USA should stop worrying about China in Africa and leverage its strengths

Posted on Updated on

This article first appeared in my weekly column with the Business Daily on September 23, 2018

The Trump administration recently appointed Donald Yamamoto as acting Assistant Secretary of State for Africa. Prior to this appointment the main signal Africa has gotten with regards to US approach to foreign policy in Africa was through statements by former US Secretary of State Rex Tillerson, and his concerns with the growing economic strength of China in Africa. On September 18, the US government, through Tibor Nagy, Assistant Secretary, Bureau of African Affairs, provided clearer direction of the focus areas for the US in Africa going forward. It seems US strategy will be focused on promoting stronger trade and commercial ties, and advancing peace and security. This is good because, rather than focusing on China in Africa, the USA has ample strengths it can leverage in Africa.

If one focuses on the economic engagement potential between Africa and the USA, there is considerable room for both parties to benefit particularly with a focus on private sector development. To be clear, the term private sector here refers both to formal and informal businesses, large players and Micro, Small and Medium Enterprises (MSMEs).

Chinese President Xi Jinping (left) with his US

(source: https://www.businessdailyafrica.com/analysis/ideas/US-should-ditch-China-jitters-and-leverage-on-its-strengths/4259414-4774076-fyi7u3z/index.html)

The first opportunity is in financing options and opportunities in Africa that can be met by US financiers. A key strength of the funding options presented by the USA is that financing opportunities fall along a spectrum of more mission-oriented to more business-oriented financing. A key funding gap Africa has right now is patient and affordable capital for MSME development, a gap which cripples private sector development in Africa. This funding gap can be met by financing options already provided by entities in the USA, particularly impact and angel investors. Business-focused grants and affordable debt can be channeled to develop MSMEs that deliver social and economic value, and strengthens their commercial returns and business activity.

There is also opportunity for more bottom-line oriented financing for more established and large players in Africa. But the reality is that without the development of MSMEs, the pipeline of viable projects for mainstream investors will continue to be narrow. The USA has a blend of financing options that can be leveraged for MSME development and the creation of a pipeline of deeper financing options for everyone. This blend of financing can be more effectively coordinated and leveraged for private sector development to the benefit of both US and African players.

Related image

(source: https://www.investigaction.net/fr/Le-conflit-entre-la-Coree-du-Nord/)

The second opportunity the USA presents Africa is a focus on environmental, social and governance (ESG) issues. While parties from other parts of the world may be more willing to be lax on ESG issues, the fact that US businesses view these are core concerns is important. While the centrality of healthy ESG practices from US business may be due to legal compliance issues and high ESG expectations at home, African businesses financed with this approach are likely to be stronger business entities going forward. Thus, the focus on ESG performance is a strength US financiers can use to support the growth of holistically sustainable businesses in Africa. African businesses benefit by ensuring they not only meet legal ESG requirements, but actually develop a brand of being responsible businesses that support the development of their continent.

The two points elucidated above are only the surface of the economic opportunities that exist between Africa and the USA. Thus, rather than being concerned with what other entities are doing in Africa, the USA ought clearly see it can be an important partner for private sector development in Africa and leverage this strength going forward.

Anzetse Were is a development economist; anzetsew@gmail.com

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s