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US targets Africa’s hotbeds of investment and opportunity

NEWS AND ANALYSIS

US targets Africa’s hotbeds of investment and opportunity

Ethiopia and Kenya are among the fastest growing economies in Africa. It’s no coincidence that Barack Obama chose to visit both countries on his recent visit, writes Mark Kapchanga.

Massive investments in infrastructure, mainly in energy and the construction of railways are expected to further bolster the growth of both Kenya and Ethiopia, besides the turnaround of their investment landscapes. There is little doubt that these two countries have been one of the biggest beneficiaries of their economic and political ties with Western countries, particularly the US. 

Perhaps this explains why US President Barack Obama opted to visit the two in July. Ethiopia and Kenya are strategic partners of the United States in the war against terrorism. Indeed, in a press conference in Addis Ababa, President Obama praised Ethiopia for its outstanding partnership in the fight against al-Shabaab, the Islamic militant group. 

“Your troops have played a key role in weakening the al-Qaeda-linked al-Shabaab group in Somalia,” Mr Obama said. In return for pushing forward America’s agenda on the global fight against terrorism, Ethiopia has emerged as one of the US’s main recipients of aid. In 2008, US aid to Ethiopia amounted to $969 million and stood at $916 million in 2009. Although US aid dropped to $513 million in 2010, it peaked again in 2011 to $586 million.

Despite the long-standing friendship between Ethiopia and Kenya and the US, in the recent past, particularly with Kenya, the relationship has been bumpy, with the Kenyan government threatening to turn to the East following allegations that the US was behind President Uhuru Kenyatta and Deputy President William Ruto’s woes at the International Criminal Court in The Hague.

At the time of the 2013 general elections, Mr Kenyatta also accused the UK of a “shadowy, suspicious” role. “The British High Commissioner has been canvassing to have rejected votes tallied in an attempt to deny the Jubilee Coalition outright victory,” he said. 

The Chinese revolution

With the corroding relations with the West, at the back of his mind, argues Dr Emmanuel Manyasa of Kenyatta University, Mr Kenyatta knew there would be a lot of support coming from the East, particularly from China. Dr Manyasa bases his argument on the fact that today, the increase in China’s economic and political involvement in Africa is arguably the most momentous development on the continent. The Asian country is revolutionising Africa’s roads, ports, railways, investing in the education and healthcare sectors, and erecting new energy plants.

As at 2009, Chinese direct investment in Ethiopia had reached $900 million while bilateral trade figures were at $1.3 billion. The Chinese, who recently built an ultra-modern, 20-storey African Union Headquarters in Addis Ababa, expect to source materials such as oil and food from Ethiopia and create a market for Chinese exports. Certainly, the Chinese involvement in Ethiopia is stimulating economic growth and helping promote exports to other countries. 

According to Berhe Mulatu, an economist from Ethiopia working in Nairobi, the undisputed engagement with China has also seen her country access large concessional loans, which have been tied to huge development projects. They include the $365 million Tekeze hydroelectric project constructed by Sino Hydro Corporation in 2009 and the $2.67 billion Gibe IV energy plant.

“These are massive energy projects which could see millions of Ethiopians access cheap and reliable energy. Importantly, the country stands to earn some foreign exchange from the export of surplus power to neighbouring countries,” said Dr Mulatu.

As America and other Western countries focused on Africa’s politics, human rights issues and  freedoms, among other areas, observes Dr Manyasa, so did China continue to win Africa’s support. 

“Africans had grown tired of democracy and other lectures from the West; they needed immediate solutions to basic needs such as unemployment, poor roads, among others,” says Dr Manyasa. “These were all provided to Africans in record time, therefore pushing the traditional forces (US, UK, France, Germany) to the periphery.”

American interests

It is an assertion supported by political analyst Ken Opala. “What would make a US president board Air Force One to fly to countries like Kenya and Ethiopia, which CNN television described as a hotbed of terror? Certainly not Africa’s but America’s interests. They have been losing out very fast to China.”

It is no wonder that during his visit, President Obama fell short of endorsing the two countries’ governments, despite claims that there had been massive electoral malpractises. In Nairobi, Obama said he will work closely with the legally elected Jubilee government, while he claimed that recent elections had been democratic. Yet, no single opposition candidate was voted in for parliamentary seats due to the fear of state intimidation which is rife in Ethiopia. China is currently Africa’s largest trading partner, having surpassed the US in 2009. Trade between Africa and China was worth $10.5 billion in 2000, $40 billion in 2005 and $166 billion in 2011. 

Even with the launch of a trading arrangement between the US and African countries in 2000, referred to as the Africa Growth and Opportunity Act (AGOA), the Institute of Economic Affairs, a think-tank in Nairobi, says the would-be achievements have been clouded by the challenges. They include an unequal trading environment therefore rendering African goods inferior, logistical challenges due to the long distance between Africa and the US as well as competition from non-AGOA countries distorting international textile and apparel markets. Be that as it may, the Obama tour of the two African countries has provided a unique opportunity for investors, particularly from the US, to deepen their engagement further with
the continent. It is obvious Africa is on a fast track to growth today. There are plenty of reliable and affordable energy supplies, its ports, railways and roads have been modernised to ease the movement of goods, services and labour from one point to another, while the security landscape is relatively stable.

All these factors, not forgetting improved communications and technology, make the continent a “hotbed of investment opportunities,” says Dr Manyasa. 

According to Dr Mulatu, China should not now rest on its laurels if it is to remain Africa’s top business partner. “Americans are coming in with their cutting edge business skills, too. If these cards are well played, Africa stands to be the biggest winner in this new scramble, thanks to President Obama,” he said. 

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  • Japhet Mwaya

    Obama’s current visit to Africa was not absolutely for American economic interests, it was also a home coming visit. Obama came home. We should not neglect this fact that Obama is of African origins and he prides in that. We have sometimes to look at him as our fellow brother and not always as a profit monger. Obama, our fellow brother, came home. He first spoke to his fellow Kenyans in Kenya and then to all his African brothers and sisters in Ethiopia, the AU headquarters.

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