AFRICA: US INCREASES ITS FOCUS ON SUSTAINABLE RELATIONSHIPS
While the United States’ (US) investment focus on Africa has grown in the past five years, it has intensified in the past eight months and gained the sharpest focus yet with last week’s trip by US Vice President Kamala Harris to Ghana, Tanzania and Zambia.
The trip was significant on a number of fronts, signalling increased efforts by the US to grow its relationships in key African jurisdictions in a coordinated and sustainable way.
It comes within the context of equally concerted initiatives by other countries to position themselves for more influence on the continent. For example, it follows African tours by French President Emmanuel Macron; Russian Foreign Minister Sergei Lavrov; and new Chinese Foreign Minister Qin Gang. There is a sense that the increased US interest is partly driven by the geopolitical competing interests in key African jurisdictions.
Increasing support for Africa by the US
The groundwork for Vice President Harris’s visit was laid in earlier high-profile visits by members of the US Government, namely US Secretary of State Antony Blinken (who visited the Democratic Republic of Congo, Rwanda and South Africa in August 2022, and Ethiopia and Niger in March 2023) and US Treasury Secretary Janet Yellen (who visited Senegal, South Africa and Zambia in January 2023).
These were followed in February by US First Lady Jill Biden’s visit to Kenya and then, in late March, the hosting of the American Chamber of Commerce (AmCham) Summit in Nairobi, which was attended by key US and Kenyan government officials as well as US investors and top executives of major US companies that have or are establishing a presence in the region.
Recent financial commitments by the US include a US 55 billion pledge to support the African Union’s Agenda 2063 together with the creation of a new Digital Transformation with Africa initiative intended to invest over USD 350 million in financing Africa’s digital transformation, which were made at the second US-Africa Leadership Summit held in Washington in December 2022.
Another example is the Biden Administration signing a memorandum of understanding to support the implementation of the African Continental Free Trade Agreement (AfCFTA) through helping to implement the USD 15.7 billion worth of private sector investments and partnerships currently being carried out by Prosper Africa.
President Biden has also endorsed the call for the inclusion of the African Union as a permanent member of the G-20.
Finally, as a follow up to the visit by Vice President Harris, plans are underway for a major visit to Africa by President Biden later this year.
Focus on sustainability initiatives and impact investing
Vice President Harris’s multifaceted trip was focused on strengthening business ties, efforts to support democracy and good governance, the empowerment of African women and entrepreneurship.
In addition, it was notable for its emphasis on sustainability initiatives and impact investing, culminating in her announcement in Lusaka on Friday, 31 March, of over USD 7 billion in private sector and US Government commitments to promote climate resilience, adaptation and mitigation across Africa.
According to a press release, these new investments are intended to ‘generate significant economic benefits while addressing African nations’ pressing needs resulting from the climate crisis, including food security challenges, by helping to lift up over 116 million farmers and promote climate-smart agriculture’.
A supporting document lists more than 20 US companies and organisations that have made firm investment commitments in clean energy, electric vehicles, agritech, agribusiness, agri-insurance, carbon storage and sequestration, sustainable forestry, living fertilizer, artificial intelligence and climate change mitigation financing and climate technology financing. The full list of initiatives is available here.
This significant focus on sustainability initiatives is not surprising considering that, while Africa is responsible for less than 5% of global greenhouse gas emissions, it will be harshly affected by the impact of climate change. Its natural habitats will also be of global importance as ‘carbon sinks’ and it is estimated that roughly a third of minerals required for the green transition are on the African continent. That said, sustainability initiatives will need to be balanced with Africa’s development needs, including in respect of infrastructure and energy.
The African Development Bank recently estimated that an average of USD 1.4 trillion will be needed between 2020 and 2030 to implement Africa’s climate action commitments and Nationally Determined Contributions with an estimated annual funding gap of about USD 99.9 billion to USD 127.2 billion.
In parallel with this, the sustainable finance market continues to evolve and develop, and we are seeing a significant increase in investors seeking innovative financial instruments that address social issues. Aligned with this approach, Vice President Harris announced a further USD 1 billion initiative to improve women’s economic empowerment in Africa. This is a key element for the wider ESG journey Africa has embarked upon, in order to help bridge the gender gap.
Most African countries, halfway to 2030, are struggling to meet the Sustainable Development Goals targets. Recent reports on the implementation of Agenda 2063 suggest slow progress towards the achievement of targets at national, regional and continental levels. There is a need for greater and more coordinated action, and deliberate policies, to accelerate progress towards these goals.
In the context of the all the above, last week’s announcement is to be welcomed, while at the same time recognising that translating these initiatives into impactful projects will require significant further work and the co-operation of the public and private sector alike. Given the extent of the climate crisis, it is certainly worth the effort.
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