When a Memorandum of Understanding (MoU) was signed between the US Trade Representative and the AfCFTA Secretariat at the US-Africa Leaders’ Summit (Summit) in Washington, DC, in December 2022, there was more good news for the successful implementation of the African Continental Free Trade Area (AfCFTA) agreement. The goal of the MoU is to “promote equitable, sustainable, and inclusive trade; boost competitiveness; and attract investment to the continent.” It also covers more cooperation between the two areas.
During the summit, it was also revealed that the US planned to invest USD 55 billion in Africa over the following three years, of which USD 15 billion would go towards “two-way trade and investment commitments, deals, and partnerships that advance key priorities, including sustainable energy, health systems, agribusiness, digital connectivity, infrastructure, and finance.”
For some time now, the US and Africa have been expanding their commercial relationship. The US Prosper Africa initiative was launched in 2019 with a goal on boosting reciprocal trade and investment between the US and African nations. In July 2021, the Biden Administration declared that it will be renewed. When the programme was announced, the US stated that it will concentrate on enhancing trade and investment in industries like infrastructure, energy and climate solutions, healthcare, and technology. A mandate was granted to 17 US government organisations participating in this programme to, among other things, encourage deals, strengthen African enterprises, and link US investors with those in Africa.
Projects that support African women and small and medium-sized businesses are also a priority of the revitalised Prosper Africa initiative. The December 2022 Summit also revealed plans to increase African exports to the US by USD 1 billion through partnerships and investments, as well as to generate an extra USD 1 billion in US investment in Africa, through the Prosper Africa project.
The US has frequently stated that it supports the AfCFTA because it wants to see Africa’s economic influence in the world increase. All future trade agreements between the US and African nations must adhere to the trade requirements of AfCFTA, and given the Biden Administration’s attitude on the environment, subsequent accords are expected to contain climate change clauses and taxes on imports of high-carbon goods.
Additionally, the administration has been concentrating on trade agreements that benefit US consumers and businesses. The US-Kenya Strategic Trade and Investment Partnership (STIP), which was signed in July 2022, outlines the enhanced engagement and high standard of commitment between the two countries and focuses on increased investment and sustainable and inclusive growth that will benefit the people and businesses of both countries. The accord also stated that regional economic integration in East Africa would be supported.
It is anticipated that the US and African nations would soon negotiate more reciprocal bilateral and regional trade agreements. These accords are anticipated to eventually replace the non-reciprocal African Growth and Opportunity Act (AGOA), which is set to expire in 2025 and permits duty- and quota-free exports from qualified African countries to the US.
The volume of trade between the two regions is escalating. The Biden Administration announced during the summit that since 2021, the US had helped 47 African nations close more than 800 bilateral trade and investment agreements worth a total of almost USD 18 billion. Furthermore, private investment deals from the US into Africa since 2021 are estimated to be worth USD 8.6 billion. There are now more potential for trade and investment in both regions as a result of the US focus on advancing engagement, sustained trade, and investment in Africa.