In brief
The strengthening partnerships between the United States and African countries is evident in recently announced initiatives that focus on sustainability and community empowerment and that provide reciprocal benefits for the citizens of both regions. Such initiatives include, for example, increased US support for climate, clean energy and infrastructure development projects in Africa, and programs that boost reciprocal trade and investment between the two regions.
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In more depth
The United States and countries in Africa are building strong partnerships that boost sustainability, empower local communities with a focus on opportunities for women and youth, and provide benefits for both African and US citizens. Recently, the US has made numerous announcements regarding cementing its strong ties with Africa via, for example, increased climate financing, infrastructure development support, and reciprocal trade and investment initiatives.
In August 2022, a fact sheet issued by the White House noted that Sub-Saharan Africa (SSA) played “a critical role in advancing global priorities to the benefit of Africans and Americans. It has one of the world’s fastest growing populations, largest free trade areas, most diverse ecosystems, and one of the largest regional voting groups in the United Nations. It is impossible to meet today’s defining challenges without African contributions and leadership.”
The White House further noted that its Africa strategy articulated the new US vision for a 21st century US-African Partnership and the “tremendous, positive opportunities that exist to advance shared interests alongside our African partners.”
Climate finance
Developing countries are among the most vulnerable in the world to the effects of climate change, especially with regard to adapting to weather extremes and finding solutions that address food insecurity and energy and water scarcity. The availability of climate financing to assist developing countries with the transition to a low-carbon, climate-resilient future was one of the key topics under discussion at this year’s United Nations Climate Change Conference (COP 27) in Egypt.
US President Joe Biden said in a speech at COP 27 that the US Emergency Plan for Adaptation and Resilience Fund (PREPARE) had already deployed USD 2 billion in financing to help developing countries prepare for climate change. He announced a USD 150 million down payment to support PREPARE’s adaptation efforts in Africa, including for the Accelerating Adaptation in Africa project that was launched by the US and Egypt earlier in 2022. Other US climate initiatives in Africa include expanding access to early warning systems, building capacity for African decision makers to accelerate climate adaptation, supporting locally led adaptation efforts, expanding access to risk-based insurance for the most vulnerable, mobilizing private sector support, and supporting climate smart food systems, as well as the initiative – Advancing Climate Security Through Sahel-Climate Advocacy and Peacebuilding with Pastoralists.
PowerAfrica
Power Africa, a US government-led program that focuses on addressing Africa’s access to electrical power, has provided significant support to African countries since its launch in 2013. A US Agency for International Development (USAID) report shows that, since then, Power Africa has helped bring more than 5,500 megawatts (MW) of cleaner and more reliable power generation and first-time electricity to 127.7 million people across sub-Saharan Africa. The program is a partnership between the US government and the governments of Ethiopia, Ghana, Kenya, Liberia, Nigeria, Tanzania, and the private sector. The African Development Bank (AfDB) has partnered with USAID to shape the Power Africa initiative and, according to the AfDB, Power Africa interventions have included investment loans, reforms, advisory services and guarantees, with a commitment of at least USD 3 billion in the six priority countries.
Infrastructure finance
In June 2022, it was announced at the G7 Summit that a USD 600 billion lending initiative, the Partnership for Global Infrastructure and Investment (PGII) would be launched to fund infrastructure projects in the developing world, with a particular focus on Africa. The G7 countries – Canada, France, Germany, Italy, Japan, the UK, and the US – explained that the PGII would help address the infrastructure gap in developing countries, with a core focus on sustainability.
The US announced at the same time that it would mobilize USD 200 billion for developing countries over the next five years as part of the PGII. This funding will be in the form of grants, financing and private sector investments. One of the priority pillars of this funding will be “tackling the climate crisis and bolstering global energy security through investments in climate resilient infrastructure, transformational energy technologies and developing clean energy supply chains across the full integrated lifecycle.” Some deals have already been announced, including a USD 2 billion solar energy project in Angola and the building of multiple hospitals in Côte d’Ivoire.
Trade and investment
In July 2021, the Biden Administration announced that it would renew the US Prosper Africa initiative, started in 2019, with a focus on increasing reciprocal trade and investment between the US and African countries. At the time, the US said that the initiative would focus on improving trade and investment in sectors such as infrastructure, energy and climate solutions, healthcare and technology. Seventeen US government agencies working as part of this initiative were given a mandate to, among other things, empower African businesses, offer deal support and connect investors from the US with those in Africa.
Also noted at the renewed Prosper Africa launch was the intention to focus on projects that supported women, and small and medium enterprises in Africa. Under the Biden Administration, US engagement with African countries has focused on strengthening these trade and investment relationships in a strategic, cooperative and reciprocal way, under the vision of shared prosperity between Africa and the US.
Trade
The US has also expressed its support for the African Continental Free Trade Area (AfCFTA), the Africa-wide free trade zone, stating that it wants to see the growth of Africa’s economic power in the world. All future trade agreements signed between the US and African countries will have to align with AfCFTA’s trade stipulations and, considering the Biden Administration’s environmental stance, new agreements will likely also include climate change provisions and tariffs on high-carbon imports. The Administration is also focusing on trade agreements that don’t disadvantage US businesses and consumers.
For example, the US-Kenya Strategic Trade and Investment Partnership (STIP) was signed in July 2022. The agreement outlined the enhanced engagement and high standard of commitment between the two countries, and focused on increased investment and sustainable and inclusive growth that will be of benefit to both countries’ citizens and businesses. The agreement also included the intention to support regional economic integration in East Africa.
Further reciprocal bilateral and regional trade agreements between the US and African countries are expected to be signed in the near future. Such agreements are expected to eventually replace the non-reciprocal African Growth and Opportunity Act (AGOA), which allows duty- and quota-free exports from eligible African countries into the US, and which is due to expire in 2025.
Investment
US investment in Africa has grown in recent years. According to Refinitv data, Prosper Africa’s focus on improving investment between the two regions appears to be working. The value of M&A transactions in SSA, where the acquirers, or acquirer’s ultimate parent, were based in the US, was USD 3.6 billion in the 2022 year-to-date, with 94 deals announced so far in 2022. The only time in the last few years that the deal value has been higher was in pre-pandemic 2017, when 58 deals were announced, valued at USD 4.9 billion. In 2021, the value of deals from US acquirers into Africa was slightly lower than in 2022 so far, at USD 3.3 billion, but the volume was higher, with 97 deals announced. In 2020, both the volume and value of deals were lower, with US-based acquirers announcing USD 1.5 billion in deals in SSA, spread over 42 deals. This was much lower than in 2019, when USD 2.9 billion in US-originated M&A deals were announced in SSA, spread over 38 deals. The volume of deals was higher in 2018 than in 2019, but the value was lower – 55 deals valued at USD 2.4 billion were announced that year. With both the volume and value of US M&A deals in Africa once again climbing, an increasing number of US investors are clearly looking to launch and grow African operations.
The US focus on increased engagement and continued trade and investment in Africa is good news for the continent. Africa needs strong partnerships to address its development challenges and reach its full potential, and it has a solid ally in the US. The numerous US-Africa initiatives and partnerships that have launched as part of the US’s renewed, sustainable and reciprocal approach to Africa, are leading to a plethora of opportunities for both regions.
