U.S. Investment in Africa: Making Up for Lost Ground

by Brandon Bennes, New York University

African development has skyrocketed in the last five years, and the U.S. has risked missing a key window for investment.

This is the message that Robert Sichinga, Zambia’s minister of commerce, emphasized while in Atlanta one month ago, warning that, "Americans are falling behind other countries in the race to in tap investment opportunities in Africa, which has been unfairly characterized as a 'lost continent’... We are here to say to you—you, our American colleagues, are lagging behind.'" This is a stinging criticism of U.S. policy that has far too often discounted and marginalized the African continent.

Africans are also taking note of who has and has not supported their development in the past. A BBC poll in May that surveyed over 24,000 people around the world showed China’s popularity around the globe had outstripped that of America overall, and two of the nations in which China polled the most favorably are also two of Africa’s strongest emerging economies: in Nigeria and Kenya, 89 percent and 75 percent of respondents hold positive views of China, respectively.

Chinese officials have not been shy about leveraging this positivity and openness to wen jiobao thabo mbeki china south africa Chinese economic support. According to the Wall Street Journal, Chinese exports to African countries amounted to $73.4 billion in 2011, more than any other nation, and most importantly, more than double the worth of U.S. exports to Africa, which stand at $31.5 billion.

Notably, respondents to the survey tended to fault the U.S. most often for its foreign policy, in which a “hard power” approach is often emphasized. Dr. Margaret C. Lee, professor of African and Afro-American Studies at the University of North Carolina-Chapel Hill, suggests that the U.S. could begin to reform its image in Africa and elsewhere by emphasizing soft power that achieves results for Africans.

“What can America’s private and public sector do at this point to change the image of the US in Africa and become part of Africa’s growing integration into the global economy?,” she said in an interview. “They need to think about ways they can help put in place real and lasting development structures (e.g. a road), that, for example, might allow a farmer to finally get his produce to the market so that s/he can actually make a living wage.“

She added that “the Chinese have become masters at this strategy. It’s never too late for Americans to… learn from those who have succeeded. Africa has had enough hard power.”

America’s Soft Power Imprint in Africa

The U.S. has implemented a brand of “soft power” in the past, but this effort has largely taken the form of aid. In this regard, the U.S. still leads China by a comfortable margin. While the Chinese often shun transparency, U.S. direct aid to Africa still totals around eight billion dollars annually, as opposed to China’s approximate annual disbursement of $2.5 billion, according to former U.S. Ambassador to Ethiopia and Burkina Faso, David Shinn. (Chinese leaders have announced that aid would increase as part of the new $20 billion loan deals arranged with African leaders in the last month.) This money goes toward countering HIV/AIDS, malaria, providing emergency food aid, and other worthy causes.

The problem is that, as New York University economist William Easterly, Ambassador Shinn, and others have pointed out, this form of assistance only “deals with development indirectly” and reinforces the classical donor-recipient/expert-client relationship, instead of building genuine, equal economic partnerships.

The difficulty in reaching beyond traditional forms of aid is that the kind of foreign infrastructure investment that Africa desperately needs is primarily private sector driven in the United States. Former Ambassador Shinn summarized the problem in our discussions with him on this matter:

The U.S. does little by way of infrastructure building while China leads in this area… American companies have to find funding somewhere. This is a huge problem, and then they have to compete against the Chinese, Europeans, Turks, Brazilians, etc. to win the contracts. They have not competed successfully in recent years. But the burden is on the U.S. private sector and not the government.

If the private sector does not believe it can make a profit with its investment in Africa, it won’t go in. Unfortunately, too many American companies seem to have come to that conclusion. There are exceptions… but most American companies don’t give serious consideration to Africa. All they see is famine, conflict, poverty, and limited disposable income in the hands of the African consumer. Hence they stay away. The U.S. government could help by increasing the resources of the Export Import Bank and by giving more high level attention to Africa, [but] when was the last time the Secretary of Commerce led a delegation to Africa?

Bringing Investment in Sub-Saharan Africa Up to Speed

Fortunately, in the last few months, this has begun to change. President Obama recently proposed a new U.S.–East African Community Trade and Investment Partnership with Kenya and other regional economies. Key provisions of the African Growth and Opportunity Act that provide countless jobs for Africans have also been extended and renewed by Congress, bolstering U.S.–African trade and investment. In addition, Fred Hochberg, chairman of the Export-Import Bank, visited South Africa with a group of trade representatives and American executives to sign new commercial deals, supporting Secretary of State Hillary Clinton’s visit to the continent.

While these are all excellent signs, it cannot be discounted that the U.S. still lags behind other powers in trade and investment in Africa by a considerable margin, and has much ground to make up. Still, recent steps taken by the Obama administration are certainly steps in the right direction, and demonstrate the kind of leadership regarding Africa that has been sorely needed for a long time. Time will tell what kind of impact these measures have had on people living in Africa.