Can Trump’s Prosper Africa make America greater than China and other partners in Africa?

FILE PHOTO: FILE PHOTO: U.S. President Donald Trump delivers his speech as he and China's President Xi Jinping meet business leaders at the Great Hall of the People in Beijing, China, November 9, 2017. REUTERS/Damir Sagolj/File Photo - RC14E55F28A0/File Photo - RC1164453C40

The official launch of the Trump Administration’s Prosper Africa program at the Corporate Council on Africa’s U.S.-Africa Business Summit in Mozambique on June 19 comes after months of policy talk about ramping up trade and investment between the United States and African countries.

Prosper Africa aligns with the Trump administration’s Africa strategy, introduced by National Security Adviser John Bolton last December, which aims to promote prosperity, security, and stability in U.S.-Africa relations, and confirms the administration’s prioritization of trade and investment to reach those three objectives. This strategy might be “one of the most business-friendly U.S.-Africa policies in recent times—at least in principle.” Now, though, the administration has to bridge the gap between its praiseworthy business principles and the policy options needed to turn them into reality.

Bolton initially posed the administration’s Africa strategy as a direct counter to Chinese and Russian “predatory practices” and influence on the continent. Prosper Africa is now, however, presented by U.S. officials as an innovative method of engaging with African leaders and entrepreneurs through a coordinated effort among U.S. agencies—with less reference to China. The initiative is a welcome change from the administration’s previous comments about avoiding engagement with some African countries and intentionally decreasing African immigration into the U.S. Though Prosper Africa cannot entirely make up for this rhetoric, nor the $252 million funding cuts to Ebola response efforts in early 2018, the strategy is a first step in improving the coordination of U.S. efforts toward better trade and investment relations.

Prosper Africa aims to reverse the United States’ eroding ground in African markets by providing technical assistance for U.S. and African companies in order to double two-way trade and investment. It includes a special focus on transparent markets and private enterprise as the foundations of economic growth and job creation. According to Deputy Secretary of Commerce Karen Kelly, Prosper Africa has three coordinated lines of effort: 1) synchronizing the initiatives and capabilities of government agencies, 2) modernizing and coordinating those agencies’ resources to help companies identify business opportunities in African markets, and 3) building African capacity through private sector strengthening. According to the administration, the presidential initiative will operate in conjunction with the new U.S. International Development Finance Corp, which has already announced that it plans to double its investment in low-income countries starting in October, and the Access Africa initiative, which focuses on boosting U.S.-African partnerships in developing sub-Saharan Africa’s information and communications technology (ICT) infrastructure.

Prosper Africa represents a step forward in U.S.-Africa trade and investment relations along two main lines. First, Prosper Africa signifies a unique attempt to effectively and permanently formalize the coordination of all relevant executive agencies to accelerate trade and investment with Africa. As such, it is a pioneering initiative that aligns with the Trump administration’s focus on “making deals” and conducting relations in a business-like manner. It is also an acknowledgement of African countries’ tremendous business potential.

Making America greater than China and other partners in Africa?

While Prosper Africa is promising, its impact will probably not be strong enough to counterbalance China’s unique influence in the region. China’s success in doing business on the continent has been driven by its high and diverse financial flows (a complex mix of concessional loans, grants, aid, market loans, etc.) to Africa: Investment from China rose twofold between 2010 and 2016. President Xi Jinping committed an additional $60 billion in broad and diverse financing—including $10 billion reserved for Chinese buying of African goods, as well as concessional loans, among other things—last September. High-level Chinese officials, especially Xi, have pushed for strong diplomatic relationships with African leaders.

In contrast, U.S. investment has barely increased since 2010, and President Trump has yet to make an official state visit to any African country.

China’s way of doing business makes it the largest trading partner of several African countries—particularly resource-rich countries like South Sudan, Angola, Eritrea, and the Gambia—and the total volume of two-way trade between China and Africa exceeds $200 billion. The Chinese “One Belt, One Road” initiative has taken flight. China has backed up its claims to increase development financing and cancel or reschedule debt, canceling $1 billion in debt in Eastern Africa alone between 2000 and 2018.

In addition to China, other countries have been increasing their economic ties with the African continent: Since 2017, Africa’s top three trading partners have included China, India, and France. Successful examples of investment and business partnerships from these partners can constitute a goal for the Prosper Africa initiative. Emerging trade agreements are putting the U.S. at a disadvantage as they edge the U.S. out. For instance, 41 African countries have signed Economic Partnership Agreements with the European Union. The EU and Africa are even talking about creating a continent-to-continent free trade agreement—an initiative that makers Prosper Africa seem modest at best.

Recommendations for US policymakers and business leaders

With this increasing competition as well as the needs of the continent in mind, the administrators of Prosper Africa should consider the following strategies:

  1. U.S. investment should be increased substantially and focus on areas that will foster industrial development and greater intra-African trade to create sustainable growth that is less dependent on commodity exports elsewhere (e.g., infrastructure related to transport, energy, water, and information and communication technology, or ICTs) and in which the U.S. has a strong competitive advantage compared to China (ICTs and cybersecurity, among others). Indeed, economic development cannot happen without massive investments—especially in infrastructure—that further unlock the private sector. Right now, Africa is only able to fund about a third of the $130 billion to $170 billion needed to finance its infrastructure per year. The Program on Infrastructure Development in Africa and the recently inaugurated Africa Investment Forum provide a comprehensive list of projects.
  2. The U.S. should embrace the African Continental Free Trade Area (AfCFTA). If the AfCFTA is successfully implemented,the combined consumer and business spending in 2030 will be $6.7 trillion and the continent’s manufacturing sector is projected to double in size, with an annual output of $1 trillion by 2025 and over 14 new million jobs. Currently, the AfCFTA, along with Agenda 2063, is considered by Africans to be the most important tool for fostering their economic prosperity, accelerating industrialization, and providing jobs to the youth. Thus far, the European Union, China, and other partners have supported the AfCFTA, but the United States is still hesitant, which seems to be in contradiction to one of the goals of Prosper Africa: to empower Africa to drive its own growth. The U.S. should instead produce a statement supporting the AfCFTA and should consider strategies for empowering the AfCFTA secretariat, such as capacity building and financing.
  3. The U.S. should reinvigorate its efforts towards governance and private sector engagement, education, and training—critical long-lived, but currently waning, components of U.S. engagement abroad. Many sub-Saharan African countries lack mechanisms for effectively and appropriately engaging private sector capabilities, experiences, and interests in policymaking processes. For instance, in some cases private sector interests are able to capture policymaking, leading to cronyism and corruption. In other cases, the private sector is shut out of the policymaking process altogether, and policy is thus not attuned to its needs. As a result, the cost of doing business in Africa is the highest in the world, and the continent receives the lowest net inflows of foreign direct investment globally. The U.S. could make a difference by supporting research on how countries can better balance and integrate the private sector in order to promote inclusive, participatory governance, thus reducing both perceived and real risks to doing business in Africa.
  4. Domestically, the U.S. should increase efforts to document and disseminate the tremendous potential Africa can have for U.S. businesses as well as create a high-level forum for direct engagement. Africa should be perceived as a “hot” destination for American small and medium enterprise (SMEs) and vice versa. Given that a critical goal of Prosper Africa is to double two-way trade, the United States should play a better role in identifying and sharing business and investment opportunities with its domestic corporations. As large corporations are already better resourced when dealing in Africa, American SMEs are the most likely beneficiaries of Prosper Africa—whether through market access or on the supply side.
  5. The U.S. should promote commercial diplomacy through an economic strategy that goes beyond the traditional vision of trade and investment. Prosper Africa should focus on winning the hearts of African leaders and citizens, as well as addressing Americans’ lack of trust in African countries as reliable business partners. For Prosper Africa to benefit both the U.S. and Africa, both sides need to feel confident in the trading process and consider each other friends. Prosper Africa could focus on specific mechanisms aimed at ensuring that SMEs better understand the dynamics in Africa and develop a specific interest and attraction for the continent, making them more eager to invest and do business there. This goal can only be achieved through business promotion and facilitation activities encouraging business development as well as corporate diplomacy.The U.S. needs to step up its high-level diplomacy as well through regular visits by senior U.S. officials, including the president and his cabinet. The attention from these visits will help to shift perceptions around Africa, highlighting the continent as a safe, reliable destination for investment.
  6. The administration should make Prosper Africa a bipartisan stepping stone to a more comprehensive, long-lasting relationship in the post-AGOA (African Growth and Opportunity Act) period. Since investors like certainty and security, it is in the interest of the country to provide investors with an efficient way of doing business. If Prosper Africa is to succeed in its shift away from classic developmental approaches to enable normal commerce with Africa, it will need to be attractive to both U.S. businesses and African countries. African and U.S. stakeholders also need a firm commitment from the administration that AGOA (or a better alternative) is safe beyond 2025. At this time, United States Assistant Secretary of State for African Affairs Tibor Nagy can only promise that AGOA is safe until 2025—the kind of message that undermines long-term confidence in the U.S. commitment to Africa.

Sustained commitment to establishing beneficial trading deals and driving local enterprise could put African countries and the US on a path toward long-term partnership. More targeted U.S. engagement in the rapidly-growing African economies is long overdue.

Note: This blog reflects the views of the authors only and does not reflect the views of the Africa Growth Initiative.