It IS about the money, stupid: US/Africa Summit comes to life

It IS about the money, stupid: US/Africa Summit comes to life

As the precedent-setting US-Africa Leaders Summit in Washington heads into its second day, J. BROOKS SPECTOR considers the core issues for that meeting.

The US-Africa Leaders Summit – or at least the introductory parts of it – kicked off on Monday in Washington, DC, as some forty-nine African heads of government or senior representatives piled into the US capital. The initial, lower-level meetings – even before the actual leaders’ summit – already generated phalanxes of motorcades, traffic snarls and a welter of discussions and announcements – all designed to herald a new, more advanced US partnership with the continent – focused on the next generation of issues and opportunities.

The presidential interactions only began on Tuesday. Nevertheless, Monday’s events already had included a ministerial-level forum on the African Growth and Opportunity Act (AGOA), discussions on the role of civil society, announcements by major businesses over new investment in Africa plans, and, of special interest for South Africans, a presentation by President Jacob Zuma on his government’s views on the future of AGOA and the US-Africa partnership. Even more than all the “blue sky” planning for the new US relationship with Africa that evolves out of the presidential plenary sessions, efforts designed to focus on AGOA renewal and some big commercial announcements constitute the real meat and potatoes of the summit, at least in present circumstances.

AGOA, of course, is an important bit of American law (at least for Africa) that allows the duty-free importation into America of thousands of African product lines, including petroleum and automobiles – as long as a country has been certified for inclusion in the program in accordance with some fairly modest standards in the rule of law and transparent government. At present, thirty-nine of the continent’s nations are so certified.

First passed in 2000, and then renewed and extended several times thereafter, it will have been in effect for fifteen years by the time it expires in September 2015. A crucial fact is that AGOA is not an international treaty between America and African nations, but is, instead, unilateral policy whose benefits are extended to African nations without formal reciprocity.

AGOA has generated some signal export benefits for African nations. According to the data, in 2013, exports into America under the terms of AGOA totalled $26.8 billion continent-wide. While most of these benefits, so far, have come from petroleum exports, nevertheless, non-oil imports reached $4.8 billion by 2013, three times the total of 2001. Several categories of products – specifically apparel, footwear, vehicles and parts, and fruits and nuts all grew in value substantially during this twelve-year period.

Besides oil exporters Nigeria and Angola, and to a lesser extent Chad, that have benefited significantly under this law, South Africa has become the largest beneficiary under AGOA. In 2013, it exported some $8.5 billion worth of goods, mostly vehicles and parts ($2.3 billion), as well as iron and steel, fruits and nuts to the US. All of this has taken place in an overall balance of trade between Africa and the US weighed significantly in Africa’s favour. While US exports to the continent as a whole totalled over $35 billion in 2013, imports from Africa reached over $50 billion – producing a negative trade balance from the US perspective of more than $14.8 billion.

Because AGOA is a non-reciprocal American policy, Congress needs to vote on it to make it law, regardless of what a president may wish to see accomplished.  As a result, because it expires in September 2015, AGOA must once again be introduced into Congress as a proposal, and then hearings, debate, amendment and passage all be scheduled and carried out before a president can sign it into law. In fact, many key congressional Republicans and Democrats have publicly expressed their support for AGOA (it was first passed during Bill Clinton’s time and then later renewed under George W Bush’s administration). Nevertheless, the current state of inter-party relations over so many other concerns is such that it has been almost impossible to gain passage of anything but the most anodyne or absolutely required legislation, except after great anguish, in this election year-session of Congress. Looking ahead, the issue is not, for the most part, the contents of an AGOA renewal. Rather the problem is substantially procedural – any new AGOA legislation would almost inevitably slide down to the bottom of the pile of pending issues, to be taken up sometime or other, but not immediately.

Having said that, this summit really has been the first opportunity to begin a broad-based, public conversation in America in support of the renewal of AGOA, given the lead-time that still remains. At this point, a new AGOA legislative proposal hasn’t even been introduced in Congress – and probably will not be until after the new Congress first meets in January 2015. Meanwhile, there are several questions about South Africa’s continued participation in AGOA duty-free entry into the US that should be noted.

First is the sense among some in Washington that in any new AGOA, there should be a kind of graduation provision in which a successful country moves beyond the special benefits given under the law. Since the plan was designed for less economically advanced nations of which Africa had more than its share, in the new, future version, there should be some way to offer a vote of congratulations to a country whose economy is sufficiently advanced that it no longer would benefit from the same opening as a country like, say, Lesotho or Mali. The obvious, logical candidate for such a “congratulations and safe journey” would seem to be a country like, say, South Africa.

Second is the concern that has been expressed in some quarters that South Africa’s own tariff and import duty regimens are serving to restrict American exports to South Africa – and that just isn’t right or suitably grateful. That behaviour seems to some critics (and perhaps some members of Congress) to be an unfair balance, given the open access to American markets currently given to South Africa’s products.

And that, in turn, seems to speak to a geopolitical issue – and that is South Africa’s seeming positioning against the US on some rather contentious issues in some international forums – and presumably standing in the Russian, Chinese or other corners instead, (One has to wonder just what impact President Zuma’s use of his high-publicity presentation on the African economy to a US business and media gathering on Monday to strongly chastise Israel over Gaza, in the US, will have in the minds of those who gathered to hear what needs to be done, and can be done, to grow the African economy still more effectively.)

This kind of muttering also comes along as senior officials like South Africa’s Trade and Industry Minister Rob Davies have publicly told Americans, just before he left for the summit, that America must renew AGOA’s trade benefits for Africa (including South Africa) for a fifteen- year period into the future. And in his comments, Davies also said that, whatever America did, they simply should not even contemplate graduating South Africa from AGOA’s coverage. In some quarters, such prescriptions might well be defined as a classic version of “chutzpah” – or even a mumbled retort from some with consequently ruffled feathers that such a decision really is not Davies’ to make.

In response to comments about the suitability of South Africa’s continued status as an AGOA beneficiary, South Africans respond that its continued status as an AGOA-certified nation has an important regional impact as well, since so much of South Africa’s economy is interwoven with the rest of the southern African region. Disaggregating these economies in terms of AGOA-beneficiary states and non-beneficiary ones would have starkly negative consequences on the entire region. Moreover, the long-term period proposed by Davies is actually necessary to generate sufficient levels of confidence in South Africa’s economy that foreign investment would continue to arrive inside the country to help the nation flourish and generate jobs and growth. Further, while South Africa’s economy appears to be a modern economy in many ways, it is still so divided into rich and poor halves that AGOA’s benefits can still make a significant contribution to the country’s efforts to grow its economy and improve the distribution of wealth outward and downward.

What is definitely true is that this summit is, or at least could be, a breakthrough opportunity for African leaders, acting in concert, to begin their effort to make the case in America for a renewed AGOA. Such a case would argue AGOA is a key element of the larger process of Africa’s continued growth and America’s part in that development. In essence, the case is that better incomes in Africa can provide better markets for America’s goods and services, and, that. in the end, becomes a classic win-win proposition.

A second key development for the summit is the accumulation of numerous announcements of trade and investment deals being signed on the margins of this summit to bulk up the overall impact of the event. US Commerce Secretary Penny Pritzker said just before the summit began that at least $900 millions’ worth of such deals would be inked at this time, in and among all that razzamatazz of the summit.

Moreover, earlier this week, General Electric announced a commitment of $2 billion’s worth of investments in the power generation infrastructure needed in various African nations, closely tied with the Barack Obama’s previously proposed Power Africa initiative. $2 billion is certainly not chump change and so it represents some real financial and corporate muscle committed to this initiative. This is not foreign assistance in the classic sense at all. Rather, it comports closely with the Obama strategy for Africa that puts increasing emphasis on the kinds of normal commercial transactions that build on public-private partnerships that speak to the “Africa rising” narrative of growing affluence and growth across many of Africa’s nations, all leveraging creative financing such as government loan guarantees and investment insurance via mechanisms from the Export-Import Bank.

While some critics argue this “sudden” rush of American interest in Africa is really occurring because of the growing prominence of China as Africa’s lead trade partner (a level that now far outstrips America now), others answer that it really reflects the realisation that Africa’s growth potential is such that it would foolish for America not make such an effort. Critics argue that China’s growing prominence is significantly fuelled by primary commodity imports and state-supported infrastructure projects, rather than investments in productive capabilities.

Now, in a potential game changer pointing to an important new approach, the Financial Times reported Tuesday night that the Chinese have now approached the United States to join in new cooperative efforts on infrastructure projects throughout Africa. As the paper explained, “China has invited the US to co-operate in financing and building infrastructure in Africa and other parts of the developing world, an unprecedented proposal that has potentially sweeping implications for the future of international development aid. Chinese officials first approached Washington last year to discuss working together on a $12bn dam project in the Democratic Republic of Congo, US officials said, but the talks gathered momentum at the annual China-US summit in July in Beijing.

“The putative partnership is challenging: a bid for what could be the world’s largest hydropower complex, in one of the world’s least developed countries. While the World Bank has recently funded a report to evaluate the project, proposals for the Inga-3 dam have been discussed for years without resolution.

“The Chinese approach, nonetheless, signals a possible change of approach by Beijing as it indicates a desire to recalibrate its relationship with Africa. It comes as the White House seeks to step up US engagement in the region, home of six of the world’s 10-fast growing countries, hosting this week the first ever US-Africa summit.  Chinese officials have faced mounting accusations in the West and Africa in recent years over its engagement strategy with the region. It has been accused of pursuing a ‘cheque book’ policy, lending money to states largely to benefit its own construction groups, which have built everything from roads to hospitals on the continent.”

Leading into this summit, critics have maintained that several problems will undermine the overall, far-reaching impact of this summit. These include the relatively lower-level presence of civil society at this summit (strange, given Barack Obama’s frequent citing of civil society as a key driver of governance transformations in Africa); the lack of crucial one-on-one bilateral meetings between Obama and the various African presidents; the fact that this meeting is taking place while many of America’s most influential commentators and politicians are on their summer vacations and thus out of the picture for this summit; and the unhappy circumstances that numerous other international crises – like Gaza, Ukraine, and Syria – are overwhelming the news bandwidth, to the detriment of this Africa summit.

Nevertheless, this summit, with is many supporting events scattered across Washington including all those independently scheduled colloquies, symposia, televised debates, social media discussions, and publications, among other efforts, may well contribute to a real change in the way the American public sees Africa. Even more importantly, this circle of events may well influence how investors and traders see the continent’s possibilities – beyond the chaos in the Central African Republic or the dire impact of the West African Ebola outbreak – as the real symbols of Africa’s future. But it will take significant time to measure the real impact, once all the flags are packed away and the presidential jets depart. Then it will be possible to judge whether this summit represents a real step in creating an African legacy for Barack Obama. DM

Photo: Prime Minister of Ethiopia Hailemariam Desalegn (C) speaks beside Africa Union Commission Chairperson Nkosazana Clarice Dlamini Zuma (R) and USAID Administrator Rajiv Shah (L), during the forum ‘Resilience and Food Security in a Changing Climate’, at the US Africa Leaders Summit in Washington DC, USA, 04 August 2014. The US Africa Leaders Summit brings almost fifty African heads of state and government to meet on a variety of issues including food security, civil rights, women’s issues and economic development. EPA/MICHAEL REYNOLDS

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