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Courting Africa: US pledges $33b in trade deals with an eye on China

Saturday August 09 2014
EA

From left Presidents Yoweri Museveni, Jakaya Kikwete, Uhuru Kenyatta, Paul Kagame and Pierre Nkurunziza. The East African leaders returned from the August 4-6 US-Africa Summit with a mixed bag of pledges. FILE PHOTOS

East African leaders returned from the August 4-6 US-Africa Summit with a mixed bag of pledges that could, if honoured, minimise the terrorist threat in the region, bring cheaper power, improve maternal health and extend duty-free exports to the US.

President Uhuru Kenyatta managed to have Kenya included in the Power Africa initiative whose commitments reached $27 billion during the summit. It will finance renewable energy projects in geothermal, wind and hydro but will exclude coal, which is considered environmentally damaging.

In addition, Kenya will, alongside Tanzania, benefit from a wildlife protection initiative worth $65 million, together with South Africa, Gabon and Togo, and share $65 million for a counter-terrorism programme with Ghana, Mali, Tunisia, Niger and Nigeria.

Uganda, Tanzania and Rwanda are also included in a $110 million pledge for peacekeeping in Somalia, South Sudan and Central African Republic.
Other peacekeeping beneficiaries are Ghana, Senegal, and Ethiopia.

READ: US to help Africa set up peacekeeping force

In addition to $4 billion for maternal health and a pledge to extend the Africa Growth and Opportunity Act (Agoa) for 15 years for all 55 African countries, Rwanda sealed a deal with Symbion Power for a 50MW Lake Kivu methane gas plant and a promise of US military action against the FDLR rebels if they do not surrender by the end of the year.

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Uganda also got a security lift with the US appearing to lose patience with Riek Machar, one of the protagonists in the South Sudan crisis, which could shift international support towards President Salva Kiir, whom President Yoweri Museveni has backed so far.

The meeting, the largest ever gathering of African leaders with a US president, signalled a shift in America’s engagement with the continent from aid and governance issues to trade and investment.

Post-Cold War

Since the end of the Cold War, Africa has remained on the back burner of US foreign policy; the Summit hosted by President Barack Obama in Washington now gives America a chance to refocus on the fastest growing market outside developing Asia.

It has also been described as an opportunity for the US president to shape his legacy in Africa, which critics say is yet to match that of predecessor George W. Bush, who spent billions of dollars combating HIV/Aids on the continent.

African political and business leaders emphasised in Washington that Africa was open for business, not aid, while President Obama said that the US wanted to be an “equal” partner in Africa’s growing success.

“We don’t simply want to extract minerals from the ground for our growth; we want to build genuine partnerships that create jobs and opportunity for all our peoples and that unleash the next era of African growth,” President Obama told the forum, which included 50 African Heads of state.

At the Summit, American leaders pitched the US as offering the best partnership to Africa. US officials described China’s dealing in Africa as a “patron” relationship.

US Vice President Joe Bidden, in an apparent swipe at China, said America “is proud of the extent to which our investment in Africa goes hand-in-hand with our efforts to hire and train locals to foster economic development and not just to extract what’s in the ground.”

While the US recasts its net around Africa, which only a decade ago was infamously christened “the hopeless continent” by the Economist magazine, it will have to play catch-up with China, whose footprint on the continent has grown rapidly in the past decade.

For 14 years, US-Africa economic relations have been dictated by Agoa, which waives import tariffs on 6,000 products from Africa.

While President Obama pledged to extend the agreement for the long run, trade between America and Africa has been in steady decline since the 2008 global financial crisis.

Much more needs to be done to diversify US-Africa trade, whose domination by oil and gas hit Africa badly in the wake of the financial crisis. Oil consumption in the US declined from 20.7 million barrels per day in 2008 to 18.9 million in 2013, and oil prices fell from $140 per barrel to $98 per barrel.

Dwindling trade

These price shocks have seen US trade in goods with Africa, which is mostly tied to oil, dwindling from $125 billion in 2011 to $99 billion in 2012 and $85 billion in 2013. It is expected to further decline to well below $80 billion this year.

China, shielded from the financial crisis, supplanted the US as Africa’s biggest trading partner in 2009, and has seen its trade volumes with the continent jump from $11 billion in 2000, to more than $210 billion in 2013.

Positive future ties

In one of the panel discussions at the summit, Rwanda’s President Paul Kagame said he was optimistic that even though the US is coming late onto the scene, its renewed partnership with Africa could “bypass the relationship between Africa and Europe, and between Africa and China.”

The EU, China and Japan have been holding similar gatherings every three to five years. To make up ground lost to China, President Obama’s guests at the Summit indicated a radical shift in his administration’s approach to Africa.

By inviting all African leaders except the presidents of Zimbabwe, Sudan, Central African Republic, Eritrea and Western Sahara; Washington was implicitly saying trade, and not governance, was high on its Africa agenda.

According to Michael Bloomberg, the former mayor of New York, sometimes it does not make economic sense to isolate countries from the world stage to influence their behaviour.

“America boycotted Cuba. The Cuban people are worse off today than they were 45 years ago. If we had traded with Cuba, the Cuban population’s lives would have been overwhelmingly better,” he said in one of the summit’s side events.

While Chinese assistance has been in the areas of infrastructure and trade, the priority area of US assistance to Africa has been health, which accounts for 80 per cent of its total aid to the continent.

However, this is slowly changing, with the US now focusing more on trade, peace and security.

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