The Whitaker Group (Washington, DC)

3 July 2013

Africa: U.S.-Africa Policy: We Can Do Better

analysis

I applaud President Obama on his long-awaited trip to Africa. He was correct when he told business leaders in Tanzania on Monday that together, the US and Africa have “an enormous opportunity to unleash the next era of African growth.” So why do his modest new initiatives – Power Africa and Trade Africa – not match his affirmation? America must not make do with half measures while other nations boldly expand their economic influence in Africa.

With initial commitments of $7 billion of largely repackaged and previously committed funds from the US government and $9 billion from the private sector, Power Africa will help, but it is a sliver of the $300 billion that the International Energy Agency estimates will be needed to achieve universal access to electricity across sub-Saharan Africa. Trade Africa, with its promise of new trade agreements and technical help with cross-border trade, is little more than a repackaging of policies established by President Bill Clinton and expanded by President George W. Bush.

President Obama’s announcement of a “New Model” focused on trade and investment, rather than just aid, is not new as this policy was established by President Clinton in 1998 and backed by the enactment of the African Growth and Opportunity Act (AGOA) in 2000. President Bush subsequently expanded the policy and included PEFPAR (President's Emergency Plan for AIDS Relief), Debt Relief and the Millennium Challenge Account (MCA) with billions of dollars in new money.

Since President Obama entered the White House in 2009, China has overtaken the US as Africa’s largest trading partner (China's trade with Africa reached nearly $200 billion in 2012). China has committed over $50 billion in economic financial support to the African continent, and its leadership meets regularly with African heads of state. Japan has also stepped up to the plate, recently committing $32 billion in development assistance to Africa, of which $6.5 billion is devoted to infrastructure projects. Other nations – namely Brazil, India, and Turkey – have also ramped up economic ties with Africa while the US, the global symbol of opportunity, has stood on the sidelines.

There is no question that the US should be fully engaged in the Africa of today and that President Obama should be commended for abandoning his heretofore NGO-aid-centered approach to Africa. Even as developed economies have sputtered and China’s economic growth begins to slow, many African economies continue to grow apace. Africa’s standard of living and annual growth rates have increased more than 30-fold in a single lifetime. Additionally, one-third of Africa’s 900 million citizens now compose a middle class with rapidly growing discretionary income. By 2030, Africa’s 18 leading cities are projected to have a combined spending power of $1.3 trillion. Those willing to invest in Africa today are enjoying returns consistently higher than in any other developing region.

Strategically, an Africa with interests and values closely aligned with America’s will strengthen US global leadership and security. Not only will African markets help boost US economic growth, but when working as a bloc, Africa can provide the swing vote in global fora such as the United Nations and the World Trade Organization.

By investing a fraction of the $1.5 trillion America has so far spent on the wars in Iraq and Afghanistan -- in building infrastructure, manufacturing, and trade capacity in Africa -- the US can also be a key player in helping to create the kind of prosperity that is our best defense against radicalization among sub-Saharan Africa’s estimated 234 million Muslims. Africa has shown a willingness to work with the US on transnational threats, but the US must deliver tangible ways to build institutions within governments and support a private sector that will extend Africa’s growing prosperity to all Africans - especially the 630 million people who are under the age of 30.

In crafting a US policy towards Africa, the President needs to abandon piecemeal solutions and take a far more holistic approach.

Firstly, he needs to take a leaf out of China’s book and incentivize US companies to invest in all sectors in Africa, including power. The best way to do this would be to encourage US investment in African manufacturing – the biggest driver of job growth – and agriculture by offering US tax benefits to those businesses that invest in Africa’s non-oil and non-extractive sectors.

Secondly, he should push for a stronger and permanent African Growth and Opportunity Act (AGOA). In the 13 years since its passage, AGOA has been a proven driver of job growth and economic diversification, but its temporary nature is a disincentive to potential investors.

Thirdly, the President should expand the Overseas Private Investment Corporation (OPIC) so that it can better support US companies wishing to invest in Africa. Because of America’s long history of viewing Africa through the prism of its vulnerabilities rather than its promise, many US business people hesitate to invest in Africa even when they are aware of the opportunities that it affords. They need to know that the US government has confidence in Africa’s future. OPIC returns money to the US Treasury and could take on this expanded mandate with little or no additional funds.

Finally, President Obama should fully and consistently engage Africa and its leaders. Africa should not merely be an item on his “To Do list.” Africa should be integrated into all US policy discussions in the same way that Europe or Asia or Latin America are.

I fully support the President’s initiatives. They speak to my belief in trade, business and investment as the key drivers of prosperity. But I challenge him to do much, much more. It is in our interests as well as Africa’s.

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