US-African leaders’ meeting: Opportunity to regain lost grounds

The summit between US and African leaders that opens in Washington, D.C. today offers an opportunity for a win-win rapprochement for both continents. Trade, business and investment ties between them have waned, choked by China’s aggressive drive to capture Africa’s resources. But the two sides confront some preliminary issues to settle for meaningful conclusions to be reached at the event.

US Vice-President Kamala Harris has declared that the summit demonstrates America’s “enduring commitment to Africa,” with at least 45 African heads of state expected in attendance for the second edition of the US-African Leaders Summit which was inaugurated by the Obama administration in 2014.

However, standing in the way of laudable ambitions to boost trade and investment, are some rather more mundane details, namely taxes and tariffs, AZA Finance Africa’s largest non-bank currency broker by trading volume at over $1 billion annually.

“On the surface, US-Africa trade enjoys tariff-free access via the USA’s African Growth and Opportunity Act (AGOA). But while AGOA has helped to boost trade for some African countries, the programme has been terminated for others including Ethiopia, Guinea, Mali, and South Sudan. The US plans to remove Burkina Faso from Jan. 1,” AZA noted in a statement.

US-African leaders’ meeting: Opportunity to regain lost grounds

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Progress at the summit would require a widening of the scope of AGOA to both excluded countries and their exports: services are not covered by AGOA, for example. In the area of taxation, America appears at loggerheads with Africa.

On Nov. 23, 2022, the UN General Assembly adopted a resolution on the “Promotion of Inclusive and Effective International Tax Cooperation at the United Nations.” That followed a proposal submitted by Nigeria on behalf of 54 member African Group of States, to establish a UN tax convention and global tax body.

The US, which stands to forfeit some of the tax base from its corporate giants to the countries they operate in, is resisting such moves, according to AZA.

Meantime, US investment and trade are dwindling in Africa. US oil producers such as Exxon and Chevron are retreating from African fields in favour of lower-cost projects on the American continent, and official US skepticism over natural gas as a long-term “transition” fuel in the move towards renewable energy is discouraging investment, according to AZA.

The finance group noted that trade between the US and Africa dropped to $64.3bn last year, less than half the $141.9bn in 2008. By contrast, China-Africa trade soared to a record $254bn last year.

Given the rising economic rivalry between the two largest economies of the world, US and China, African countries with the appropriate policies stand a great chance to benefit from the seeming lobbying of the two global powers, says Abiola Rasaq, a former Economist and Head, Investor Relations for United Bank for Africa Plc.

This is not just in terms of trade and investment flows, but also the terms of the trades and capital flows.

“Africa is like a bride now but extracting sustainable benefit from such circumstantial position requires the right policy environment, political will and of course execution.

“It should not just be about talking about what needs to be done to stimulate increased trade flows between Africa and the US, because most of those are known facts, rather it should be about taking requisite actions and backing words with action,” Rasaq said.

China does not have much fun-fare but its actions speak louder than words and the evidence is clear in how China captured and has almost monopolised African trade over the past two decades. So, it should be about execution than the rhetoric of facts.

African nations can hopefully leverage this opportunity to enhance their prospects in technology transfer from America, at least on light manufacturing which has dominated Chinese exports to Africa, with near-zero or absolutely absent technical transfer.

The meeting is also an opportunity to redefine how Africa’s raw materials would be exported going forward, with the hope of capturing basic value addition that can enhance the pricing and broader benefits of the resources to Africa and afford the nations some benefit of better integration of the extractive sector into the broader economy.

This, especially as such would be critical to providing jobs for Africa’s teeming youth, enhancing income levels as well as improving fiscal and current account balances.

The summit also presents a chance for African leaders to put their best foot forward, and eschew undue and unhealthy intra-African competition.

It’s an opportunity for African leaders to test their patriotism and shun inept and corrupt tendencies, by taking unbiased decisions and backing them up with decisive actions for stimulating and hopefully better-balanced trade terms for Africa.

In this regard, African leaders need to have an objective position to benefit from the competition between US and China. “Africa cannot afford to take a side, rather it should be about interest and being partisan and clear about interest is important…it should be about who serves the interest of Africa better and it can be both sides on different aspects and sectors,” Rasaq said.