Following a year of landmark political changes, could it be that the time has never been more opportune for Africa to seize control of its place in the global market? Whilst it is still too early to predict the long-term effects of the Trump presidency and a post-Brexit environment on sub-Saharan Africa, it is clear that there is a real risk that Africa will lose the attention of the world. At the same time, however, many powers are promising enhanced investment on the continent, often apparently in competition with each other. So can Africa act positively to avoid losing out on the agenda of global leaders and influencers and take advantage of the disrupted landscape to put its house in order and negotiate its own deals? Those who can manage the existing uncertainty best could succeed and thrive in ways that they have not been able to do before. We will be following this theme in our blogs and our events in the coming months.
At the time of writing this article, Donald Trump has made very few comments about Africa, with his remarks during his speech on foreign policy limited to a brief mention of past attacks on US embassies in both Kenya and Tanzania. However, recent questions posed by President Trump's team to the US State Department as reported by The New York Times imply a level of scepticism about the US' progress in Africa to date and may suggest a shift in focus and approach on the continent, particularly away from aid and towards anti-terrorism and business investment, perhaps in an attempt to overtake Chinese efforts (as indicated by questions such as "How does US business compete with other nations in Africa? Are we losing out to the Chinese?"). China currently continues to promise significant investment in Africa. In December 2016, China pledged to invest $60 billion which is being used today for infrastructure and transportation projects in several countries, including in those nations which are key from a military and defence perspective such as Djibouti, where China is building, amongst other things, a railroad, two airports and a natural gas liquefaction plant. As China and the US consider their position, Japan has also reinvigorated its approach with President Abe's recent visit to Kenya during which he announced Japan's "faith in Africa's future" by making a commitment to invest $30 billion before 34 African heads of state.
Europe meanwhile ponders Brexit, but again there is a dichotomy of strategy. First, Europe will be inward looking whilst it addresses its internal problems. However, what is also clear is that the UK will seek to enhance its position in world trade including deals with individual African countries and that the remaining members of the EU (and, in particular France and Germany) will attempt to grow and maintain their own relationships and power bases. Angela Merkel, for example, confirmed that she would prioritise Africa during Germany's G20 presidency in 2017, focussing on sustainable economic development. To this end, Kenya recently hosted the second German – African Business Summit. Further, James Duddridge, the UK's former minister for Africa, committed the UK to playing a more active role in African security regardless of whether the UK remains within the EU or not and has condemned the EU's decision to reduce funding for the African Union Mission in Somalia, a peacekeeping operation. As such, whilst Brexit is unchartered territory and the early response by global markets is unlikely to fill many interested in Africa with confidence, there will be opportunities to manage the situation to Africa's advantage.
This is not to underestimate the obstacles, especially given the dire economic state of some African countries in the context of a rampant dollar, high (dollar based) debt and reduced trade in key resources. Indeed, one of the current challenges facing African countries is to put Africa first – that is, to organise its own affairs, potentially focusing on upskilling and diversification and in adding value to generate more local and intra-continental trade. Whilst doing this, Africa should use this time to ensure that it is not forgotten and to participate in the conversation around recalibrating global trade relationships. This will not be easy as many countries globally are proceeding with caution and are likely to prioritise negotiations with their largest and most profitable trading partners and attempt to secure deals which are mutually beneficial during such unpredictable times. A focus on the largest and most profitable trading partners could leave several African economies vulnerable, particularly those which are better-integrated into the global economy such as Kenya, Nigeria and South Africa. We have discussed in earlier posts, for example, the potential adverse impact on Kenyan cut flowers in times of such great uncertainty (https://www.hoganlovells.com/en/blogs/the-a-perspective/in-conversation-with-edward-george).
However, President Trump's aggressive negotiation style should not necessarily be mistaken for a commitment to isolationism and inward looking policies. What is clear is that his administration hopes to secure better deals for the US and to generate more opportunities 'at home' (he commented "from this day onwards it is only going to be America first – America first" during his inauguration speech). In the context of Africa, this may mean reviewing its relationship to see where benefits can be exploited by both parties. There are also those who fear that the UK could adopt a much more protectionist stance vis-à-vis trade, but that would run contrary to the stated aims of the current government. Clearly world trade must thrive and all major countries will want access to as many markets as possible, including those in Africa. With many powers now seeking individual rather than group deals (eg the Transatlantic Trade and Investment Partnership), there are good opportunities to be seized.
Ironically, it is this uncertainty and disruption which could therefore provide Africans with the precise kind of leverage that they need to negotiate more favourable terms with their trading partners in the EU, the UK and the US, especially as many continue a modern day scramble to invest. Brexit, for instance, will require the UK to enter into a series of new bilateral agreements with African countries and Africans could take the chance to insist that these deals both align closely with their interests and grant no less favourable treatment than African signatories currently experience under existing Economic Partnership Agreements ("EPAs") with the EU. Uganda and Tanzania refused to sign the EPA governing trade between the East African Community and Europe in the days following the Brexit vote, which could indicate that some African nations are aware of this opportunity.
Indeed the latest EPA between the South African Development Community and Europe might provide some inspiration as a starting point for wider discussion. Commentators have noted that the EPA strikes a better deal for African nations as compared with earlier versions of the agreement, notably prohibiting the EU from using export subsidies in respect of agriculture. This restriction may provide greater market access and level the playing field for smaller African traders who might previously have been priced out of the market, and is sure to be a welcome development given that over 60 per cent of Africa's working population work within the agriculture sector.
Ultimately, it is crucial that African nations identify their objectives and use these to inform any conversations they enter with their trading partners across the world on the future of their relationship. In this transformative environment, Africa has a real opportunity to shape its future but only if the countries are willing to prepare and work better together. The level of local capacity, lack of diversification, reliance on external dollar based debt, and limited intra continental trade remains in many cases lamentable and only strong strategic leadership will allow Africa to position itself as a serious market player, whose needs and interests must be recognised and respected by the rest of the world.