Editor’s note: The Foresight Africa blog series is a collection of blog posts from Africa experts and policymakers on what they think the top priorities for Africa should be in 2014. This blog series is part of the larger Foresight Africa project that aims to help policymakers and Africa watchers stay ahead of the trends and developments impacting the continent.
2013 ushered in the most significant change in the United States’ Africa policy since the passing of PEPFAR 10 years ago. The unveiling of investment-focused initiatives—Power Africa and Trade Africa—reflects not just a change in how the Obama administration views the continent, but also how foreign investors have prioritized it. But policy rarely achieves its objectives without equal attention to implementation. A number of implementation barriers—old regulations and new policies working at cross-purposes, and limited on-the-ground capacity—threaten to undermine America’s new approach to the continent in 2014. If 2013 was marked by change in U.S. strategy towards Africa, 2014 will be marked by the recognition that 90 percent of the success of that strategy is implementation.
Powering Power Africa: Power Africa is arguably the most significant new piece of policy from the Obama administration, so there is a lot at stake to get it right. Spanning 10 different government agencies from the Export-Import Bank to the much smaller African Development Foundation, it is a big policy. But there are caveats: The funds are limited, non-appropriated and subject to very specific regulations, and the timeline (5 years) is arguably too short to make a dent in Africa’s long-term power sector. Simply sourcing, vetting, preparing and finding the deal teams able to assess a power project can take up to 24 months—after which the administration may well be in handover mode. As the initiative stands, it limits funding for projects that exceed a specific carbon emission cap (100,000 tons of carbon dioxide equivalent per year), which effectively eliminates natural gas projects on the continent, not to mention coal-fueled power plants. Leaving the carbon cap as it is would cripple any chance of success for Power Africa and demonstrate to Africans America’s obsession with green investment in every country other than its own.
Building Trade Africa: Even although Trade Africa has received less attention, its promise for driving the continent’s growth is arguably greater than powering Africa. The administration has been less clear about its intent here, though. An initial focus on the East Africa Community (EAC) is a good and well-considered entry point. And although Trade Africa will establish the new U.S.–EAC Commercial Dialogue and advance the Department of Commerce’s Doing Business in Africa campaign, these projects will be hard to implement with only a few Commerce Department officials on the continent and, despite exceptional leadership by EAC Rwandan Secretary-General Richard Sezibera, a woefully under-resourced EAC Secretariat in Arusha, Tanzania. The imbalance of resources and priorities pose substantial structural constraints for Trade Africa’s success. A more effective use of U.S. resources might be to help advance existing initiatives that promote the financial architecture of regional trade, such as the East Africa Commodity exchange (EAX).
Encouraging Compliance from the Ground Up: The compliance and due diligence industry is expanding rapidly, and 2014 will see additional regulations increasing the burden for companies and investors. Even as Power Africa promises $7 billion for the continent, one new piece of regulation—Section 1502 of the Dodd Frank Act, “conflict minerals”—is estimated to cost investors $8 billion in compliance costs alone next year. So, what can the U.S. government do to achieve market transparency, but also effective and efficient regulation? The answer might be to help generate more and better data on these markets. New regulations and compliance standards can only be institutionalized and effective with more information and data. For broader regulatory requirements such as Section 1502, the U.S. government should be supporting on-the-ground initiatives, leveraging local knowledge and advancing new methods for extracting more information about local environments so that corporate compliance officers can make well-informed decisions.
Six months after the announcement of Power and Trade Africa, the focus in 2014 will shift to implementation, an altogether different and bigger challenge. U.S.-Africa investors are right to be optimistic about the direction of the relationship, but moving beyond an expression of commitment to getting things done will require a focused approach that more clearly syncs priorities with resources.