President Obama is flying to Africa this week, with plans to visit Kenya and Ethiopia. On his last trip to the continent, Obama showed off his sporting prowess with the soccket—a soccer ball that generates small amounts of electricity while you play. An overpriced and ineffective toy presented as a solution to the region’s need for reliable energy, it’s also a symbol of the U.S. government’s lack of serious engagement with Africa. But it isn’t too late for the U.S. to do better—and act on the real potential of an area home to 1 billion people.
In the past 15 years, the economy of sub-Saharan Africa has doubled in size to more than $1 trillion (this at market exchange rates). The region’s imports of goods and services over the same period have climbed from $127 billion to $377 billion. And there are a lot of reasons to think Africa’s economic future is bright. Inflation is down and debt is increasingly sustainable: In 1997, the region was paying 4.6 percent of gross national income GNI to debt service, but that’s dropped to 1.9 percent in 2013. Sub-Saharan Africa is also ever more healthy and educated: Life expectancy has climbed seven years since 2000, and secondary school enrollment rates went from 21 percent to 34 percent over that time.
The U.S. is missing out on the opportunity this dynamism presents. Africa’s imports of goods equaled $194 billion in 2013, of which the U.S. provided $8.7 billion—less than 5 percent of the total and one-third of China’s share. U.S. foreign direct investment in the region, with a stock of $31 billion, was a more respectable 13 percent of total stocks but has been growing at half the rate of Japan’s regional FDI stock and one-quarter of China’s over the period 2001-12.
In part, that’s because U.S. economic policy toward Africa hasn’t developed past a decades-old model driven by aid. U.S. development assistance to the continent has done wonderful things. The President’s Emergency Plan for AIDS Relief (PEPFAR), for instance, is supporting access to life-saving drugs for more than 7 million HIV-positive people across the region. Nonetheless, aid overall is of declining economic relevance to much of the region: Domestic government revenue from taxes and royalties tops $400 billion in Sub-Saharan Africa–compare that with U.S. aid flows of around $8 billion.
The Obama administration points to its Power Africa initiative as evidence of a changing approach, including a serious engagement on energy. The initiative has supported hydropower development in Tanzania, a geothermal plant in Ethiopia, and power-plant privatization in Nigeria. But the initial goals of the project were based on power deals already under development. And nearly all the initial $7 billion in resources for Power Africa came from the (currently unfunded) Ex-Im Bank—which provides export credits—and the Overseas Private Investment Corp., which directly invests in private sector projects. These institutions were already supporting power deals in the region, so it’s unclear if any of the Power Africa financing is additional to what would have happened even without the initiative.
It isn’t too late to do better, and the U.S. could start with its leadership of multilateral financing institutions. Scott Morris of the Center for Global Development predicts that more than four out of 10 of the World Bank’s borrowers will be concentrated in Sub-Saharan Africa by 2019. If the administration can’t persuade Congress to provide more resources to back World Bank investments in infrastructure, health, and education, at the least it could allow other countries to provide those resources in return for a larger voting share on the institution’s board. That could significantly increase the bank’s lending and grant operations, currently running at about $40 billion a year.
The U.S. in the past two decades has negotiated just two African bilateral investment treaties, which protect investors against political risk. All of America’s existing investment treaties cover just 7 percent of the region’s GDP. China’s bilateral investment treaties cover 80 percent. On trade, it’s past time to get all the way to duty-free, quota-free access for exports from Africa’s least-developed countries, a commitment the U.S. made more than a decade ago. And for all the political complexities of migration, it has been a vital force in extending democracy, trade, and investment ties to Africa. If the administration made getting visas and scholarships easier for African travelers and students, alongside adding African countries to the eligibility lists for temporary work authorizations, that could make a substantial difference in the strength of economic ties between the U.S. and Africa.
If the president left Africa having promised renewed engagement on investment treaties and support and backed up those words with executive action on immigration and multilateral reform, he might even raise the administration’s economic record in the region from laughable to legacy status.