US launches effort to counter China’s economic influence in Africa

Mozambique's Prime Minister Carlos Agostinho do Rosario attends during the opening ceremony of the US-Africa Business Summit in Maputo, Mozambique, 19 June 2019. (Photo: EPA-EFE / Antonio Silva)

Eleven African leaders are at the US-Africa Business summit in Maputo. But South Africa is only represented by its ambassador.

The US is launching a big push to counter China’s large economic influence in Africa at the US-Africa Business Summit in Maputo this week.

Eleven African heads of state or government and more than 1,000 business leaders have been attending the summit, hosted by the Mozambican government and the Corporate Council on Africa, a US organisation advocating more American engagement with the continent.

The South African government, however, does not seem to be represented even at ministerial level. This seems odd when President Cyril Ramaphosa is trying hard to attract $100-billion of investment in five years.

Two major new initiatives to boost US trade and investment on the continent are being launched.

One is the $60-billion US International Development Finance Corporation (DFC) which will more than double the amount of money available for US investment in low- and middle-income countries than was previously available through the Overseas Private Investment Corporation (Opic) and the Development Credit Authority (DCA). Many of the countries supported by this new agency will be in Africa.

The other is Prosper Africa, an inter-agency initiative which aims to help double US trade and investment with Africa in five years, mainly by mitigating risk and improving the environment for private sector business. It will help African governments create more predictable business regulations and strengthen institutions.

The initial budget request for Prosper Africa is expected to be at least $50-million for the financial years 2020 to 2022; not much but it could be larger. It will also work through the US DFC’s much larger budget.

US officials say the emphasis will be on helping the private sector to grow business with Africa and so the US Chamber of Commerce and its branches throughout the continent will play a vital role.

The Maputo summit is also creating opportunities for US and African business leaders to meet and make deals.

Prosper Africa represents a departure from the unilateral model of development assistance,” says Anthony Carroll, vice-president of Manchester Trade.

It builds upon the successes of MCC (the Millennium Challenge Corporation, an independent US foreign aid agency) in terms of assistance being a mutually beneficial and mutually funded exercise.

And it will solicit more US private sector engagement in Africa.”

The shift away from classic development assistance to enabling normal commerce with Africa is expected to be followed later by the US negotiating normal reciprocal free trade agreements with individual African countries. They will eventually replace the Africa Growth and Opportunity Act (Agoa) which allows eligible African countries to export their products to the US duty-free or at preferential rates, without having to raise their import tariffs on US imports.

Officials say 18 US government agencies will be involved in Prosper Africa and so it will take a whole-of-government, one-stop-shop approach to development.

They also say it will focus on trade and investment in sectors which have been neglected in the past such as IT, manufacturing and infrastructure.

Meanwhile, the US DFC, created through the bipartisan-supported BUILD Act of 2018, will allow the US government to make overseas equity investments for the first time and will increase technical assistance and oversight on development projects. It will also more than double the US investment limit to $60-billion.

This, perhaps not coincidentally, is the amount of Chinese financial support to Africa which China’s President Xi Jinping announced at last year’s Forum on China-Africa Cooperation (Focac) in Beijing. At the previous Focac summit, in Johannesburg in 2015, he announced the same amount for the next three years.

Aubrey Hruby, a senior fellow with the Atlantic Council’s Africa Center and co-author of the book The Next Africa, has told Al Jazeera that the US DFC with its larger investment cap, provides an opportunity for the US to reframe the way it does development in Africa.

She said it was “utterly surprising” that this was happening under President Donald Trump, who has been criticised for derogatory comments about Africa and who previously proposed scrapping funding for Opic, which provided US companies with investment guarantees. She said in many ways, more resources had been put into Africa and US companies in Africa under the Trump administration than any other.

However, the volume of US government financial commitment to Africa will still remain small versus China’s. Even the goal of Prosper Africa doubling current trade and investment to the continent over five years will not bring it up to levels reached before the 2008 global financial and economic crisis, one analyst said. He also pointed out, though, that much of the trade then was in oil, which has declined steeply as the US taps more of its own shale gas.

There is also talk in Washington that Trump is closing the Africa offices in the National Security Council and in Exim, the Export-Import Bank, which supports US foreign exports and imports.

The US government frequently counters criticism that it is being outspent by China in Africa by stressing that its investments are financially sound and affordable – in part because they come from the private sector – compared to large state-led investments from China which the US claims often land African countries in debt traps because they can’t afford to repay them.

This narrative infuriates the Chinese government. Last year the Chinese ambassador to South Africa, Lin Songtian, rejected the accusation and insisted that Chinese companies only loaned money after feasibility studies had shown the projects being financed were potentially profitable. He challenged US and EU companies to show the same transparency by demonstrating where their financing in Africa had gone.

The African leaders at the summit are presidents Filipe Nyusi of Mozambique, Paul Kagame of Rwanda, Hage Geingob of Namibia; Uhuru Kenyatta of Kenya, José Mário Vaz of Guinea-Bissau; Peter Mutharika of Malawi; Edgar Lungu of Zambia; Mokgweetsi Masisi of Botswana; Emmerson Mnangagwa of Zimbabwe; and Teodoro Obiang Mbasogo of Equatorial Guinea, plus King Mswati III of Eswatini and Ugandan Prime Minister Ruhakana Rugunda. DM


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