CHARLES DOUGLAS: US hones in on sustainable relationships in Africa

The US investment focus on Africa over the past five years has intensified in the past eight months, gaining the sharpest focus yet with US vice-president Kamala Harris’s visit to Ghana, Tanzania and Zambia earlier in the month. 

The trip signals increased US efforts to grow its relationships in Africa in a co-ordinated and sustainable way at a time of equally concerted initiatives by other countries to position themselves for more influence on the continent, including French president Emmanuel Macron, Russian foreign minister Sergei Lavrov, and new Chinese foreign minister Qin Gang. There is a sense that the heightened US interest is partly driven by competing geopolitical interests. 

The groundwork for Harris’s trip was laid in earlier visits by US secretary of state Antony Blinken (who visited the Democratic Republic of the Congo, Rwanda and SA in August last year, and Ethiopia and Niger in March this year) and US treasury secretary Janet Yellen (who visited Senegal, SA and Zambia in January).  

US first lady Jill Biden followed with a trip to Kenya and then, in late March, the hosting of the American Chamber of Commerce Summit in Nairobi, which was attended by US and Kenyan government officials as well as US investors and executives of major US companies that have or are establishing a presence in the region. 

Recent financial commitments by Washington include  a $55bn pledge to support the AU’s Agenda 2063, together with the creation of a new Digital Transformation with Africa initiative. Both commitments were made at the second US-Africa Leadership Summit held in Washington in December. 

Another example is the Biden administration’s signing of a memorandum of understanding to support the implementation of the African Continental Free Trade Agreement by facilitating $15.7bn private sector investments and partnerships currently being carried out by its Prosper Africa programme. President Joe Biden has also endorsed the call for the inclusion of the AU as a permanent member of the G20. 

Plans also are under way for a major trip to Africa by Biden later this year. 

Harris’s multifaceted trip sought to strengthen business ties, support democracy and good governance, the empowerment of African women and entrepreneurship. Also, it was notable for its emphasis on sustainability initiatives and impact investing, culminating in her announcement in Lusaka on March 31 of more than $7bn in private sector and US government commitments to promote climate resilience, adaptation and mitigation across Africa.  

According to the press release, these new investments are intended to “generate significant economic benefits while addressing African nations’ pressing needs resulting from the climate crisis, including food security challenges, by helping to uplift up more than 116-million farmers and promote climate-smart agriculture”. 

A supporting document lists more than 20 US companies and organisations that have made firm investment commitments in clean energy, electric vehicles, agritech, agribusiness, agri-insurance, carbon storage and sequestration, sustainable forestry, living fertiliser, artificial intelligence and climate change mitigation financing and climate technology financing.  

This focus on sustainability initiatives is not surprising considering that, while Africa is responsible for less than 5% of global greenhouse gas emissions, it will be harshly affected by climate change. Its natural habitats are also of global importance as “carbon sinks”, and an estimated one-third of minerals required for the green transition are on the continent. That said, sustainability initiatives will need to be balanced with Africa’s development needs, including infrastructure and energy. 

The African Development Bank recently estimated that Africa’s climate action commitments and nationally determined contributions will require about $1.4-trillion between 2020 and 2030, with an estimated annual funding gap of about $100bn-$127bn over that period.

In parallel, the sustainable finance market continues to evolve and develop as increasing numbers of investors seek innovative financial instruments that address social issues. In that regard, Harris announced a further $1bn initiative to improve women’s economic empowerment in Africa, an important component for the wider ESG journey Africa has embarked on in bridging the gender gap. 

Most African countries are struggling to meet the 2030 Sustainable Development Goal targets. Recent reports on the implementation of Agenda 2063 suggest slow progress at national, regional and continental levels, laying bare the need for greater and more co-ordinated action, and deliberate policies to accelerate towards these goals.   

The US’s recent announcements are to be welcomed, even while recognising that translating these initiatives into impact requires plenty of work and the co-operation of the public and private sector. Given the extent of the climate crisis, it is certainly worth the effort.

Douglas is co-head of mergers & acquisitions at Bowmans SA.