The Joe Biden administration is now pushing hard for U.S. companies to invest in Africa, despite the obstacles they face there. More than a decade ago, China began to expand its economic and political ties with African countries.
U.S. Vice President Kamala Harris pledged on Tuesday in Ghana’s seaside capital to “double down” on bringing billions of dollars of investment to Africa. Many Western investors still view Africa as highly risky. Harris is the highest in a string of senior White House and Biden administration officials to visit Africa this year. She pledged to unleash U.S. investment at a time when both the U.S. and China look to tap the continent’s rich natural resources.
But U.S. and other Western investors often cite corruption, poor infrastructure and still-pervasive poverty as problems that make it difficult for companies to operate easily in Africa. Dozens of countries in Africa have their own rules, and their markets have their own characteristics.
The U.S. interest in expanding its influence on the African continent comes at a time of heightened tension and competition between the two countries. For example, Chinese companies have spent more than a decade and spent billions of dollars on acquisitions in the cobalt and copper belts of the Democratic Republic of Congo, taking over interests originally held by European and American miners. Experts say the U.S. has a lot to catch up to, especially in areas of strategic importance, such as securing supply chains for raw materials such as battery metals that are critical to the energy transition.
“The Chinese system is much more centralized, with a greater role for state power,” said Cobus van Staden, editor-in-chief of The China-Global South Project, a nonprofit based in Johannesburg. “The Chinese have been very focused on opportunities in Africa. The U.S. private sector is very risk-conscious and that precludes all opportunities.” The group was formerly known as The China Africa Project.
According to an analysis by Oyintarelado Moses, a data analyst at Boston University’s Global Development Policy Center’s Global China Initiative, using U.S. government data and data from a database of Chinese lending to Africa, 2007 The U.S. funded some $14 billion worth of projects on the African continent between 2020 and 2020, while Chinese counterparts funded roughly $120 billion worth of projects over the same period.
Harris’ trip to Africa follows US Secretary of State Antony Blinken, US Treasury Secretary Janet Yellen and US ambassador to the United Nations Linda Thomas-Greenfield, who have visited several African countries this year, but , U.S. officials still face deep-seated institutional obstacles to balancing China’s economic dominance in Africa.
“In terms of perception, I think the U.S. is doing pretty well,” said Gyude Moore, a senior policy fellow at the Center for Global Development and former Liberia’s public works minister. Still, he said, problems include infrastructure projects in Africa. On the one hand, there is a lack of funds from the United States, Africans have easier access to higher education in China than in the United States, and there are concerns that this round of investment in Africa by the United States may be accidental.
“There is a lingering risk that a change in the U.S. administration could put Africa on the sidelines again,” Moore said.
Harris appeared Wednesday at Mix Design Hub, a design-forward four-story office building and gallery in Accra’s trendy district, to announce an estimated $1 billion in new projects and investments on the continent , the purpose is to support entrepreneurs, most of these funds come from foundations.
Nearly $500 million of this will be used to increase access to technology for women in Africa. Also included in the new funding commitments is $500 million from the Tony Elumelu Foundation in Nigeria, much of which is earmarked to support women entrepreneurs.
Harris, who was among a group of businesswomen on Wednesday morning, said, “There is a direct correlation between policies aimed at the economic empowerment of women and the general prosperity of society.”
But some structural problems remain for U.S. companies looking to expand on the continent.
U.S. public lenders are considered slower and more bureaucratic than their Chinese counterparts, said Bobby Pittman, founder of Kupanda Capital and an investor in Mavin Records, the continent’s premier music label. He said that when dealing with China, all financing projects are implemented as soon as they are signed, while the United States may take many months to help companies finance large-scale projects on the African continent.
Others say that is changing as some industries see increased demand.
Rob Still, a partner at Denham Capital Management LP, a US-based global energy transition investment firm, said commodity projects such as cobalt, niobium, lithium and tin used to be rejected immediately by more risk-averse Western development agencies because they Commodities cannot be hedged by trading in the futures market, either because the underlying market is too thin or because no such market exists.
But things are no longer what they used to be. Still, who is based in Johannesburg, said there must be more interest and higher frequency of action by such Western institutions now than in the past, especially American institutions.
The day after Biden held a summit with African regional leaders in Washington, D.C., in December, the administration announced that KoBold Metals, a business start-up backed by Bill Gates’ Breakthrough Energy Ventures, had agreed to invest $150 million. US dollars to acquire a controlling stake in a large undeveloped copper mine in Zambia. KoBold Metals aims to use AI to find the metals needed for the electric vehicle boom. The deal is part of a new effort by the U.S. government to compete for key minerals in Africa.
“We have broadly sought U.S. government support for our activities in Zambia,” said KoBold President Josh Goldman. “We just want to have a smooth path to deploy a lot of capital.”
Zambian President Hakainde Hichilema sees the investment as a harbinger of larger investments to come. “This investment is significant. With the first investment, there will likely be a second,” he told The Wall Street Journal in an interview.
U.S. officials also stress that Chinese financing often comes with strings attached, such as requiring Chinese companies and materials made in China. At a news conference in Ghana’s presidential palace on Monday, Harris hinted at the intricacies of getting money from China, citing the need to “relieve the debt burden faced by too many countries” without naming China.
According to a December report by Chatham House, 12% of Africa’s private and public sector foreign debt comes from Chinese lenders. Both Ghana and Zambia, which Harris is visiting, are currently seeking aid from China.
Asked in Accra on Monday how much of China’s rise was the driving force behind the trip, Harris said: “We look at global dynamics from a macro perspective and we are very aware of that.” The importance of Ghana’s bilateral relationship, and when I travel to the African continent, the importance of the country’s bilateral relationship with the United States.”