Next week, as promised during his trip to Africa last year, President Obama will host the first US-Africa Summit in Washington, D.C. to highlight the administration’s goal of strengthening political and economic ties with the continent. From August 4th-6th, more than 40 African presidents along with leaders of the African Union will be hosted at the White House to discuss economic, political and security issues. The three-day event is a statement to Africa’s recent economic rise and the Obama administration’s attempt to challenge China’s status as Africa’s main trading partner.
Despite the expanding Sino-African relationship, between 2004-2013, U.S. firms invested in 768 FDI projects in Africa or 12.2% of the total, according to EY’s Africa Attractiveness Survey 2014 (here). Except in 2008 when Beijing-based Industrial and Commercial Bank of China (ICBC) purchased 20% of Johannesburg-based Standard Bank for $5.4 billion, the U.S. remains the largest investor in Africa. In addition, the U.S and the World Bank’s IDA also provide more than 17% of official development assistance to African countries compared to China, which focuses mostly on resource-credit swaps and concessional loans, a model it learned from Japan. In such deals, Chinese State-Owned Enterprises (SOEs) enjoy exclusive rights to bid for infrastructure projects.
Countering China in Africa
Since the beginning of its “Going out” policy in the late 1990s and early 2000s, China has increased its trade with the African continent from $10 billion in 2000 to more than $200 billion last year. This commodity-driven trade relationship has underwritten Africa’s recent economic growth, especially in oil-rich countries such as Angola, Nigeria and Congo (Brazzaville). Given China’s mammoth $3.66 trillion foreign currency reserve, it has armed its SOEs and Exim bank to secure access to vital energy sources in Africa. This largest foreign reserve has also given Chinese SOEs a competitive edge over Western and local firms in acquiring infrastructure contracts throughout the continent. As deduced from China’s new white paper on foreign aid by Brookings Institution, Beijing’s involvement in Africa includes:
…14 agricultural technical demonstration centers, 86 economic infrastructure projects, 30 hospitals, 30 malaria centers, as well as 150 schools, and 105 clean energy and water projects as well as training more than 5,000 agricultural technical experts and more than 3,000 medical staff.
Obama’s Pivot to Africa
This year’s US-Africa summit is happening almost 14 years after China’s first Forum on China-Africa Cooperation (FOCAC) held in Beijing, where 44 African presidents and 80 ministers attended. The conference illustrated China’s emphasis on South-South cooperation, which has recently exceeded the value of trade between developing and developed countries. Next FOCAC will be held in 2015 in Durban, South Africa, where Chinese leaders will allocate special attention to every African country, something the Obama administration does not promise to African presidents next week.
After the Obama administration’s strategic pivot to East Asia, it is beginning to look like next week summit is another U.S. strategic test to China growing influence in a different part of the world. Since the fall of the USSR and the end of the Cold War, the U.S. looked at Africa through humanitarian lenses, but the growing Sino-African cooperation and the continent’s improving economic conditions are slowly changing the narrative. For example, U.S. Trade Representative, Michael Froman, mentioned yesterday that the U.S. would like to eventually upgrade the African Growth and Opportunity Act (AGOA), slated to expire in September 2015, to a reciprocal trade agreement.
Unlike in FOCAC meetings, the Obama administration is not promising additional ODA to African presidents. Instead, the “Investing in the Next Generation” themed summit will focus on trade and investment between the United States and African countries. With two years left to go, President Obama is now trying to cement his legacy on U.S-Africa relations, especially with his multi-billion Power Africa initiative to double access to reliable electricity throughout the continent.
After Shinzo Abe’s three-day event on African development last year, the Obama administration is finally jumping on the “Africa Rising” bandwagon. Due to the rise of security issues in Nigeria, Libya, and elsewhere on the continent, next week U.S.-Africa summit is well-timed. As the largest investor in Africa, it is important for the U.S. to maintain a strong relationship with the African continent, where 7 out of the 10 fastest-growing economies in the world are located. Even though Africa is rising, several challenges remain, and the U.S. certainly has a role to play in helping the continent surmount those hurdles.