How can the US engage in Africa, and go around China?

.. Extracts from “Deconstructing the Dragon: China’s Commercial Expansion in Africa,” a recent report by Aubrey Hruby that postulates what the United States can do to reposition its influence in Africa whose governments have received extensive assistance from China, mainly in terms of infrastructure projects.

The looks at the nature of infrastructure deals that have come to be dominated by China state-owned enterprises through a combination of feasibility studies, negotiations financing through Chinese loans, and eventually mobilization to start construction. Quick-decision making is a factor and McKinsey found that over half of investment decisions for Chinese construction and real estate companies were made in under a month.

The US can counter to these mainly be through US government to African business initiatives, while contracts with China’s “government to government programs.

Recommendations include:

  • Niche infrastructure that fall within the US competitive advantage like renewable energy, oil exploration and urban/smarter city solutions. However on the last one, the report points out that China has made significant inroads in media, telecommunications and security services.
  • Push for anti-corruption agenda, as this will level the playing field for US companies. This can be through supporting African government efforts to investigate and prosecute corruption cases.
  • Generate a pipeline of projects, data, and trade links to assist US businesses to invest in Africa. This can be through sponsoring competitions and investor trips.
  • Support the creativity and education sectors. There is an opportunity in the entertainment spaces as recent deals involving Netflix, Mavin Records and the National Basketball Association have shown. Also a quarter of African children (66 million) could be studying in private schools by 2021.
  • US financial institutions can work towards providing working capital, which remains a great challenge for individuals and small businesses in Africa.

It also notes that more US intuitional investors have opened up to putting more funding to African venture. These include the New York State Common Retirement Fund, which has allocated $6 billion to investments in Africa and the Chicago Teachers Pension Fund that have invested in two African private equity funds.

EDIT: A story in the Africa Report shows how a new US Development Finance Corporation (DFC), which combines the Overseas Private Investment Corporation (OPIC) and the Credit Authority of the U.S. Agency for International Development’s (USAID) is part of the broader economic and trade battle led by the USA against China.  

The new organization has more latitude than its predecessors in that, it will be able to make equity investment in private firms (previously they were restricted to debt) and a restriction that OPIC could only support projects with “a significant link with the American private sector” has been removed.

One thought on “How can the US engage in Africa, and go around China?

  1. Silantoi ventures limited

    If at all the US want to counter China influence in Africa then one thing is certain! I come from Kenya one of the African countries where China influence is rampant. If US is going to invest in infrustructure like China then they must be ready to send their engeneersand reputable construction companies here to do and supervise the work full time right from its initiation why? because here most constructors and engeneers can not be trusted they are corrupt and like to do shoddy work. these traits has pushed many to start trusting Chinese work and they are here on the ground full time doing quality work. If you come here dump your money for a certain projects and watch from a distance trust me no work will be done and no trust will be accorded to you. today even World Bank projects here in Kenya is done by chinese engeneers and construction companies due to its quality work and realiable time frame. Thank me later.

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