US establishes corporation to rival the growing influence of China on the continent.
East Africa is looking to benefit from a $60 billion fund set up as part of the Trump administration’s plans to increase its influence in Africa.
To rival the growing influence of China on the continent, the US has established a new agency, the International Development Finance Corporation (IDFC), which will spearhead the financing of infrastructure projects and open avenues for US companies to increase investments in Africa.
American firms seeking to invest in Africa have often cited the challenge of securing financing and mitigating risk as key roadblocks in competing with the Chinese for projects in Africa.
It is for that reason that the US has renewed its push to exert more influence in Africa with the passing of the Better Utilisation of Investments Leading to Development (Build) Act by the Senate, which President Donald Trump signed into law early last month.
Among other things, the Act creates the IDFC, which will oversee the funding of infrastructure projects like roads, ports, energy, railways and dams in Africa.
The IDFC has a seed capital of $60 billion for investing in both equity and debt in infrastructure projects across emerging markets.
Largest donor
In establishing it to replace the Overseas Private Investment Corporation, Washington acknowledges that Africa is demographically destined to be a focal point for global commercial competition, owing to its of population of 1.2 billion, growing economies and political stability.
“Congress has taken an important step toward fulfilling the commitment President Trump made to reform development finance institutions so that they better incentivise private sector investment in emerging economies,” said the White House in a statement.
East Africa will be a key beneficiary as US companies seek to bid for infrastructure construction. The new fund offers them an avenue to mobilise project funding.
American construction firm Bechtel Corporation, for instance, has been awarded a major contract to build the $2.1 billion Mombasa-Nairobi expressway in Kenya under the public-private partnership model.
Although the US remains Africa’s largest donor, committing $12.2 billion in 2017 for health, education and agriculture, China and its agencies dominated in infrastructure projects.
Over the past decade, China has invested $75 billion in key infrastructure projects like railways, ports, energy and roads in Africa.
Of this amount, East Africa took up $29.42 billion or 39 per cent. In September, China committed an extra $60 billion in development finance when African leaders converged in Beijing for the Forum on China-Africa Co-operation summit.