There’s lots of money to be made if America changes its Africa game

What you need to know:

  • For a start: One way the US can counter the state-to-state thrust of Chinese infra-structure investment in Africa is by over-hauling the World Bank.
  • Of course, aid will always retain a precious niche.

The message from the US-Africa Summit couldn’t have been clearer: What Africa needs is trade and investment, not aid handouts. Aid never brought meaningful development to any country. Nor has it killed poverty on our continent.

Agoa, the trade opportunity that was started by Bill Clinton, has done more to Africa than aid ever did. US aid has only created a fat parasitic class of civil society which lives on seminars and talk-shops.

Belatedly, the US is realising it has to change its game. US corporations are putting $14 billion on the table for new investment in Africa. That is not small money. Yet there is quite a distance to go to rival the mega billions China pours into its state-to-state investment deals with Africa.

SKEWED

Actually US investment in Africa has never been insignificant. The problem is that it is skewed. America’s bankrolling of UN and AU military peace enforcement operations on the continent as well as for anti-terrorism account for the biggest chunk.

On trade, the bulk of it — in dollar value — consists of oil imports, mainly from Angola, Nigeria and Equatorial Guinea. The money reflected in other sectors is small potatoes, relatively.

And with US domestic oil production expanding rapidly because of new shale oil extraction using the new-fangled “fracking” technique (America is suddenly becoming the world’s largest producer!), its oil imports from Africa will sharply decrease.

When it comes to foreign investment, the US adheres to the capitalist philosophy of private sector partnerships. China, on the other hand, has huge state-owned enterprises and banks which it uses to finance its deals with African governments.

One problem with the US approach is that Africa has few private sector players with enough heft to partner with on Chinese-sized infrastructure projects.

Two, US companies have traditionally considered doing business in Africa an unpleasant task.

Much of this stems from misconceptions, which the Washington DC summit sought to dispel. Examples are legion.

In 2001, US entertainment group MCA Universal had an bitter fallout with its French partner Vivendi in a row originating from the 1990s on how to diversify their investments.

Alongside the big ventures the American shareholders objected to were two little telecom businesses in Morocco and Kenya (Kencell) which they deemed misplaced and in the wrong continent.

Yet European firms like Vodafone — which owns Safaricom — have since demonstrated the good profits to be made in the telecoms business in virgin Africa.

And Caterpillar, a US construction equipment firm, quietly continues to rake in money from, ironically, the Chinese-financed road-building operations across Africa.

OVERHAUL WORLD BANK

One way the US can counter the state-to-state thrust of Chinese infrastructure investment in Africa is by overhauling the World Bank, where it has veto power.

That would mean persuading Congress — a near impossibility, to be sure — to beef up the Bank’s capital to fund more and bigger projects in Africa. But the larger point of the overhaul must be to make the Bank “user friendly” to Africa.

American civil rights leader Jesse Jackson has written of an institutional culture in the Bank that is almost colonial in its attitude. It is reflected in the paternalistic conditionalities the Bank imposes on poor borrowers.

Inflexible lending policies and layers of unnecessary consultants who fleece away most of the cash before it reaches the borrower, have made the Bank an increasingly unattractive partner for Africa’s forward-looking economies.

As for the IMF, I can’t think of any single success story its reactionary programmes have ever scored in Africa.

Indeed there is much that America can profit from in today’s Africa. There is money to be made in Africa’s largest economy, Nigeria, specifically in electricity generation and distribution (power blackouts are the norm there).

Opportunity abounds as well for the US in Kenya in financial services, and in South Africa in information technology. In the vast Congo, the US can focus on infrastructure; and in Ethiopia, there is room for large-scale commercial farming of the type the US excels in.

Of course, aid will always retain a precious niche. The US remains the biggest donor for anti-HIV programmes in Africa and in provision of anti-retroviral drugs for Aids patients, thanks to one George W. Bush.

The emerging scourge of Ebola will also best be fought by the US’s superior medical and research expertise.