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What the US-Africa strategy means for SA and the continent

Moneyweb | 7 January 2019

What the US-Africa strategy means for SA and the continent

by Wandile Sihlobo and Tinashe Kapuya

The tail end of 2018 was inundated with various news cycles, both domestic and international, which eventually over shadowed a major policy pronouncement – the United States (US)-Africa strategy. After two years without much clarity on the Trump Administration’s stance on Africa, it seemed ironic that the Africa strategy almost went unnoticed, given that it was announced well into the festive season, with many institutions either wrapping up or closed for the holidays. Given the significance of the strategy, it is necessary to unpack it and discuss its implications for the continent.

The actual strategy and how it differs from that of the previous administration

At the core, there is not much that has shifted from a policy perspective. The US still places emphasis on conditional support for Africa – punctuated by phrases such as “aid with effect”, “assistance with accountability” and “relief with reform”. The US also maintains its vision of reciprocity – underlined by a desire to terminate preference programmes such as the Africa Growth Opportunity Act (Agoa) and the Generalised System of Preferences (GSP) towards what they call “modern and comprehensive bilateral trade agreements”.

My interpretation of the US’s take of “modern and comprehensive bilateral trade agreements” includes a number of “new generation” issues such as Trade in Services, Trade in Environmental Goods, aspects of the Agreement on Government Procurement, and immediate (tariff) liberalisation of almost all forms of trade.

While the Obama administration pushed these issues through mega-regional and plurilateral trade agreements, the Trump administration has adopted a more selective approach, opting for bilateral agreements with specific countries.

We foresee the Trump administration’s stance being implemented throughout the continent with the Africa strategy. This will see the US dealing with specific African countries, rather than the entire continent, neither through Regional Economic Communities (RECs) nor the African Continental Free Trade Agreement (Af-CFTA).

The differences between the Obama and Trump administrations is nuanced, and it is not in policy content but more in the approach. The latter is adopting a more overtly aggressive approach, while the former pursued more diplomatic ways of conveying US interests in the continent.

The aggressive approach can be seen in the speech by National Security Advisor to President Trump – Ambassador John R. Bolton – where he lamented the Chinese and Russian approach in Africa. For instance, Ambassador Bolton noted that the “predatory practices pursued by China and Russia stunt economic growth in Africa; [which] threaten the financial independence of African nations; inhibits opportunities for US investment; interferes with US military operations, and poses a significant threat to US national security interests”.

A new addition in the US Africa strategy is the “Prosper Africa” initiative and the objectives are “to support open markets for American businesses, grow Africa’s middle class, promote youth employment opportunities, and improve the business climate”. Prosper Africa is almost an extension to Agoa in terms of its goals and ambitions, which seek to support sound and transparent governance and improve the “ease of doing business environments” across the continent.

What is clear is that the US-Africa strategy seeks to reposition the US and bring it to par with China and Russia. What seems to set the US apart from China and Russia is the aspect of “conditional support”, and the question then is, will a more aggressive US approach change the balance of power or even its influence on the African continent?

This ties in with the pursuit of “modern and comprehensive bilateral trade agreements”, which the US might seek to have with specific African countries. My view is that the US could potentially target key markets like Kenya, South Africa, Nigeria and Egypt (as well as some others), which are core economic and socio-political power hubs in Eastern, Western, Southern, and Northern Africa, respectively.

Key issues that arise from Trump’s Africa strategy

Firstly, bilateral agreements with specific countries, rather than with RECs could run against the regional integration agenda. In other words, the US runs the risk of being seen to favour larger economies at the expense of smaller ones. Working outside of RECs could thus be seen to be disruptive to the functioning of regional trade agreements.

The counter narrative to this argument is that working with specific economic hubs (i.e. country markets) will promote sourcing of raw materials from neighbouring, smaller economies which, ideally, could lead to deeper regional integration. However, there remains little evidence to suggest that this could actually happen. Alternative efforts of trade integration outside of existing trade agreements might be worth testing, given that the power and influence (both political and economic) of RECs has been arguably limited.

Secondly, the notion of a modern and comprehensive trade agreement (assuming that these will be done with specific strong African economies) needs to be interrogated from the standpoint of whether these African economies are actually ready to liberalise domestic markets to the same standards as the US.

Lastly, and more importantly, it seems that the Africa strategy – through the “Prosper Africa” programme – reflects a new shift in emphasis from trade to an investment-led approach, which will situate US firms in the African continent as key drivers of economic integration.

Prosper Africa is at the centre of the US-Africa strategy, not only because it’s uniquely a signature Trump initiative (unlike other legacy programmes such as Power Africa, Trade Africa which were inherited from the previous administration) but also due to the view that the penetration of US technology and expertise in Africa can create the largest impact on policy, as well as shift the balance of power away from Russian and Chinese hegemony in the continent.

Powerful US multinationals have a clear comparative advantage from a technology standpoint, and unlocking more business opportunities at a much larger scale – through influencing broad and sweeping policy reforms in Africa – could become a game-changer in placing US at the fore-front of investment in the continent.

Wandile Sihlobo is an agricultural economist and the head of research at Agbiz and Tinashe Kapuya is agricultural techinical advisor at the Seriti Institute.

 source: Moneyweb