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Vol 55 No 16

Published 8th August 2014

Dollars, security and a few surprises

President Obama and the promise of trade and investment drew the leaders to Washington’s summit but the results will emerge only slowly

For many, the most emblematic moment of Washington's maiden Africa summit on 4-6 August came at the end of an intense day of economic and commercial debate on 5 August, when President Barack Obama sat in on a 15-minute discussion with Takunda Chingonzo, a 21-year-old internet entrepreneur from Zimbabwe. It was a conversation of the free-ranging kind that Obama had specified for the following day at the Leaders Summit. It was also a signal that the USA wanted to send about its offers of partnership with Africa, the continent with the youngest population. 

The tacit warning was that if Africa misses the chance to reap the benefits of that demographic dividend, with massive investment in education and infrastructure, the political and security consequences could be horrific, reaching well beyond the continent's shores. It seemed the message about Africa's commercial opportunities was designed as much for the 100 or so big US companies and their associates as for the African state and commercial delegations. Just over 1% of US foreign investment goes to Africa but that figure could jump if the business chiefs and state officials at the summit make good on their promises.

Chingonzo, one of 500 young African students and entrepreneurs invited to the US as part of the State Department's Young African Leaders' Initiative, told Obama that he and his colleagues were 'liberating the internet for Zimbabweans'. Now on his third start-up venture, Chingonzo also explained how USA firms were reluctant to work with him due to fears of breaching sanctions on Zimbabwe, despite being repeatedly told that they were limited to politically aligned individuals. Obama conceded the difficulty of ensuring that even targeted sanctions did not penalise ordinary Zimbabweans. He also sympathised with Chingonzo's request for more US finance for start-up companies in Africa and elsewhere, given their record of job creation although they often face restrictive pressures from established companies. 

The two wound up with a talk on the need for governments to invest more in infrastructure. State-funded projects such as roads, bridges and airports, or regulating markets were not popular in Washington these days, Obama told Chingonzo, but that sort of pro-active government was relevant to both Africa and the USA, he argued.

Mandarin meeting
For the previous six hours, the top tier of the US business and foreign policy establishment, along with former New York Mayor Michael Bloomberg, had hosted an array of African political and business leaders at Washington's Mandarin Oriental Hotel. Their statements and pledges aimed to convince US companies and politicians to do more in Africa as well as to persuade the continent of the USA's commitment.

US exports to Africa have grown to record levels, Obama said. That's true but US imports from Africa have slumped to US$85 billion since it has replaced imports of African oil with domestically-produced shale oil and gas. That is about the volume of trade that the US does each year with Brazil. Given that China's trade with Africa is worth $200 bn. and rising, it seemed unlikely that US officials would play the numbers game. Yet they did, taking full advantage of the US government's convening power.

Whether in the ability to team up and match finance from the World Bank and African Development Bank (AfDB) or to galvanise the world's biggest capital and money markets to take a bigger stake in Africa, that convening power is unmatched. That allowed Obama to rack up a score of some $33 bn. of 'new commitments' to Africa, comprising $12 bn. of new deals from Blackstone, Carlyle Group, Coca-Cola, General Electric and Marriott; $7 bn. of finance to promote US exports; another $12 bn. in new money from the US, World Bank and Sweden for the Power Africa programme, as well as $2 bn. of smaller-scale financing facilities through the AfDB and others. Washington added a further $4 bn. to be disbursed over the next three years by Interaction, an alliance of US civic groups, to tackle maternal and children's health, and deliveries of vaccines and drugs.

The summit points to a more intense and targeted competition between the USA and China for business in Africa. But it also showcased the deep differences in their approaches to Africa and also the extent to which both countries are improvising. Their Africa-enthusiasts may struggle to convince their top power-brokers of the continent's growing importance.

US and African activists criticised Washington for prioritising economic interests above human rights and democracy but the first day of the summit was led by civil society groups campaigning against corruption, tax avoidance, and ethnic and sexual discrimination, which would be strictly off limits in Beijing. The final day of discussion between Obama and the African leaders ended on a serious note: the pressing security crises in the Horn and the Sahel, which are spreading outwards. The US promise of a $550 million military training programme over the next five years for an African rapid response force points to other differences of emphasis with China.  

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