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Ideas & Debate

US should ditch China jitters and leverage on its strengths

Chinese President Xi Jinping (left) with his US
Chinese President Xi Jinping (left) with his US counterpart Donald Trump at the Great Hall of the People in Beijing on November 9, last year. PHOTO | AFP 

The Trump administration recently appointed Donald Yamamoto as acting Assistant Secretary of State for Africa.

Prior to this appointment the main signal Africa has gotten with regard to the US approach to foreign policy was through statements by former US Secretary of State Rex Tillerson, and his concerns with the growing economic strength of China in Africa.

On September 18, the US government, through Tibor Nagy, assistant secretary, Bureau of African Affairs, provided clearer direction of the focus areas for the US in Africa going forward. It seems US strategy will be focused on promoting stronger trade and commercial ties, and advancing peace and security.

This is good because, rather than focus on China in Africa, the US has ample strengths it can leverage in the continent.

If one focuses on the economic engagement potential between Africa and the US, there is considerable room for both parties to benefit particularly with a focus on private sector development. To be clear, the term private sector here refers both to formal and informal businesses, large players and micro, small and medium enterprises (MSMEs).

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The first opportunity is in financing options in Africa that can be met by US financiers.

A key strength of the funding options presented by America is that opportunities fall along a spectrum of more mission-oriented to more-business oriented financing.

A major funding gap Africa has right now is patient capital for MSME development, a gap which cripples private sector development in Africa.

This funding gap can be met by financing options already provided by entities in the US, particularly impact and angel investors. Business-focused grants and affordable debt can be channelled to develop SMEs that deliver social and economic value and strengthens their commercial returns and business activity.

There is also an opportunity for more bottom-line oriented financing for more established and large players in Africa. But the reality is that without the development of MSMEs, the pipeline of viable projects for mainstream investors will continue to be narrow. The US has a blend of financing options that can be leveraged for MSME development and the creation of a pipeline of deeper financing options for everyone.

This blend of financing can be more effectively coordinated and leveraged for private sector development to the benefit of both US and African players.

The second opportunity the US presents Africa is a focus on environmental, social and governance (ESG) issues.

While parties from other parts of the world may be more willing to be lax on ESG issues, the fact that US businesses view these as core concerns is important. Although the centrality of healthy ESG practices from US business may be due to legal compliance issues and high ESG expectations at home, African businesses financed with this approach are likely to be stronger business entities going forward.

Thus, the focus on ESG performance is a strength US financiers can use to support the growth of holistically sustainable businesses in Africa.

African businesses benefit by ensuring they not only meet legal ESG requirements but actually develop a brand of being responsible businesses that support the development of their continent.

The two points elucidated above are only the surface of the economic opportunities that exist between Africa and the US. Therefore, rather than being concerned with what other entities are doing in Africa, the US ought clearly see it can be an important partner for private sector development in the continent and leverage this strength going forward.

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