China-US rivalry heading to East Africa

Donald Trump’s administration to focus on development finance and lending for infrastructure projects in Africa

Kampala, Uganda | RONALD MUSOKE | The US will step up efforts to counter China’s growing influence in Africa this year, according to a recent report that shows the growing rivalry between the world’s two largest economic giants.

The report released on Dec. 11 by Control Risks— a global risk consultancy that forecasts political and security risk for business leaders and policy makers around the world— notes that while the US continues to be vocal on the danger of Chinese debt in Africa, China continues to broaden its engagement across the continent with particular focus on East Africa.

“Support for China or the US has not emerged as a defining issue in African politics, with most countries keen to pursue closer ties and seek financing from both sides rather than falling neatly on one camp,” he added, “In 2019 we might see this changing,” said George Nicholls, the senior partner for southern Africa.

Nicholls said whereas the US is still the largest investor in Africa, its engagement on the continent is narrowly focused on security matters under the current administration.

In contrast, China has made formidable inroads in sub-Saharan Africa specializing in trade and investment over the past decade.

Chinese development finance institutions and export credit agencies have accounted for 53% of investments flowing into African power projects, according to the U.S based law firm, Baker McKenzie and the UK financial data provider IJ Global.

Though official Chinese data on loans lent to African countries remains scanty as a result of little or no transaction transparency between China and most African countries, figures from the China-Africa Research Initiative at the Johns Hopkins University show that the Chinese government, banks and contractors have doled out U.S $143bn to African governments since 2007.  The six East African Community states are believed to owe China a combined US$30 bn as at April, 2018, sunk mainly into construction of modern railway lines, hydro power dams and other hardware infrastructure.

But perhaps in a bid to counter the narrative that China’s influence in Africa is solid, the U.S’ Donald Trump administration is believed to have hatched a plan to counter Chinese clout on the continent, with particular focus on East Africa.

This development comes as reports indicate that China could take over the Port of Mombasa incase Kenya fails to repay the US$3.23bn acquired from the China’s Exim Bank in 2013 toward the construction of the Standard Gauge Railway.

“(The year) 2019 will show revived US interest in development finance and lending for infrastructure projects on the continent,  and a more concerted US commercial strategy towards Africa is likely to take shape,” Nicholls said.

He said increased rivalry will therefore open up additional investment opportunities but will also present African countries with increasingly starker foreign policy and commercial choices.

Control Risks’ prediction also comes at a time when the U.S administration has pledged to double its development investment budget in Africa to US$60 billion following the creation of a new agency that will be able to take equity stakes and other financial tools to invest in local businesses.

Interestingly, U.S businesses and investors still have a formidable presence on the continent. EY Global’s 2018 Africa Attractiveness report notes that U.S entities increased the number of American FDI projects in Africa by 43% to 130 in 2017 nearly twice that of China.