With the signing into law last week of the Better Utilization of Investment Leading to Development (Build) Act by US President Donald Trump, it will only add to development welfare – and the concerns – in Africa echoing that of China’s infrastructural ventures.
The Build Act is the answer to China’s enhanced economic and political influence in the Sub-Saharan region. The similarities suggest the American initiative will only add a slightly different hue to the considerable heft in major league international investment, blending in with the foreign venture landscape in the continent.
Designed by US legislators in a rare spirit of bipartisanship between the Republicans and Democrats, it will create a new agency — the US International Development Finance Corporation (DFC) — with a $60 billion investment kitty.
The DFC will combine existing agencies, including the Overseas Private Investment Corporation (OPIC) and the U.S. Agency for International Development’s Development Credit Authority.
In a statement attributed to the OPIC President Ray W. Washburne, the US Act setting up the new agency “recognizes that private sector-led investment is essential to economic growth and development and offers a financially-sound alternative to the state-directed initiatives pursued by China.”
It echoes the bipartisan legislature’s sentiment to counter the world’s second largest economy with an overhaul of the US investment strategy in the continent.
But, with Chinese President Xi Jinping’s pledge to African leaders at the recent Focac Summit to bring his country’s investment to a total $120 billion by pumping an additional $60 billion onto the similar amount announced at a previous summit in 2015, China is a bit ahead.
As noted by BBC, China is now the single largest bilateral financier of infrastructure in Africa — surpassing the African Development Bank (ADB), the European Commission, the European Investment Bank, the International Finance Corporation, the World Bank and the Group of Eight (G8) countries combined.
In this light, some observers suggest, may be viewed the joining in the fray of the US with the new agency not to be upstaged, but also in changing tact in its investment strategy. It reflects the slowly dawning realisation that perhaps doing business with the developing countries could be more useful than simply dishing out aid that often has had strings attached, notably by the West.
While the specific details are yet to be clarified about how the new US initiative may, say, specifically benefit EAC countries, it will increase US private-sector investment with the expectation it will ultimately reduce the need for American foreign aid.
This, in a sense, is comparable to the Africa Growth and Opportunity Act (Agoa) launched in 2000 to redefine US-Africa relations along trade lines, with African countries granted preferential access to the US market for certain of their exports.
However, if the aim is also to for the US to assert its economic might in countering the Chinese investment wave, perhaps it may do to consider if it is worth it by interrogating the reach and impact the Chinese generosity has had.
I mention China only to make a point. Countries in Europe, including the US, Japan and others have had their mark on the continent.
Thus far, in terms of reach according to official figures — and in the broader view of official development aid, export credit, suppliers’ credit and commercial credit — China has enabled construction of some 6,200km of railroad and 5,000km of highways.
In terms of impact, opinion remains divided between those who view the “partnership” as having some positive impact and those who don’t, accusing Beijing of “predatory economic practices” and tying down the continent into massive debt.
Collectively, African countries owe China about $130 billion, according to the China-Africa Research Initiative.
The debt has been entered to with eyes wide open by both sides.
As the Kenyan development economist and columnist Anzete Were has previously argued, it is infantilising to imply China plies clueless African governments with debt by failing to acknowledge that African nations are aware of these debt obligations.
In a first for Africa, Sierra Leone’s cancelling of the Chinese-funded $400 million Mamamah airport project earlier this week, whatever may have informed the decision, proves Anzete’s point.
With reference to China and its Focac initiative, I have argued previously, as with similar multilateral alliances with America or Europe and elsewhere, it is in mutual acknowledgement that it’s for the benefit of the parties concerned that the investment agreements are entered into. It is about national and regional interests in accord with comparative advantages in a globalised world.
Arguably, for this reason, the investment designs for the new the US International Development Finance Corporation are par for the course, only adding a slightly different hue to the foreign venture landscape on the continent in which China is in the lead.
The only caveat is for Africa and its constituent economic regions and countries to keep vigilant of the debt-trap we have been hearing so much about lately. Put another way, to paraphrase the medieval aphorism I am sure our policymakers must be aware, even the road to hell may at times be paved with good intentions.
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