NAIROBI, KENYA, NOVEMBER 12 — East African countries stand a chance to be among the biggest beneficiaries of funding from the US government, as President Donald Trump’s administration remains keen to command its influence on Africa.
This is in the wake of the widening gap on Sino-African relations which have recently been buoyed by increased lending by the Chinese to the African continent.
President Trump signed into law the Better Utilization of Investments Leading to Development (BUILD) Act of 2018, On October 5, which creates an International Development Finance Corporation (IDFC) and establishes a powerful tool for U.S assistance and foreign policy.
The IDFC is coiled towards supporting private investment and development projects in emerging countries, including backing private investment; a move that gives or rather empowers private entities which have previously struggled with funding.
Americas move is seen as a shift to counter China which has cemented its position in East Africa as a key lender and developer of mega projects.
The region’s economies are reported to have borrowed over $29.42 billion from Beijing in the past 10 years to grow their transport, energy, manufacturing and communication sectors.
On the other hand, American companies have struggled to invest in the region and the continent at large where they have cited the challenge of securing financing and mitigating risk as impediment, which has blocked them from competing with the deep-pocketed Chinese for major projects.
During the 6th Forum on China-Africa Cooperation held in Beijing, in September this year, President Xi Jinping pledged an additional $60 billion in new development financing to African countries.
Jinping who addressed African leaders at the forum which focused on the “Belt and Road” initiative, insisted that China’s investments on the continent have no political strings attached.
China’s increased concentration on East Africa has since jilted a number of European states, the US and even fellow Asians such as Japan who have historically maintained close ties and development relations with the continent.
The US International Development Finance Corporation is expected to serve as a win for smart development policies and the private sector.
It is expected to further compliment the U.S. Agency for International Development (USAID), an independent agency of the US federal government that is primarily responsible for administering civilian foreign aid and development assistance.
With a budget of over $27 billion, USAID is one of the largest official aid agencies in the world, and accounts for more than half of all U.S. foreign assistance-the highest in the world in absolute dollar terms.
IDFC therefore is expected to increase America’s oversea investments with Sub Saharan Africa and the East African countries, which include Kenya, Uganda, Tanzania and Rwanda, being among the beneficiaries.
Passing the BUILD Act was a significant move which now allows the US to take the next steps in catalyzing private sector resources and expertise to bridge the gap on investments, fighting poverty and helping American companies remain competitive globally.
IDFC will oversee the funding of major infrastructure projects with East Africa standing to benefit in construction of roads, railways, ports and energy projects among others. These are areas currently dominated by the Chinese in Countries such as Kenya.
Developments under IDFC will be driven by the $60 billion seed capital at the Corporation, which is targeted for investments in both debt and equity.
This covers mainly infrastructure projects across developing countries and emerging markets. IDFC replaces the Overseas Private Investment Corporation.
The latest developments come as Africa continues to stand out as the next frontier and an investment hub.
With a population of about 1.2 billion, growing economies and political stability, the continent is strategic for global commercial competition with key infrastructure development being among top area of investment.
The recent tour of Africa by Commerce Secretary Wilbur Ross and Senator Chris Coons, who led a delegation to Kenya, Ethiopia, Ivory Coast and Ghana, saw them describe as “hallmarks of China’s economic presence” all over major African cities.
This indicates that the US is keen to make a significant impact in a rival-like move.
The passing of the BUILD Act is a major finance reform which has since sent a message that the US is keen to remain fully engaged in Africa.
“Congress has taken an important step toward fulfilling the commitment President Trump made to reform development finance institutions, so that, they better incentivize private sector investment in emerging economies,” White House said in a recent statement.
With IDFC, American companies will be expected to unlock financing for major projects in the continent with East Africa being among the investment hubs.
Kenya for instance is looking forward to construction of the US$2.1 billion Nairobi -Mombasa expressway, a contract which has been awarded to American construction firm- Bechtel Corporation.
The Public-Private Partnership project will see expansion of the highway connecting the country’s capital to the port city of Mombasa.
During a recent visit by Kenya’s President Uhuru Kenyatta to the US where he held talks with President Trump, the East Africa economic power house sealed a number of deals with US entities, attracting financing in key projects on energy and food security among other sectors.
The Overseas Private Investment Corporation (Opic) and Kipeto Wind Energy Company were among entities which signed documents to close a $232 million deal in financing the construction and operation of a 100-megawatt grid-connected wind power project in Nairobi.
US is also expected to play a major role in assisting Kenya achieve its “Big Four” agenda, a key focus area by President Kenyatta’s administration which is keen to growing manufacturing in the country, offer affordable housing, universal healthcare and food security by the year 2022.
These, and other investment opportunities in the region mainly road and rail, are areas US companies will be eying to claim a share of; what is currently seen as a China dominated area.
The US government will be keen to support its agencies and American companies in securing development projects as it remains Africa’s largest donor where last year, it committed US $12.2 billion for health, education and agriculture.
China has invested US$75 billion in Africa’s key infrastructure projects which include rail, ports, energy and roads.
East Africa accounts for about US$30 billion or 39 per cent of these investments.
Strengthening development finance will not only help the US to be more competitive, but will also ensure it takes advantage of opportunities available in the region and the continent at large.
This will also play a key role in tackling some of the global problems such as extreme poverty, a boost for the U.N.’s Sustainable Development Goals which face a funding shortfall of about US$2.5 trillion per year.