Reframing the U.S-Africa relationship

Africa Practice and Mercury LLC hosted a webinar on 14 July, 2022 for business leaders, entrepreneurs, development practitioners, diplomats and policy-makers to assess the state of the U.S-Africa relationship, and to share views on ways to strengthen it at both multilateral and bilaterals levels, so that real progress can be made; progress that benefits all concerned, grounded not in U.S guilt or charity nor African critiques of U.S motives, but in a better understanding of the real synergies and practical interventions that can strengthen both.

Contributors included Hon. Barbara Lee, United States Congresswoman; Ambassador Martin Kimani, Kenya’s Ambassador to the UN; Ambassador Elsie Kanza, Tanzania’s Ambassador to Washington; Gyude Moore, Fellow at the Centre for Global Development;  Charles Murito, Regional Director, Google; Caitlin Dolkart, Chief Executive, FLARE; and Samir Ibrahim, Chief Executive, SunCulture. 

The consensus among all participants was that the U.S-Africa relationship suffers from a lack of strategic U.S engagement, which has given rise to a feeling that America is not a reliable and committed partner, and that ‘we are not in this together’. U.S policy towards Africa – and Western policy more generally – in relation to vaccines, climate finance, international security arrangements, and immigration, have been poorly received in Africa, and U.S standing among many Africans has deteriorated, as the Ichikowitz foundation survey of African youth reveals.

The U.S-Africa relationship depends too heavily on who occupies the White House, in a way that U.S-EU and U.S-Asia relations do not. The value at stake for US policymakers is seen predominantly through the lens of competition with China and national security, rather than an exercise in improving investment flows or trade relations. 

African policy-makers should more clearly set out their ambitions for the relationship and seek to define it from a focus on self, rather than as an exercise in appeasement. And rather than view Africa purely through a national security lens, U.S policy makers should seek to better understand the opportunities afforded African nations, which American organisations can help to realise  for mutual benefit.

Africans will make up a quarter of the world’s population by 2050 and a workforce of 1 billion. As Africa’s population and economies continue to expand,  the opportunities for  U.S organisations will accelerate. 

Here are 7 key takeaways:

• Fast digitalization and an accelerated Fourth Industrial Revolution (4IR)

Last year, African startups raised over $4.1 billion in investment, three times the previous year in 2020. Africa’s technology sector is forecast to contribute $180 billion of GDP by 2025. By 2050  the projected potential contribution could reach $712 billion,  or 8.5% of the continent’s GDP (Google/IFC-2020).  Driving this growth is a combination of increased access to faster and better quality internet connectivity, a rapidly expanding urban population, a growing tech talent pool, a vibrant startup ecosystem, and Africa’s commitment to creating the world’s largest single market under the African Continental Free Trade Area. 

Decision-makers need to think through ways Africa can work closely with the U.S to ensure that we are leveraging the relationship between African entrepreneurs and the U.S technology ecosystem – including U.S technology investors – to accelerate the growth of the digital economy.

• Skills and training 

Africa is a young continent and too many of its youth are either unemployed or underemployed. The growing demand for U.S education on the African continent necessitates a heavier focus on lifting restrictions for African students to access the skills required for the new economy. While the number of African students going to the United States to study grew by 30% between 2011 and 2017 (it reduced in the 2020/2021 academic year), the number of African students studying in China grew at a pace nearly nine times this over the same period. China is now the first destination of English-speaking African students.

There needs to be a deliberate diplomatic push to establish and scale up points of collaboration between the U.S private sector and U.S universities, targeted at training Africans in the vocational skills required for the new economy. A study undertaken by IFC and Google in 2020 (e-Conomy Africa 2020) found that 38% of Africa’s 720,000 software engineers and coders were working for companies outside Africa, creating an opportunity for virtual jobs and inflows of revenue to the continent.

• Trade and investment: support for AfCFTA

Full implementation of the African Continental Free Trade Agreement (AfCFTA) could boost intra-African trade by more than 100% by 2035, and Africa’s exports to the rest of the world would go up by 32 percent, raising real income by 9 percent, the World Bank estimates.

Africa needs to do more to pursue deep integration and to make the AfCFTA  a real operating system. For that to happen, Africa must build infrastructure connecting the continent’s countries, and reduce the tariff and nontariff barriers that constrain how Africa trades with itself. When that happens, the value and opportunity from streamlined intra-African trade for American firms operating in the region will encourage more U.S investors to Africa, not because of U.S policy, but because the AfCFTA will have spurred demand for more advanced American products, allowing the U.S to embrace its competitive advantage to export technology and finished goods to Africa.

Africa urgently needs to change its mindset on how to unlock the billions in intra-cross-border trade. That would change the worldview about investing in Africa, from a risky endeavour to a profitable one. For its part, the U.S should support African multilateralism and initiatives like the AfCFTA, and not undermine these with lopsided bilateral trade agreements.

• Multilateralism: UN reform, MDBs

When the U.S threatens to turn away from the existing global multilateral order that it had such a primary role in building, it creates a dangerous vacuum which undermines our global society’s ability to resolve complex and interdependent challenges.

How we define the U.S-Africa relationship has to be about how the U.S defines its relationship to the global multilateral order and what it seeks to do with the multilateral order. The U.S has to choose either to fight for an order that is today not fit for purpose; to neglect an order that is not fit for purpose; or to inject its vision and energy into reforming the global multilateral order in a way that allows it to remain an indispensable part of it. The question now is, will America once again lend its vision and its power – economically and politically – to reforming these institutions so that they are fit for purpose for another 50 years?  African nations stand ready to partner with the U.S in this effort.

Africa’s foreign relations have evolved significantly over the last decade, and  U.S policy-makers need to appreciate that African leaders no longer face a binary choice between traditional East and West rivals. There are a multitude of partners in developed and emerging regions alike competing for ties and access to African markets. 

The U.S needs to do better at treating African nations as equal partners, and not interfering with Africa’s partnerships with other countries; not making Africa choose.  Above all, the U.S relationship would benefit from more focus and more nuance, and from a flexibility that enables it to respond more to the opportunity as it’s shaped by Africans themselves.  

• Climate change

Fossil fuels are a critical part of the energy mix for countries and regions that suffer the kind of energy deficiencies that African nations experience. 600 million Africans have no access to electricity today.  

The U.S has grown its immense economy on the back of fossil fuels. If Africa is unable to take advantage of its fossil fuels, then Africa is going to need an entirely new industrial revolution to chart its way forward to wealth and security.

It’s very important that the U.S facilitates Africa’s industrialisation and development and not stand in its way. What we saw in Glasgow, with the richest countries in the world telling Africa that for Africa it’s going to be renewables and the continent will not use fossil fuels, while they continue using them, is not acceptable.

The contribution of Africa to global greenhouse gas emissions is minimal (3% of global emissions today). However, a combination of geographical and economic factors make African countries highly vulnerable to the adverse effects of climate change. 

African leaders are working to tackle the systemic causes of recurrent climate catastrophes and strengthen Africa’s adaptation efforts. The Africa Adaptation Acceleration Program (AAAP), an African-owned and African-led initiative, aims to  equip African nations to  adapt to the effects of climate change.  

The AAAP  merits the full support of the U.S and the broader G7. If the G7 were to match just half of AAAP’s funding, the AAAP could accelerate projects that will strengthen Africa’s ability to withstand the impacts of climate change, and hopefully lay the foundations for a new kind of development characterised by long-term planning and healthy returns.

• Food security

With agriculture sustaining 70% of  African livelihoods, agriculture is a key sector and accounts for 14% of GDP and 52% of the continent’s workforce.  

With investments in storage facilities, irrigation infrastructure and other adaptation strategies such as drought resilient seeds, the sector can realise exponential growth.  The annual agricultural adaptation cost for Sub-Saharan Africa is $15 billion, the GCA estimates. The African agritech sector alone is forecast to be valued at $1 trillion by 2030, research commissioned by Microsoft reveals.

Money invested in strengthening Africa’s ability to adapt to climate change will not eradicate hunger today, but it will radically improve Africa’s ability to feed itself and the world tomorrow – and with it, the food security of the entire world. Supporting a food secure world is not altruistic, it’s strategic because food security is national security.

• Development finance

Evidence of the contribution of Development Finance Institutions (DFIs) to economic growth, productivity and employment, is amassing. 

The Biden administration’s announcement of a commitment to mobilise $200 billion for the G7 Partnership for Global Infrastructure (PGII) to deliver quality, sustainable infrastructure over the next 5 years through grants, Federal financing, and leveraging of private sector investments, is a welcome commitment, and hopefully the beginning of a much larger commitment of concessional funding for private businesses investing in climate resilient infrastructure,  digital connectivity,  gender equality and health systems.

Beyond the provision of concessional finance to the private sector, the U.S’s International Development Finance Corporation (DFC) should upweight its collaboration with African governments to support national innovation systems, including trade facilitation, competition policy, and better state-business linkages.

What’s at stake?

Africa’s economic transformation and business potential are more substantial than most Americans appreciate. By 2050, Africa will be home to an estimated $16.12 trillion of combined consumer and business spending, the Brookings Institute forecasts. Such growth will offer tremendous opportunities for U.S businesses.

While initiatives such as the African Growth and Opportunity Act (AGOA) and the Millennium Challenge Corporation (MCC) have generated tremendous opportunities for millions of Africans and Americans over the last decades, the relationship has suffered from a series of setbacks during the last five years. The Biden administration is awake to this and has adopted a consultative approach in the process of developing a  new strategy for U.S engagement with Africa.

The announcement on August 20th (after this webinar took place) that the U.S will stage a U.S-Africa Leaders summit in December in Washington DC is very welcome, and so too is the announcement that the U.S will organise a conference for Sub-Saharan African trade ministers to discuss expanding trade and investment relations and implementation of the African Growth and Opportunity Act (AGOA). Africans want the  future of AGOA extended beyond 2025 and the provision of preferential trade access for the 37 qualifying African nations extended, too. 

Every country that has achieved velocity economically since the Second World War has done so by selling stuff to Americans; and this includes China. America’s opening of its markets has been the key to moving hundreds of millions from poverty to comfortable middle class lives. If that road is not kept open, then many African countries are going to have to reinvent the 20th century approach to growing wealth.

Two-way goods trade between the U.S and Sub-Saharan Africa totalled $44.9 billion in 2021 (a 22 percent increase from $36.8 billion in 2019).  U.S outward foreign direct investment (FDI) stock in Sub-Saharan Africa stood at $30.31 billion in 2021 (a 5.3 percent decrease from 2019). The value and scale of American investment in the continent has been declining as a total and when compared with others. There are, however, notable bright spots, particularly in relation to U.S private investment in Africa’s burgeoning technology sector.  As Gyude Moore reminded us, ‘almost every single African unicorn has been financed by American Venture Capital (VCs)’, so U.S companies and U.S money is still finding its way onto the continent.

The African Continental Free Trade Area (AfCFTA), which came into effect on 1st January 2021, once fully implemented will open up a $3.4 trillion market connecting 1.3 billion people. This development provides a great opportunity for the Biden administration to strengthen America’s economic ties with African states, and merits strong U.S support. 

The Biden administration has signalled its intent to listen and consult in the process of developing a new strategy and resetting the relationship. African leaders should engage, setting out clearly their expectations and needs. United they will be stronger.

About the Author 

Marcus Courage, CEO at Africa Practice.

*Image source: TheshirtYurt