Comparing U.S. and Chinese Business Strategies in Africa

The African Centre for the Study of the United States (Johannesburg)By Bob Wekesa

Over the past decade, many of the discussions and debates on foreign investments in Africa have revolved around competition between the U.S. and so-called emerging powers. This narrative has taken a near zero-sum trajectory since China overtook the U.S. to become Africa’s number one trading partner in 2009. U.S. administrations, from Obama (2009-2017), Trump (2017-2021) and the current Biden presidency have developed policies and postures aimed at returning to the top slot as Africa’s most preferred trade and investment partners.

It is true that in some respects the U.S. remains head and shoulder above China in some aspects of trade and engagements with Africa. The non-reciprocal trade agreement between the U.S. and Africa – African Growth and Opportunity Act (AGOA) – is a good example as it allows enhanced entry of over 6000 African goods into the U.S. market. It is also true however that China has not only surged ahead of the U.S. in areas such as the financing of infrastructure projects under the rubric of the Belt and Road Initiative. In these scenarios, the U.S. and China can learn from each other with regards to hits and misses in their African strategies. Africa too can mine lots of lessons from the two big powers – but this is not the focus of this essay. Neither is the essay on how China can extend its leadership over the U.S. in Africa – that can be subject to a future treatise.

This article is focused on how the U.S. can spruce up its strategy in Africa as with an aim to even out competition with China. A different approach to enhanced success for U.S. businesses in Africa is possible. While fending off competition from emerging economies of which China is the most significant and traditional African partners such as Europe, U.S. trade and economic actors would do well to reset their strategies.

First, balance trade and aid. For years, African leaders, scholars and corporate executives have taken the position that trade is more important than aid. African scholars such Dambisa MoyoGeorge AyitteyGreg Mills and Jakkie Villiers among others are virtually evangelists in this stream of thought.

The argument for cessation of aid to Africa is only partially cogent though! Africa still needs huge infusions of humanitarian assistance. Plugging the current U.S. aid flows would devastate African countries. In the Horn of Africa for instance, the United States Agency for International for International Development (USAID) released $1.3 billion in July to save lives for a region in the grip of a historic drought.

In another example, United States President’s Emergency Plan for AIDS Relief (PEPFAR), initiated by the George Bush administration in 2003 has reportedly saved over 20 million people globally, most of them in Sub Saharan Africa, by 2021. It therefore patent that US assistance to Africa is crucial for responding to the crises that beset the continent.

However, the arguments made by forward-looking African thought leaders is that the U.S. should graduate from overseas development assistance to Africa to foreign direct investment and business-to-business relations. In so doing, borrowing a leaf from the Chinese strategy can provide some pathways. Researchers and casual evidence show that China favours more of trade and investment to Africa than humanitarian assistance.

In a new scheme of things, U.S. government entities would work closely with African partners in stepping up investments in areas that need investment such as agriculture, energy, and health. It is not that agencies such as USAID are not devising business-based solutions to Africa’s problems. It is that more can be done in such a way that business approaches begin to outweigh direct humanitarian assistance. U.S. businesses, counting in their thousands across the continent, would be on the forefront as the relations shift from aid-first to trade-first.

The second potential area of strategy reset for U.S. businesses would be greater stakeholder engagement particularly with African governments. Various studies have shown that Chinese businesses benefit a great deal from their proximity to African governments often with robust backing of the Chinese government. We are beginning to see U.S. businesses gaining the support of U.S. commercial and diplomatic missions in Africa. This has been done through the involvement of American diplomats and trade and economics officials in events such as trade fairs, conferences, and exhibitions. These are very important avenues for building business-to-business relations resulting in the closing of deals. However, more could be done with regards to government-business engagements.

Like the Chinese, American officials and business executives could step up the strategy of directly linking U.S. businesses to consequential government officials in African countries. One among other strategies – again borrowed from the Chinese approach – would be for top American officials visiting African nations to be accompanied by American businesses seeking opportunity in Africa. Such bundling of government-business efforts towards Africa could also help overcome some of the bottlenecks for doing business in Africa particularly tariff and non-tariff barriers to trade.

Third is the area of corporate ambassadorship. Under the rubric of commercial, business, or corporate diplomacy, the thousands of U.S. businesses could play a large role. There is no question that the U.S. government through diplomatic missions and other agencies is at the core of formal corporate and commercial diplomacy in Africa. However, diplomacy broadly, and commercial diplomacy specifically has changed tremendously over the last couple of years. In the past, it was anathema for businesses to be imagined playing diplomatic roles for their countries. As several global multinationals have amassed large volumes of capital and assets (think Apple, Google, Microsoft, Amazon), they have established mechanisms that resemble state-led diplomacy. Generally, Chinese companies are seen as representatives of their country in a much more explicit way that American companies do. The corporate social responsibility programs of companies such as Huawei and ZTE are often closely tied to the Chinese government’s agenda in African countries.

On the other hand, a quick review some of the corporate social responsibility programs of U.S. businesses proceed without closer involvement of U.S. officials. Many opportunities can be mined by more strategically coalescing state-led U.S. corporate diplomacy and U.S. non-state-led corporate diplomacy together.

An opportunity for considering these various strategies is the forthcoming U.S. Business in Africa Awards which will be held in Johannesburg on October 28 at the Hilton Hotel in Johannesburg.

The author is deputy director at the African Centre for the Study of the United States, University of the Witwatersrand: