At the U.S.-Africa Business Summit in Mozambique last week, USAID Administrator Mark Green and Deputy Secretary of Commerce Karen Dunn Kelley rolled out more details on the Administration’s Prosper Africa initiative with the ambitious goal of doubling two-way trade and investment between the United States and Africa.
Below are five questions for the new initiative.
Prosper Africa “is not a program,” according to USAID Administrator Green, and will not create new tools to promote trade and investment with Africa but seeks to better coordinate the existing tools across 15 agencies in the U.S. government. U.S. exports to Africa have fallen 32 percent since 2014, despite Africa being home to six of the ten fastest growing economies. Deputy Secretary Kelley suggested that U.S. financing tools have been underutilized and many U.S. small and medium sized enterprises have been unaware of the U.S. Government’s export, investment, and risk-mitigation tools.
While commercial diplomacy has long been a tool for global engagement, the emphasis on the threat of competition from China is stark. China’s trade with Africa is three time that of the U.S. – $148 billion in 2017 versus America’s $55 billion. When announcing the strategy last December, Ambassador John Bolton warned the Chinese “are deliberately and aggressively targeting their investments in the region to gain a competitive advantage over the United States.” While Prosper Africa is said to be “demand driven” by the private sector, will Prosper Africa target its investments to directly challenge China?
When Prosper Africa was first announced, there was no mention of the track record of effective U.S. foreign assistance on the continent such as PEPFAR, Power Africa, and Feed the Future. In Mozambique, Deputy Secretary of Commerce Kelley highlighted the Millennium Challenge Corporation, Power Africa 2.0, and the African Growth and Opportunity Act as initiatives working with Prosper Africa to promote economic growth on the continent. The U.S. also announced the renewal of the President’s Advisory Council on Doing Business in Africa through 2021 with 26 private sector members, including UPS, GE, Citi, Pfizer, and Visa.
Are there new resources?
Prosper Africa was launched with a budget of $50 million, although the initiative is reportedly seeking to secure additional funds from interagency partners from unspent FY19 funds. Overall, the President’s FY20 budget request includes $4.9 billion for U.S. programs in Africa, a 42 percent cut from FY18 actual levels. By contrast, China’s Export-Import Bank aims to invest more than $1 trillion in the continent by 2025.
What is USAID’s role?
USAID is the co-lead for Prosper Africa along with the Commerce Department. This makes sense since increasing trade and investment in Africa is only possible if the U.S. helps build African capacity to encourage investment and works to remove barriers that constrain American business investment such as poor infrastructure, lack of transparency, and time-consuming customs practices.
This is precisely the kind of work that USAID does in many countries. For example, USAID worked with the government of Kenya in 2016 to help repeal the 30 percent Kenyan equity share-holding requirement in foreign businesses, creating an even more attractive environment for investment. Kenya subsequently climbed 21 places in the World Bank’s Doing Business Index and the U.S. exports to Kenya increased by nearly $60 million between 2016 and 2017.
What does it mean for Africa?
Prosper Africa is intended to create a U.S. alternative for African leaders and “help break the debt-trap, the trap that authoritarian funders have planted like landmines in too many parts of this continent,” according to USAID Administrator Green. It draws on the transaction model of Power Africa, an interagency initiative that seeks to facilitate private sector investments in electricity by bringing together legal and technical experts to address barriers to investment.
To do this, the initiative will create one-stop-shops at all U.S. embassies in Africa, including a new trade and investment hub in North Africa, develop country-by-country private sector development strategies, and create “Deal Facilitation Teams.” As Assistant Secretary for Africa Tibor Nagy said in May, “we are weaponizing our embassies in Africa to confront China.”
What’s next? Deputy Secretary Kelley noted that Africa’s GDP growth forecast is projected at 4 percent this year, up from 3.5 percent in 2018, making Africa the fastest growing region in the world after Asia. The Africa Continental Free Trade Agreement went into effect last month, creating the largest free trade area in the world that encompasses more than 1 billion people and over $3 trillion in GDP. This is expected to boost intra-African trade by more than 50 percent by 2022 and double Africa’s manufacturing output to $1 trillion by 2025.
The lessons of Power Africa suggest that good deals take time. This week, the United States announced the first deal of Prosper Africa — $20 billion investment by a Texas-based company to build a liquefaction natural gas (LNG) terminal in Mozambique, the largest single LNG project in Africa. Will future deals involve African companies as well as U.S. multinationals? How will Prosper Africa ensure that future deals respect human and labor rights standards part of American businesses’ commitment to corporate responsibility? In Administrator Green’s words, “The sky’s the limit.” Let’s hope so.