Author: Landry Signé
Site of publication: Brookings
Type of publication: Article
Date of publication: July 28th, 2021
Advancing trade, investment, and technology in Africa offers enormous economic growth and increased prosperity for both regions and is best realized through value-based foreign policy and a market-based model of development, education, and accountability. There is no better time to accelerate U.S. trade and investment in Africa than now. Despite Africa’s tremendous economic potential, the U.S. has lost substantial ground to traditional and emerging partners, especially China. Indeed, while recent trends indicate that the U.S. engagement with the region has fallen, it has not and should not cede its relationship with the region to other powers.
Importantly, the U.S. can build on new regional momentum to revive and strengthen its partnership with Africa for mutual prosperity, including building on the recent launch of the African Continental Free Trade Area (AfCFTA), and given the promise of the initiatives of the DFC, Prosper Africa, and the post-AGOA 2025 options. To do so means a shift in emphasis in the relationship to one more focused on value-based foreign policy, and also building upon the areas of strength and convergence with African citizens’ preferences; such as trade, investment, technology, education, accountability, and a market-based model of development.
Trade and investment are not just about money and prosperity. They also bring and support peace, stability, and security. In my book Unlocking Africa’s Business Potential, I explore key trade and investment trends, opportunities, challenges and strategies, that illustrate the tremendous potential of Africa, and explain the complex competition between emerging and established powers on the continent. The following key trends are critical for policymaking given their implications for trade investment, economic transformation, inclusive prosperity, geopolitical dynamics, and mutual U.S.-Africa interests.
Trade and investment are not just about money and prosperity. They also bring and support peace, stability, and security. In my book Unlocking Africa’s Business Potential, I explore key trade and investment trends, opportunities, challenges and strategies, that illustrate the tremendous potential of Africa, and explain the complex competition between emerging and established powers on the continent. The following key trends are critical for policymaking given their implications for trade investment, economic transformation, inclusive prosperity, geopolitical dynamics, and mutual U.S.-Africa interests.
Importantly, the U.S. can build on new regional momentum to revive and strengthen its partnership with Africa for mutual prosperity, including building on the recent launch of the African Continental Free Trade Area (AfCFTA), and given the promise of the initiatives of the DFC, Prosper Africa, and the post-AGOA 2025 options
The growth of household consumption and business spending: a unique opportunity for U.S. trade and investment. By 2050, Africa will be home to an estimated USD 16.12 trillion of combined consumer and business spending. And Africa’s prosperity can be good for the U.S.: Such growth will offer tremendous opportunities for U.S. businesses in household consumption (USD 8 trillion) in areas such as food and beverages, housing, hospitality and recreation, health care, financial services, education and transport, and consumer goods, but also business to business spending (construction, utility, and transportation, agriculture and agri-processing, wholesale and retail, etc.).
The rise of global partnerships and the competition between traditional and new players: an opportunity for the U.S. to build on its sustainable competitive advantage. In 2009, China became the region’s prime trading partner. In fact, between 2006 and 2016, China’s trade with Africa surged, with imports increasing by 233 percent and exports increasing 53 percent, as they did for several other global players as well. During the same period, the U.S. lost ground in exports to Africa (-66 percent).
China’s influence goes beyond the trade relationship: It is also the top investor in infrastructure, and now is the first destination of English-speaking African students, outperforming the U.S. and the U.K.
U.S. policy recommendations for bolstering trade with Africa by increasing investment, bridging the digital divide, and addressing the continent’s energy and infrastructure needs
Africa has made tremendous progress in mobilizing resources for infrastructure development, working hard to bridge gaps in ICT, energy, water and sanitation, and transportation. Despite the remaining deficits, the Infrastructure Consortium for Africa (ICA) reported that between 2013 and 2017 the annual funding for infrastructure development in the region was USD 77 billion, about twice as much as the annual funding average of the first six years of the 2000s. However, many of these gaps persist.
In 2018 the African Development Bank (AfDB) found that Africa’s infrastructure requirements are between USD 130 and 170 billion a year, leaving a financing gap of USD 68 to108 billion. China has played a key role in financing, and has become the largest bilateral infrastructure financer in Africa (Chinese FDI grew 40 percent annually from 2010 to 2020). However, the U.S. has the chance to make a monumental difference when it comes to investing in infrastructure development in Africa.
Fast digitalization, increased technological innovation, and an accelerated Fourth Industrial Revolution (4IR): The Fourth Industrial Revolution is characterized by the fusion of the digital, biological, and technological world, and technologies such as artificial intelligence, big data, 5G, drones and automated vehicles, and cloud computing. As a world leader in technological innovation, digital transformation, and the Fourth Industrial Revolution, the United States is well-positioned to play a leading role in the African digital space and contribute to Africa’s pursuit of now-vital technologies.
U.S. policy recommendations for bolstering trade with Africa by increasing investment, bridging the digital divide, and addressing the continent’s energy and infrastructure needs.
The pandemic has created unique momentum for engagement with Africa. The U.S. should seize this momentum and build on Congress’ historical bi-partisan support for the region to develop and successfully implement a long-term comprehensive Africa strategy that effectively coordinates action around trade, investment, commerce, and economic growth. This strategy should draw from consultations with African partners and multilaterals, building on areas of sustainable competitive advantages. The strategy should:
- a) be rooted in the American values and principles that are aligned with the priorities of African citizens and U.S.-Africa mutual trade and investment interests
- b) protect American, African, and global interests by advancing security, stability, and peace through strategic partnerships with African organizations
- c) utilize U.S. strengths (digital transformation, Fourth Industrial Revolution, education, creative industries, health, democratic values, etc.) in the context of the new continental trade dynamics brought about by the African Continental Free Trade Areas (AfCFTA).
Enhance the effectiveness and better coordinate the action of U.S. agencies acting around trade and investment in Africa by adopting the principle of agile governance.
The U.S. already has phenomenal tools, which in principle, could make a monumental difference if successfully implemented. Prosper Africa holds a lot of potential in terms of trade, investment, shared prosperity, and effective coordination of U.S. agencies, which is not yet realized. The goal of Prosper Africa is to coordinate the tools from across government agencies and to foster trade and investment between the U.S. and Africa. Although it is a great idea, many players, especially on the African side, are still hoping for it to achieve its full potential. It will be extremely important to have major wins to reinstate trust with African partners.
Redefine the base for new engagement with Africa by appointing a U.S. Special Presidential Envoy for Africa to represent the U.S. at high-level meetings and multiply presidential and high-level visits in Africa.
To stop ceding ground to other powers in Africa, it is crucial that the U.S. reiterate the respect it has for Africa, Africans, and their leaders. Appointing a Special Envoy and reinstating high-level meetings, including presidential visits to the region, between the United States and Africa will send a strong signal. Regular visits by senior U.S. officials, including the President and his cabinet, will help to shift perceptions around Africa, highlighting the continent as a safe, reliable destination for investment. Creating a forum for dialogue between government officials and the SME community will create the opportunity to engage in a systematic and coordinated way.
The U.S. should capitalize on the African Diaspora, which is heavily represented and active in the U.S., by specifically adopting diaspora commercial diplomacy to foster trade and investment between the U.S. and Africa.
President Biden has made steps in strengthening this relationship through early engagement with the community, but this strategy can be pursued further in regard to trade and investment with Africa in order to distinguish the U.S. from other competitors and accelerate its competitive advantage. The collaborations between African innovators on the continent and African and African-American innovators based in the U.S. have the potential to advance U.S.-Africa relations on several levels. Members of the African diaspora have an incredibly valuable understanding of Africa-U.S. cross-cultural engagement, not to mention existing relationships and networks on the continent, making them perhaps the best suited to Prosper Africa’s efforts to support and facilitate business I mentioned above.
Prosper Africa should formalize a relationship with the African diaspora’s SME community and the continent’s SME community, and routinely engage as a group, to support the formulation of strategies and mechanisms to increase two-way trade. It has started such an effort, but can do more: For example, in 2019, Brookings hosted a conversation between USAID and members of the diaspora’s SMEs. It brought to light specific, actionable ways to enhance the program’s mechanisms, including the need to expand staff support at trade hubs, expedite DFC loans, and improve data collection and analysis. SMEs in Africa are crucial to include in these conversations so that all stakeholders are involved to ensure Prosper Africa designs effective, efficient policies.
Accelerate the COVID-19 vaccine strategy and partnerships, and aggressively pursue vaccine diplomacy beyond COVID-19 by supporting the development of a vaccine manufacturing industry in Africa, including investments in human capital and technology development.
According to the Africa Centers for Disease Control and Prevention (Africa CDC), only 3.19 percent of Africans have received at least one dose of the COVID-19 vaccine as of July 21, 2021. A Duke University study estimated that most Africans will not have had an opportunity to receive the COVID-19 vaccine until 2024. The devastation of the COVID-19 pandemic, as well as other epidemics in recent years like, has revealed the urgent need for investment in Africa’s national and continental healthcare systems. Vaccine diplomacy is a crucial first step towards helping Africa recover from the pandemic and prevent the emergence of new variants that might damage the recoveries in other nations.
The U.S. can build on higher education, another area of comparative advantage, to provide technical training and reskilling programs through initiatives and agencies to close the digital skills gap and human capital gap (especially for youth and women).
It is crucial the U.S. expand educational and training opportunities in Africa. The soft skills and development of academic institutions provide the opportunity for the U.S. to lay the foundation for a lasting win-win partnership with Africa, sustained by knowledge exchange and deepening business ties. U.S. policy needs to provide support that incentivizes American universities to open more campuses and degree programs, especially in STEM and technology, throughout Africa. Such programs provide skills in areas critical for the rise of manufacturing industry and effective decentralisation of global supply chains and will be equally beneficial learning opportunities for African students and American students who may study abroad.
For example, Carnegie Mellon University has a campus in Rwanda that offers master’s programs in information technology and electrical and computer engineering. Morgan State University has recently launched a partnership with a university in Ghana, offering two graduate degree programs to students. Fast-growing SMEs will be far more likely to evolve and invest in areas where there is a skilled workforce or, at least, resources to support training workers, and added U.S. support could go a long way towards creating an attractive business environment for SME investment. It is indeed an opportunity to establish a long-term partnership of a new nature between U.S. and Africa.
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