Africa is Open for Business

September 12, 2018 By Sung Lee

Africa – with its growing middle class and expanding infrastructure – is home to six out of the twelve fastest growing economies in the world, and represents an enormous opportunity to elevate America’s trade and investment relationships. But as America faces competition from countries like China with its state-sponsored investment activities in Africa, how can the U.S. effectively capitalize on the immense economic opportunity and not risk falling behind? The answer lies with America’s development and diplomacy programs, helping to level the playing field and create an enabling environment for American businesses to compete in developing countries.

Encouraging American businesses to invest in his country during his visit to the White House last month, President Uhuru Kenyatta said, “Kenya is open for business,” at a signing for two U.S. companies to invest $238 million in energy and food security projects in his country. America’s development programs through USAID have contributed to Kenya’s impressive progress in recent years. In fact, Kenya has risen 56 spots in the World Bank’s Ease of Doing Business Index, from 136 in 2015 to number 80 in 2018.

Fierce Competition

While the opportunities are substantial, economic competition is immediate and fierce in Africa. For instance, China surpassed the U.S. as Africa’s largest trading partner in 2009 and is now the top exporter to 19 out of 48 countries in sub-Saharan Africa. China has also committed to spending over $1 trillion— seven times the cost of the Marshall Plan— on the Belt and Road Initiative to build new markets for Chinese goods from Asia to Africa to the Americas.

Maximizing America’s Development Tool Kit

While the United States cannot and should not try to match China’s investment dollar-for-dollar, U.S. government programs – from USAID to the Millennium Challenge Corporation to the U.S. African Development Foundation – have helped African countries diversify their economies, increase their integration into global markets, and overcome barriers to trade and investment, all without burdening countries with unsustainable debts.

For example, Africa Trade Hubs supported by USAID have helped to reduce the cost of doing business throughout entire regions of Africa, creating a level playing field and allowing U.S. companies to export nearly $22 billion worth of American goods to the continent in 2017. At the same time, USAID Trade Hubs have created 46,000 jobs in Africa since 2010, fueling economic growth from within the continent.

And there’s more good news: the House of Representatives— with the support of the Administration—overwhelmingly supported the passage of the BUILD Act of 2018, which would create a new U.S. development finance agency, transforming OPIC and empowering it to do more. If passed by the Senate, the BUILD Act will help expand America’s development toolkit to further catalyze U.S. private sector investment in developing countries where traditional sources of financing are unavailable.

Bipartisan Support for the U.S.-Africa Partnership

In today’s hyper-partisan world, consensus is often rare— but not when it comes to support for the U.S.-Africa partnership. Senator Chris Coons (D-DE) and Commerce Secretary Wilbur Ross recently wrote that the United States “must do more to present our African partners with better alternatives to state-led economic models, promoted by countries like China.”

The recent news that First Lady Melania Trump will travel to Africa in October is another encouraging sign for American engagement. Her office has said she hopes to highlight “the successful humanitarian work and development programs being done in many of the countries.” Seeing these U.S. government programs on the ground alongside American business and NGO partners will surely underscore the return on investment from continued American leadership both in Africa and around the world.

As America’s competitors utilize all available tools to expand into the continent, the United States must leverage our development and diplomacy toolkit to increase America’s economic engagement with Africa. If we don’t, we risk losing influence and falling behind.