U.S. President Barack Obama’s
pronouncements that Africa is poised to emerge from decades of foreign aid into
a future of trade have elicited mixed responses from members of the development
community, some of whom worry the continent’s poorest populations are not
positioned yet to benefit from a surge in private investment.
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U.S. President Barack Obama
greets residents of Gorée Island in
Senegal during his visit to
the country on June 27, 2013. During
his trip, he highlighted the
role of foreign aid as a catalyst for
private sector investment.
Photo by: Pete Souza / White House
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Questions surround how exactly the
administration will use limited funds to balance leveraging private sector
partnerships with ensuring that sufficient foreign assistance resources
continue to flow to programs that support Africa’s poorest populations.
That balancing act must ensure the
necessary regulatory environment is in place in African trade and investment
partner nations — prior to paving the way for private multinational firms to
intensify agricultural production and natural resource extraction to accelerate
economic growth on the continent.
That will demand a degree of targeted
coordination between private investors, aid agencies and development
implementers that, according to several industry experts, the administration
has yet to fully articulate, despite campaigns like the New Alliance
for Food Security and Nutrition, announced last year by G-8
leaders, and ”Power
Africa,” a new initiative to spur energy development through
public-private partnerships.
Relationship and trade: Hand in hand
Members of the development community
stress they were in “conversation” with the Obama administration prior to his
trip to Africa last week, emphasizing the importance of a “hand-in-hand”
relationship between aid and trade to ensure inclusive, broad-based economic
growth.
“We are going to be making sure the
messages we want to get across are getting across, in terms of the poverty
focus, ensuring that whatever paradigm shift there may be doesn’t leave
anything on the sidelines,” said Jeremy Kadden, senior legislative manager at InterAction,
a U.S.-based network of nongovernmental organizations.
Kadden told Devex: “We just want to
make sure the benefits are broadly distributed and they get to the smallholders
and those who need the most help in being a part of the system and not just
those who are already benefiting from the system.”
Others see a trend toward a more
“limited role” for donor-funded programs to support the continent’s transition
from aid recipient to trade and investment partner, stressing the transition
reflects Africans’ own calls for a new kind of relationship with the United
States and other potential trade partners.
That limited role, according to
supporters of a trade-led approach, would see official foreign assistance
operating more as a catalyst to spur infrastructure and energy investments and
to take steps to ensure those investments benefit from a favorable regulatory
environment.
“Ultimately, for societies to develop
they need power and infrastructure,” explained Dan Runde, director of the
Project on Prosperity and Development at the Center for Strategic and
International Studies.
Runde told Devex that “the more
investments in energy you have, the price of energy drops.” He added that the African Development Bank
“has a huge role to play here, and is an organization that has great
credibility in Africa.”
US aid as catalyst for investment
During his trip, Obama stressed the
role foreign aid can play as a catalyst for private sector investment. Case in
point: the so-called Power Africa initiative, by which the U.S. government has
pledged to direct $7 billion to sub-Saharan energy investments, brings together
several U.S. agencies with partners including General Electric.
Runde, though, questioned whether the
effectiveness of Power Africa will suffer from an overabundance of prescriptive
development requirements and unwillingness to offer the type of unencumbered
partnership that he says African nations are actually asking for, at a time
when they are attracting more interest from a variety of investors and
partners, especially China.
“I’m not sure the instruments that we
have reflect what Africa needs today in 2013 as opposed to 2005,” he said,
citing a controversial “carbon cap” that restricts carbon emissions for
investments by the Overseas
Private Investment Corp., a key partner in Power Africa.
Runde called for a waiver of the cap
for low-income African countries.
“They’re not going to say, ‘since you
won’t give us gas-powered generators, United States, well, then just give us
solar panels and wind mills,’” he said. “We need to be vigilant about how
Africa is changing and make adjustments to make sure our solutions match the
evolving challenges.”
Renewed focus on Africa
Despite positive macroeconomic signals
(seven of the 10 fastest-growing economies are in Africa), nascent investment fervor
and concerns that China is beating the United States to the punch, many experts
continue to question whether Africa has actually reached a “tipping point” of
economic security and growth.
According to World Bank
statistics, 2012 was the first year since 1981 that less than half of
sub-Saharan Africa’s population lived in absolute poverty.
Obama’s vision of a trade partnership
with Africa must make inroads into persistent corruption problems to overcome a
“history of distrust” between the public sector and the private sector,
Jonathan White, transatlantic fellow at the German
Marshall Fund, told Devex.
Progress on this front will be
required if the shift from aid to trade is to amount to more than economic
growth for a well-positioned few, an outcome that would likely only fuel
charges of neocolonialist resource extraction and land-grabbing.
Obama’s trip shined a “spotlight” on
Africa, and offered a sense of renewed focus on the developing world, for which
many development practitioners and world leaders appeared grateful.
DEVEX
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