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Russia's late October summit with African leaders in Sochi took place amid a renewed global scramble among foreign powers for influence on the continent.

Why it matters: Increased competition holds promise for Africa. Not only will foreign investment — which rebounded last year after a recent downturn — rise, but African countries can be more selective about deal terms while diversifying their partnerships beyond currently dominant powers such as China.

Driving the news: Russia had shown scant interest in Africa since the fall of the Soviet Union, but it announced $12.5 billion in investments at the summit in Sochi. Most are memorandums of understanding focused on arms, its largest export to Africa.

In 2017, Russian-African trade surged to $17.4 billion, up significantly from $5.7 billion in 2009. Although Russia’s trade volumes with Africa are relatively tiny, exports represent a larger share of its GDP than China's or India's.

Context: Political instability has spurred an upheaval in international trade flows and pushed nontraditional trading partners to pursue Africa as a new market.

In 2018, the Trump administration launched Prosper Africa, an initiative to increase U.S. trade and investment on the continent. It will be buoyed by the new U.S. Development Finance Corporation, which can invest in equity and at higher amounts in African companies, making the U.S. private sector more competitive.

Japan held its seventh Tokyo International Conference on African Development in August. Over the last three years, Japanese companies have invested $20 billion on the continent, and Prime Minister Shinzo Abe has pledged to continue boosting private investment.

China has curried favor with African governments by committing $60 billion in investment and building large infrastructure projects through its Belt and Road Initiative. Beijing has also made heavy "soft power" investments in media and education.

Yes, but: There are drawbacks to the worldwide attention.

Russia’s embrace of authoritarian leaders in Africa and military support in volatile countries like the Central African Republic and Guinea could sow political instability.

China’s opaque financing of large infrastructure projects, such as Kenya’s “railroad to nowhere,” raises questions about the sustainability of Africa’s debt levels and fears that China could seize vital infrastructure assets.

What to watch: More high-profile summits and initiatives are likely to follow, given the projected growth rates of Africa's population and economy. Next up is the U.K.-Africa Investment Summit in January 2020, followed by the European Union's summit with the African Union.

Paulo Gomes is the founder of Constelor Investment, an investment management firm, and a co-founder of New African Capital Partners.

Global powers accelerate plays for influence in Africa

Many are trying to disrupt China's recent dominance on the continent.

Putin, Kagame and fellow Russian and Rwandan officials seated across a conference table

Rwandan President Paul Kagame and Russian President Vladimir Putin at the Sochi summit. Photo: Alexander Ryumin/TASS via Getty Images

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Africa

Expert Voices

Russia&#x27;s late October summit with African leaders in Sochi took place amid a renewed global scramble among foreign powers for influence on the continent.Why it matters: Increased competition holds promise for Africa. Not only will foreign investment — which <a class="gtmContentClick" data-vars-link-text="rebounded" data-vars-click-url="https://unctad.org/en/pages/newsdetails.aspx?OriginalVersionID=2109" data-vars-content-id="0bd74a60-0374-457b-a480-2d6dd3d788dd" data-vars-headline="Global powers accelerate plays for influence in Africa" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://unctad.org/en/pages/newsdetails.aspx?OriginalVersionID=2109" target="_blank">rebounded</a> last year after a recent downturn — rise, but African countries can be more selective about deal terms while diversifying their partnerships beyond currently dominant powers such as China.

China is becoming the most formidable rival America has faced, and the risk of confrontation with Russia, North Korea or Iran still looms. Authoritarians are rising, the chaotic Afghanistan exit revealed the limits of U.S. power, and the pandemic, climate change and other critical challenges continue to pose grave threats.

Last week, the Trump administration unveiled its new Africa strategy, prioritizing deeper economic ties, counterterrorism and the efficient use of U.S. aid. The strategy aims to counter Chinese and Russian interests on the continent, especially the former’s strategic use of debt to control African countries.

Why it matters: The strategy oversimplifies Africa’s debt situation. It fails to distinguish between good and bad debt and doesn’t address Africa’s debt levels on a country-by-country basis. This polarizing approach could alienate key potential African allies, leading them to further align with China.

Chinese debt is not driving the vast majority of African countries’ indebtedness. Only 8 out of 68 countries in the world are potentially facing unsustainable debt levels because of Belt and Road Initiative projects. In Africa, only Ethiopia, Djibouti and Kenya fall into this category.

Not all debt is created equal. Good debt fosters economic growth, thereby increasing the ability of African governments to repay their creditors. Spending to improve Africa’s poor infrastructure, for example, can be a good use of Chinese debt, as it drives future economic growth. Sub-Saharan Africa’s road and rail networks are some of the least developed in the world, and the region’s GDP per capita could increase by 1.7% if the quantity and quality of its infrastructure reached those of the world's median. 

The bottom line: An effective development-oriented policy from the U.S. will require a more nuanced discussion of Africa’s debt and a recognition of the growth returns on infrastructure investment.

Paulo Gomes is the founder of Constelor Investment and a co-founder of New African Capital Partners. 

Trump's new Africa strategy misjudges risks of Chinese debts

China is not the driver of most African countries’ indebtedness.

US National Security Advisor John Bolton speaks about the administration's African policy at the Heritage Foundation in Washington, DC

National security adviser John Bolton speaks about the administration's Africa policy at the Heritage Foundation in Washington, D.C., on Dec. 13. Photo: Nicholas Kamm/AFP via Getty Images 

Business

Last week, the Trump administration <a class="gtmContentClick" data-vars-link-text="unveiled" data-vars-click-url="https://www.whitehouse.gov/briefings-statements/remarks-national-security-advisor-ambassador-john-r-bolton-trump-administrations-new-africa-strategy/" data-vars-content-id="25b0ef18-61d6-4710-b7fb-5e559e63bee6" data-vars-headline="Trump&#x27;s new Africa strategy misjudges risks of Chinese debts" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.whitehouse.gov/briefings-statements/remarks-national-security-advisor-ambassador-john-r-bolton-trump-administrations-new-africa-strategy/" target="_blank">unveiled</a> its new Africa strategy, prioritizing deeper economic ties, counterterrorism and the efficient use of U.S. aid. The strategy aims to counter Chinese and Russian interests on the continent, especially the former’s <a class="gtmContentClick" data-vars-link-text="strategic use of debt" data-vars-click-url="https://www.washingtonpost.com/news/global-opinions/wp/2018/08/27/chinas-debt-traps-around-the-world-are-a-trademark-of-its-imperialist-ambitions/?utm_term=.f158b4f2030b" data-vars-content-id="25b0ef18-61d6-4710-b7fb-5e559e63bee6" data-vars-headline="Trump&#x27;s new Africa strategy misjudges risks of Chinese debts" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.washingtonpost.com/news/global-opinions/wp/2018/08/27/chinas-debt-traps-around-the-world-are-a-trademark-of-its-imperialist-ambitions/?utm_term=.f158b4f2030b" target="_blank">strategic use of debt</a> to control African countries.Why it matters: The strategy oversimplifies Africa’s debt situation. It fails to distinguish between good and bad debt and doesn’t address Africa’s debt levels on a country-by-country basis. This polarizing approach could alienate key potential African allies, leading them to further align with China.

The new year is off to a rocky start for African countries: Democratic Republic of the Congo held a disputed presidential election tainted by allegations of fraud; protests in Zimbabwe over a 150% hike in fuel prices have sparked a violent government crackdown; and a horrific terrorist attack that hit an upscale hotel and commercial real estate complex two weeks ago in Nairobi, Kenya, killed 21 people.

Why it matters: Recent and potential civil unrest will result in lower investment in a region of the world that needs it most. Foreign direct investment flows into African markets fell by 21% to $42 billion in 2017 and are predicted to decrease further over the next three years.

Background: Investors are already pulling back from emerging markets because of growing concerns over political tensions, which likely contributed to sub-Saharan Africa’s absence on the 2018 A.T. Kearney FDI Confidence Index.

Further exacerbating the political risk outlook, over a dozen high-profile elections are taking place in Africa this year, including the continent’s two largest markets, Nigeria and South Africa.

Yes, but: Investors’ perceptions of Africa's high political risk need to be put into perspective, assessed within the local context rather than generalized to the whole continent. Broad perceptions of political risk blind investors to opportunities in Africa, which hosts half of the world's fastest-growing economies. Over the next five years, 20 African economies are expected to grow at 5% or higher, outpacing the 3.6% rate for the world economy.

Moreover, political dysfunction has become a global trend. The U.S. just grappled with its longest government shutdown in history, while in the U.K. Theresa May has faced two no-confidence votes in Parliament, impeding her ability to pass her Brexit plan. 

The bottom line: Perceptions of risk in African markets need to be better calibrated to global realities and cross-border uncertainties. Many African countries — such as Ethiopia, which is expected to grow by 8.5% this year, and Guinea, which is expected to grow by nearly 6% — remain promising places to do business and will continue to attract savvy investors with a nuanced approach to risk assessment. 

Short-term African investment may slow despite bright growth prospects

Africa is not immune to the political dysfunction sweeping the globe.

A supporter of Martin Fayulu, the runner up in the Democratic Republic of the Congo's elections, protests in Kinshasa, against the election of Felix Tshisekedi as president of the DRC. 

A supporter of Martin Fayulu, runner-up in the Democratic Republic of the Congo's contested elections, protests in Kinshasa against Felix Tshisekedi's win, on Jan. 21. Photo: John Wessels/AFP via Getty Images

The new year is off to a rocky start for African countries: Democratic Republic of the Congo held a <a class="gtmContentClick" data-vars-link-text="disputed presidential election" data-vars-click-url="https://www.ft.com/content/7d6921b2-1c70-11e9-b126-46fc3ad87c65" data-vars-content-id="5de67396-c6ca-4865-8a66-ec815007f735" data-vars-headline="Short-term African investment may slow despite bright growth prospects" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.ft.com/content/7d6921b2-1c70-11e9-b126-46fc3ad87c65" target="_blank">disputed presidential election</a> tainted by allegations of fraud; protests in Zimbabwe over a 150% hike in fuel prices have sparked a <a class="gtmContentClick" data-vars-link-text="violent government " data-vars-click-url="https://www.apnews.com/7cf7713da14c46909800f74fd8f08cb2" data-vars-content-id="5de67396-c6ca-4865-8a66-ec815007f735" data-vars-headline="Short-term African investment may slow despite bright growth prospects" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.apnews.com/7cf7713da14c46909800f74fd8f08cb2" target="_blank">violent government </a><a class="gtmContentClick" data-vars-link-text="crackdown" data-vars-click-url="https://www.apnews.com/7cf7713da14c46909800f74fd8f08cb2" data-vars-content-id="5de67396-c6ca-4865-8a66-ec815007f735" data-vars-headline="Short-term African investment may slow despite bright growth prospects" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.apnews.com/7cf7713da14c46909800f74fd8f08cb2" target="_blank">crackdown</a>; and a horrific <a class="gtmContentClick" data-vars-link-text="terrorist attack" data-vars-click-url="https://www.bloomberg.com/news/articles/2019-01-17/al-qaeda-disciples-still-a-potent-threat-to-african-business-hub?utm_medium=social&amp;utm_campaign=socialflow-organic&amp;cmpid%3D=socialflow-twitter-africa&amp;utm_content=africa&amp;utm_source=twitter" data-vars-content-id="5de67396-c6ca-4865-8a66-ec815007f735" data-vars-headline="Short-term African investment may slow despite bright growth prospects" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.bloomberg.com/news/articles/2019-01-17/al-qaeda-disciples-still-a-potent-threat-to-african-business-hub?utm_medium=social&amp;utm_campaign=socialflow-organic&amp;cmpid%3D=socialflow-twitter-africa&amp;utm_content=africa&amp;utm_source=twitter" target="_blank">terrorist attack</a> that hit an upscale hotel and commercial real estate complex two weeks ago in Nairobi, Kenya, killed 21 people.Why it matters: Recent and potential civil unrest will result in lower investment in a region of the world that needs it most. Foreign direct investment flows into African markets fell <a class="gtmContentClick" data-vars-link-text="by 21% to $42 billion in 2017" data-vars-click-url="https://unctad.org/en/pages/PressRelease.aspx?OriginalVersionID=461" data-vars-content-id="5de67396-c6ca-4865-8a66-ec815007f735" data-vars-headline="Short-term African investment may slow despite bright growth prospects" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://unctad.org/en/pages/PressRelease.aspx?OriginalVersionID=461" target="_blank">by 21% to $42 billion in 2017</a> and are predicted to decrease further over the next three years.

Jim Yong Kim suddenly stepped down Monday as president of the World Bank, 3 years ahead of the end of his second 5-year term. Kim’s resignation is expected to spark a heated debate over leadership of the World Bank.

The big picture: At issue is whether the presidency should reflect the needs of donors or recipients. While the U.S. candidate has always been picked as president — an informal tradition since the bank's founding in 1944 — the board of directors, made up of donor countries, is likely to challenge a U.S. candidate because of growing opposition to historical U.S. dominance of the institution. Given that Sub-Saharan Africa is one of the largest recipients of bank funds, the timing could be ripe for an African leader.

Between the lines: An African president would better understand the finance needs of Sub-Saharan Africa.

Over the next three fiscal years, the World Bank has earmarked $57 billion for the region, with three-fourths of the funds coming from the International Development Fund (IDA), which is dedicated to the world’s poorest countries. 

Over half of IDA funds are expected to flow to Sub-Saharan Africa. 

Why it matters: Economic growth in Sub-Saharan Africa, the world’s least-developed region, has especially great geopolitical implications. As long as economic opportunity remains scarce on the continent, Africans will migrate elsewhere, particularly to Europe. Rising migration levels have led to the rise of populist parties in Hungary, Austria, Germany and elsewhere, undermining liberal democracy and posing an existential threat to the EU. 

In the years to come, demographics and climate change could further exacerbate migration flows:

Africa’s population is predicted to surge, doubling in size to reach 2.5 billion by 2050, making it the youngest population in the world.

Unpredictable weather patterns and environmental degradation resulting from climate change in the arid Sahel and Horn will worsen food insecurity and jeopardize livelihoods.

What’s next: The race for the World Bank presidency will be hotly contested in the coming months, with many donor and recipient countries rallying against a Trump appointee. Sub-Saharan African countries will push to advance a candidate who is receptive to their needs.

Paulo Gomes is the founder of Constelor Investment and a co-founder of New African Capital Partners.

Kim's resignation could tee up non-U.S. leadership at World Bank

The timing could be ripe for an African to lead the bank.

World Bank President Jim Yong Kim arrives for a news conference at International Monetary Fund Headquarters April 19, 2018 in Washington, DC. 

World Bank President Jim Yong Kim. Photo: Chip Somodevilla via Getty Images

World Bank

Jim Yong Kim suddenly <a class="gtmContentClick" data-vars-link-text="stepped down" data-vars-click-url="https://www.theguardian.com/business/2019/jan/07/jim-yong-kim-to-resign-as-president-of-the-world-bank" data-vars-content-id="9fb31ee3-9eed-43ee-861a-3436a8515fc0" data-vars-headline="Kim&#x27;s resignation could tee up non-U.S. leadership at World Bank" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.theguardian.com/business/2019/jan/07/jim-yong-kim-to-resign-as-president-of-the-world-bank" target="_blank">stepped down</a> Monday as president of the World Bank, 3 years ahead of the end of his second 5-year term. Kim’s resignation is expected to spark a heated debate over leadership of the World Bank.The big picture: At issue is whether the presidency should reflect the needs of donors or recipients. While the U.S. candidate has always been picked as president — an informal tradition since the bank&#x27;s founding in 1944 — the board of directors, made up of donor countries, is likely to <a class="gtmContentClick" data-vars-link-text="challenge a U.S. candidate" data-vars-click-url="https://www.washingtonpost.com/business/economy/world-bank-chief-jim-kim-to-leave-post-on-feb-1/2019/01/07/bad35b08-129d-11e9-90a8-136fa44b80ba_story.html?noredirect=on&amp;utm_term=.9bc102a9842c" data-vars-content-id="9fb31ee3-9eed-43ee-861a-3436a8515fc0" data-vars-headline="Kim&#x27;s resignation could tee up non-U.S. leadership at World Bank" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.washingtonpost.com/business/economy/world-bank-chief-jim-kim-to-leave-post-on-feb-1/2019/01/07/bad35b08-129d-11e9-90a8-136fa44b80ba_story.html?noredirect=on&amp;utm_term=.9bc102a9842c" target="_blank">challenge a U.S. candidate</a> because of growing opposition to historical U.S. dominance of the institution. Given that Sub-Saharan Africa is one of the largest recipients of bank funds, the timing could be ripe for an African leader.

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Global powers accelerate plays for influence in Africa

Short-term African investment may slow despite bright growth prospects

Kim's resignation could tee up non-U.S. leadership at World Bank

Trump's new Africa strategy misjudges risks of Chinese debts