“After the breakneck growth rates that characterized much of Africa’s first decade in the 21st century, we are entering a more sober period. That is not to say the region is in freefall; while capital investment decreased by 24% to $66.5bn in 2015, the number of FDI projects increased by 6% to 705. Of these investments, 44% went into infrastructure related areas including power, construction, and ICT,” Africa Investment Report 2016, released by the Financial Times, UK said.
More than ever before, Africa, especially sub-Saharan Africa needs foreign direct investments (FDIs) to develop. In recent times there have been serious debates among members of the Congressional Black Caucus on American foreign policy on Africa. The American senate considered a bill that would, “among other things, secure a 10-year extension of AGOA, a trade preferences program that facilitate an economic partnership between the U.S. and sub-Saharan Africa.” However, some Democrats were skeptical about the renewal of AGOA, a multi-nation pact that has long enjoyed bipartisan support.
Since his surprising victory at the US elections in late 2016, President Trump has said not indicated any serious interest in Sub-Saharan Africa. It is uncertain whether the region will receive vigorous attention in the new American administration. In effect, career diplomats in Africa will have to lobby the American government to sustain African American trade relations.
The American policy on trade in Africa was developed on the idea that trade into Africa would promote economic growth and thus foster stability and the growth of democracy. The African Growth and Opportunity Act (AGOA) was created to foster that idea in 2000. AGOA aimed to enhance Sub-Saharan African countries’ access to the American market by granting them tariff-free access while basing eligibility on whether countries were working to improve labor and human rights standards and the rule of law. The Act, according to a recent report, “now applies to over 40 countries and is responsible for almost all trade between America and the region. It is estimated to have created 120 000 jobs in Sub-Saharan Africa and has more than doubled trade between the region and America.”
Although AGOA was established to encourage exports from the African continent, it also provided a window for the inflow of FDIs into Africa. The balance of trade, however, grows that the U.S. has a trade deficit in terms if the balance of trade which president Trump believes had unfairly impacted the American economy. AGOA’s future seems to hang in the balance as Trump has vowed to renegotiate America’s trade deals and has specifically targeted those that he deems to prejudice American business interests. This has led to particular scrutiny on multilateral trade deals, like AGOA, with Trump preferring bilateral deals. In addition, AGOA created a trade deficit for America that reached $8bn in 2016. Meaning it could find itself as a target for the new administration.