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New Approach to Doing Business in Africa: Understanding the United States’ Strategy for Africa

Updated: Oct 17, 2019

In December 2018, the President Trump administration launched Prosper Africa, a new strategy for U.S. engagement in Africa. This coincided with Africa’s recognition as the second fastest-growing region in the world with a projected growth rate of 4 percent. With little details about the components of the initiative, National Security Adviser John Bolton, during the launch, described Power Africa as a tool to promote U.S. interests and expand its influence in Africa - ahead of Russia and China.


Six months later at the Corporate Council on Africa’s U.S.– Africa Business Summit, U.S. deputy secretary of commerce Karen Dunn Kelly and USAID administrator Mark Green provided full details on the initiative. Prosper Africa will build on other U.S. programs such as the Africa Growth and Opportunity Act (AGOA), President George W. Bush’s Emergency Plan for AIDS Relief (PEPFAR), Power Africa initiative, USAID’s trade and investment hubs, and Millennium Challenge Corporation’s programs.


Understanding Prosper Africa

Defined as a new approach to doing business in Africa, Prosper Africa will increase two-way trade between the U.S. and African countries. It will synchronize the capabilities and initiatives of all U.S. agencies in Africa to facilitate deals through multi-platform trade and investment hubs. At a time when trade between the U.S. and Africa is declining, the initiative will facilitate transactions by providing blended finance instruments and market intelligence to help American businesses explore commercial opportunities on the continent. On the side of the African countries, Prosper Africa will support private-sector-led economic growth by removing trade barriers and increasing foreign investment.


The Prosper Africa initiative builds on the Better Utilization of Investment Leading to Development (BUILD) Act which created the United States Development Finance Corporation (USDFC) to serve as America’s development finance institution in low and middle-income countries. Doubling the financial power of Overseas Private Investment Corporation (OPIC), USDFC provides loan guarantees and invest directly in businesses in these countries.


Under Prosper Africa, the United States will pursue negotiations with countries on a bilateral basis. This new approach to trade agreements contrasts the conventional approach of the U.S. to regional agreements such as AGOA. AGOA is a trade program that provides U.S. market access in selected value chains to sub-Sharan African countries. So far, the U.S. Department of Commerce has signed a Memorandum of agreement with Côte d’Ivoire, Ethiopia, Ghana, Kenya, and Mozambique. Despite this new approach, AGOA will remain effective until 2025.

New Initiative, Old Concerns

While Prosper Africa holds incredible potential to tackle trade barriers and strengthen economic relationships between the U.S. and African countries, the aggressive investment pursued by China may undermine America’s position as Africa’s leading economic partner. Between 2014 and 2018, two-way trade between the United States and Africa decreased by 15 percent. During the same period, China intensified its relationships with African countries by providing bilateral loans, through its belt and road initiative, to close Africa’ $170 billion infrastructure gap. In 2018, the Chinese government committed $60 billion in debt financing and $10 billion in private investments to African countries. Although China’s approach to development may be viewed as exploitative, most African governments accept China as a key partner.


Furthermore, the bilateral trade agreement approach adopted under Prosper Africa is like going back in time. This approach does not align with Africa’ strategic direction under the Africa Continental Free Trade Agreement (AfCFTA). Once fully ratified by all 55 countries, the AfCFTA will be the largest free trade area, covering over 1.2 billion people and a gross domestic product (GDP) of over $3trillion. Also, Africa’s population is projected to reach 2.5 billion by 2050. As a result, regional trade agreements would be the optimal approach in the emerging Africa context.


Going forward

Africa holds so much potential and the Prosper Africa initiative is a great way to reinforce U.S. interests in the continent. Although the initiative will promote trading relations and tackle trade barriers on the continent, the United States should also support African countries to solve its complex infrastructural challenges. The Prosper Africa initiative, just like the Power Africa initiative, should adopt sector-focused interventions which have proven to be successful. The Power Africa initiative has generated over 10,000 megawatts of electricity and connected more than 60 million people to the power grid.


Finally, the United States must review its proposed approach to trade agreements. As a major economic partner in Africa, the U.S. must adopt a proactive trade strategy by negotiating with African countries as a bloc rather than through bilateral agreements. Regional agreements will only expand market size and opportunities for African and American companies.


by Ridwan Sorunke

Public Policy Advisor


To learn more about doing business in Africa, please reach out to us at contactus@acioe.com


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