing and building of infrastructure. This is something that Africa needs and may well lead to better understanding between the rising and the established power.

Certainly, China's interest in cooperation with the U.S. is in itself a good sign.

 

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