US President Barack Obama during his visit to Kenya last year.
Africa after Obama
Moreover, President Obama extended AGOA to 2025, and to strengthen the US-Africa engagement on trade and finance, the US-Africa Business Forum was organised in 2014 and again this year in 2016. In his last official visit to Africa in 2015, President Obama also engaged with the African Union in Addis Ababa, Ethiopia.
Despite these engagements with Africa, US trade with Africa is showing a downward trend. This is because trade with Africa is mainly based on commodities – oil and minerals – and the drop in commodity prices has influenced the trend over the last few years.
The top three trade partners of the US in Africa are Angola, Nigeria and South Africa. According to the US Census Bureau, US trade with the African continent peaked in 2008 with about $141bn worth of goods being exchanged, whereas in 2015, trade was just $52bn, representing about 1% of US trade globally.
Meanwhile, African trade with China has seen rapid growth – from $10bn in 2000 to $220bn in 2014. China-Africa trade is estimated to reach a staggering $400bn by 2020, about eight times more than 2015 US-Africa trade figures.
With the global economy still very fragile, the US presidential elections are being closely watched so as to forecast the future path taken by the United States, the world’s largest economy.
On the one hand, Republican Party candidate Donald Trump’s campaign seems to be about protectionism, anti-globalisation and anti-free trade (to ‘Make America great again!’). On the other hand, although Democratic Party candidate Hillary Clinton seems to be a continuation of the Obama administration, she has also expressed concerns about free trade agreements like the Trans-Pacific Partnership (TPP). No matter who wins the elections, the US’s political and economic engagement with the world will change. This will have direct and indirect impacts on Africa.
Donald Trump has wons the elections and puts if he his campaign promises into practice, there will be a lot of uncertainties globally. The US stock markets will suffer knee-jerk reactions and drop significantly. This will also spread to the other financial markets, causing an increase in global volatility.
Economic and political experts are predicting that future decisions made by Donald Trump will put him at loggerheads with countries like Mexico and China. Moreover, adopting a more protectionist approach and reviewing trade agreements like the North American Free Trade Agreement, (NAFTA), will put the United States on a trade war path with its main economic partners. US economic recovery could consequently be sapped, dragging the whole world into recession.
Hillary Clinton is facing an American economy that is slowing down in an uncertain global environment. To assuage the anti-globalisation feelings of the American electorate, she has raised doubts about the US’s position on free trade and ratifying free-trade agreements like the TPP. Even if she does not make drastic changes, the monetary policy and imminent rate hike by the Federal Reserve will have an impact on the US and global economies.
To counterbalance the Chinese economic influence on Africa, the United States needs to continue and increase its future engagement with the continent. To tap into the vast opportunities of Africa, with its population of 1.2 billion and its $1.2tn economy, more American companies must be encouraged to venture into the continent. Over the last few years, American technology giants like IBM, Facebook and Google have increased their involvement with Africa. Other American multinationals like Ford, General Electric, Starbucks and Walmart, as well as private equity firms like Blackstone, Carlyle and KKR, have also tapped into African opportunities.
Whoever wins the elections will bring with their presidency global macroeconomic uncertainties that may affect Africa. For the US to maintain its global economic supremacy, the future US president will not only have to keep the American economy open, but also capture the economic potential of Africa.
The author, Richard Li, is a partner of Steel Advisory Partners, Singapore. This article was written specifically for NTU-SBF Centre for African Studies, a trilateral platform for government, business and academia to promote knowledge and expertise on Africa, established by Nanyang Technological University and the Singapore Business Federation.