Improved US-Africa Cooperation Enhances Mutual Growth Prospects

From the highs at the start of the previous decade catalysed by the commodity boom, US-Africa trade has fallen sharply, effectively halving in the ten years since. This is reflective of a US policy towards the continent, which has not sustained the active engagement of trade and investment experienced in the 2000s. With significantly less focus on economic development, the vacuum has increasingly been occupied by investment from the developing world, spearheaded by China.

Recognising Africa’s Strategic Importance

Amidst a shakeup in global geopolitical alignments and worsening impacts of the climate crisis, the US has recognised the importance of Africa as a political and economic partner. Less than a fifth of African countries voted in favour of Russia’s suspension from the UN Human Rights Council in April this year. Something of a wakeup call, this provided a reminder of Africa’s importance as a voting bloc and of the growing independence and influence it exercises on the international stage. 

In recognition of this wider trend and acknowledging the US’s reduced engagement across the continent, the Biden administration recently launched its Africa strategy. The policy approach is based on four pillars: transparency and governance; democracy and security; economic growth and pandemic recovery; and combating climate change. It serves to be less prescriptive but more pragmatic and practical, and shaped by the urgent needs of the continent, while being cognisant of the longer-term developments set to transform Africa’s social and economic landscapes.

US Secretary of State Antony Blinken’s approach to listen, and develop a partnership on equal footing, marks a distinct change of tone. “Africa will shape the future— and not just the future of the African people but of the world,” according to Blinken. This is in line with the consensus on the continent across multiple areas. As the average population of many developed economies age, a third of the world’s working age population will be in Africa. As the world rapidly decarbonises, a third of the metals and minerals needed to do this are under African soil.

“Africa will shape the future – and not just the future of the African people but of the world.”

Minerals are of greater relevance over the near term, especially in the run up to COP27, being held in Egypt this year. The continent bears the brunt of global warming, whilst being the lowest carbon emitting region. Multiple African economies generate the majority of their energy from renewable resources, and the continent’s forests absorb much of the CO2 the world emits. In addition, while Africa has an abundance of clean energy to harness, it is prioritising access to energy in all forms. In 2014, research showed that energy consumption per capita in the US was 26-fold that in Africa.

An Important Boost to Harness Potential  

The Biden Administration has accounted for this deficit, after Western leaders pledged to cease investment in hydrocarbon projects outside their countries at COP26, the US has committed to investing in gas-to-power infrastructure in Africa. This is an enormous boost to advancing and diversifying African economies, some of which harbour large gas reserves. Importantly, as energy supply falls and prices rise across Europe, it will strengthen Africa’s negotiating stance at COP27.

More immediate access to energy will support industrialisation in Africa, where greater people-driven policies will stimulate job markets and strengthen value chains from metals to maize. Consumption of homegrown and processed products will also insulate import dependant economies against price shocks and resulting inflationary pressures, and encourage intra-African trade. Amidst this, and global supply chain impacts, there is significant export potential for Africa’s farmers, pharmaceutical and consumer products.

Improving Africa’s productivity will incentivise trading opportunities with the US. The African Growth and Opportunity Act (AGOA), which spans 6,500 tariff lines providing preferential access for 44 countries to the US market, encourages that, along with good governance, a core element of the new US-Africa strategy. AGOA is nearing expiry and renewed relations between the two regions will make it a good time to see it further extended, as done so by two of the last three presidencies.

Economic opportunities extend beyond this; as the global economy contracts and investment yields shrink, American investment can seek above market returns across Africa. Of the $18.8 trillion under management in US pension funds in 2021, less than 1% was invested in Africa. However with the US’s commitment to improving transparency and democracy, this should help erode the real and perceived risks US investors confront when channelling capital into the continent.  

Meaningful engagement from US counterparts will be welcomed widely and strengthen sustainable development prospects across Africa. Invest Africa is pleased to leverage this co-operation to grow opportunities, starting in New York during the United Nations General Assembly. Join us as our experts discuss Africa’s new position in the global political economy and listen to His Excellency Hage G. Geingob, the President of the Republic of Namibia, outline investment opportunities in his country.