Mbatha further noted that the diversification of African economies has not happened at the expected levels, with many African countries still exporting mainly raw products. “And most notably these raw products have gone to China. This should not only worry the US, but African countries themselves.”
China’s rapid economic influence on Africa seems to have undermined America’s economic aspirations for African countries outlined through the Agoa, Mbatha added. “It is easier — it takes less time and local investment — to export raw materials than to first add value to products. This is especially the case if there is big demand for raw products from China.”
Mbatha noted that China also actively helps African partners to extract raw materials for exporting, while also investing in programmes such as the building of transport infrastructure to ensure greater flows of extracted products. “China has outsmarted the US at this game.”
China has taken advantage of Africa’s current political and economic landscape to craft its programmes, while America’s strategy holds aspirations to fundamentally transform these two areas, Mbatha explained. Countries can lose their Agoa benefits if they fail to meet certain democratic and human rights thresholds, as was the case with the removal of Ethiopia, Mali and Guinea from the programme last year.
This week, Biden gave notice to the US congress of his intention to “terminate the designation” of the Central African Republic, Uganda, Gabon and Niger, saying they did not “meet the eligibility criteria of section 104 of Agoa”.
“Ultimately this is a battle of political and cultural values. Partnering for doing business with China for many African countries has less transformational costs and transactional costs and therefore it is more attractive and effective. This is also a challenge for both the US and the EU,” Mbatha said.
He suggested that this predicament may require that Agoa’s economic aspirations have to be separated from its political demands.
“The requirements for revision of political conditions may have to be reduced and a more stepwise approach taken that accounts for the costs of political transformation that are paid by African governments.
“Basically, the US strategy has to be more realistic of the current conditions at least for short-term gains, if they want to deal with competition from China. Whether such a strategy will work in the long term would be up in the air though.”
Perhaps the most pressing demand from Agoa’s beneficiaries is for its early renewal. Patel has underlined that the Act’s early renewal will go a long way towards creating certainty for investors as the continent looks to assert its role in the global economy.
“This illustrates the leverage that African countries now have with China competing with the West,” Mbatha said.
“Agoa beneficiaries know that Agoa will be renewed in 2025, and this may take a long time — but can now ask the US, if not demand, that Agoa be renewed early to erase uncertainties and ensure Agoa is in place for the benefit of the US especially.”
But officials from the US may prioritise improving Agoa over its early renewal, despite the fact that tweaking the legislation could create further delays at congress. Hamilton hinted at this during last week’s press briefing, noting that not trying to improve the programme would be a wasted opportunity.
Landry Signé, a senior fellow in the Global Economy and Development Programme and the Africa Growth Initiative at the Brookings Institution, said the East-West dynamic seems to have emboldened Agoa’s beneficiaries — but the US side may take a more ambivalent posture.
“Those geopolitical questions will have implications on the conversations, perhaps even more on the African side than on the US side … I mention the African side because with the rise of China, Russia, Indonesia, Brazil and their increased economic investment and commercial relations with Africa, the African side feels they have more options.”
Signé noted that though the Ways and Means Committee did ask that the Agoa report be drafted, suggesting a desire to renew the programme, others in congress do not see the urgency of this. “The US side is more ambivalent. On the African side it is clear. The official position of the African diplomatic corps in the US is that Agoa should be renewed without delay,” he said.
Furthermore, African countries want Agoa to be extended beyond the sub-Saharan region, Signé said.
With Agoa being a unilateral agreement, and with the geopolitical context not necessarily applying a huge amount of pressure, Congress still has room to move at its own speed.
That said, Africa’s position in the global economy is important, especially in the longer term, making it a key destination for investors, who will look for certainty through commercial agreements like Agoa.
Africa will represent up to 40% of the global population by the end of the century and is home to many of the critical minerals needed for the energy transition, as well as digital transformation. The continent also has an estimated 60% of the world’s uncultivated arable land.
Signé recalled a May 2000 edition of The Economist brandishing the headline, “The hopeless continent”. “At that time, Africa was viewed as insignificant and just as a recipient, whereas now it is increasingly considered an important contributor to the global economy,” he said.
But Africa represents only 3% of global trade. “That is why initiatives such as the African Continental Free Trade Area [AfCFTA] are important in putting Africa on the map, both on the continent itself and also in the minds of the rest of the world,” Signé said.
The AfCFTA is a key element of Africa’s intention to assert itself in the wake of a changing world order. It has also given African countries the opportunity to speak with one voice on matters affecting regional trade. But inadequate manufacturing capacity among AfCFTA partners suggest there are still problems to be overcome before it comes into full force.
Africa demands far more attention than it did even a decade ago — but ultimately investors want certainty and there remains a lot of work to be done on this front. “That is where stability is important, security is important, peace,” Signé noted.
“For African countries to leverage the positive trends that we have seen thus far, it will be important to address some of those other challenges … Generating more value will make a more meaningful difference on the continent, generating more stability and long-term success.”