Feb 19, 2020 - Economy & Business

Waking up to Africa's importance

Illustration of map of Africa covered in push pins
Illustration: Aïda Amer/Axios

Secretary of State Mike Pompeo is in Africa working to counter growing Chinese investment in the continent as the U.S. tries to fight China's rising global influence.

Why it matters: China has upped its spending on the continent in recent years while the Trump administration has not and looks to be trying to make up for lost time.

  • African countries are some of the fastest growing on Earth, a quality which is expected to become increasingly important as developed countries like the U.S. and China deal with aging populations and declining productivity that most asset managers believe will lead to reduced investment returns.
  • Last year, debt from African countries and other so-called frontier markets delivered the best return for investors since 2012.

What's happening: China has ramped its financing of infrastructure projects like bridges, airports, dams, power plants, and Africa's largest port.

  • Between 2014 and 2018, Chinese companies invested twice as much money in African countries as American companies, spending $72.2 billion and creating more than twice as many jobs, according to an analysis from accounting firm EY.
  • And Chinese President Xi Jinping vowed in 2018 to invest a further $60 billion.

Between the lines: Chinese companies are investing in African manufacturing companies as a means of avoiding U.S. tariffs on exports, making products in countries like Senegal and shipping to the U.S. from there.

On the other side: Though the U.S. created the International Development Finance Corporation to increase funding for Africa and other developing nations just last year, the Trump administration's latest budget proposed cutting aid and development funding to African states and is weighing cutting troops throughout the continent.

  • The Trump administration also recently announced an expanded travel ban that affects nearly a quarter of Africa’s population.
  • And few have forgotten that two years ago President Trump included African states in his “shithole countries” remark.

The bottom line: The administration seems to be waking up to Africa's strategic importance in the trade war and in its ambitions to counter China.

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