- African Growth and Opportunity Act
TRALAC - Trade Law Centre
You are here: Home/News/Article/How to drive US investment to Africa - Opinion

How to drive US investment to Africa - Opinion

How to drive US investment to Africa - Opinion
Published date:
Saturday, 17 June 2023
Witney Schneidman and Gracelin Baskaran

When it was established during the Obama administration, the President’s Advisory Council on Doing Business in Africa—or its acronym PAC-DBIA—was an important initiative, and it still is highly relevant.

After all, the body was charged with providing recommendations to the president of the United States through the secretary of commerce on how to increase the U.S. commercial presence in Africa.

Who better to provide advice than some of the leading American companies on the continent?

The U.S. companies represented on the PAC-DBIA have the advantage of understanding the challenges and opportunities of doing business in Africa. Moreover, a larger U.S. business presence in Africa is a priority for many African governments. Not only do our partners on the continent want closer commercial ties with the U.S. but they appreciate that most American companies create jobs, enhance skills, and comply with global best business practices, including anti-corruption.

Nevertheless, it is fair to ask: What has the PAC-DBIA accomplished over the course of seven meetings and five reports? After all, when President Obama established the committee in 2014, U.S. direct investment in Africa was at an all-time high—nearly $69 billion. Seven years later it dropped to about $45 billion.


Africa has experienced its share of challenges over the last decade. Ebola, the COVID-19 pandemic, the impact of Russia’s invasion of Ukraine, debt distress and the effects of climate change are several deterrents to new investments. Conflicts in Ethiopia, Mozambique, the Sahel and most recently, Sudan, have also weakened the investment climate. Not only do these shocks heighten the perception of risk but they divert domestic resources and policymakers’ priorities away from creating an enabling environment for investments.

A course of action 

In its most recent report, the PAC-DBIA makes an important recommendation on reducing private sector risk. Indeed, financial instruments are important for transferring some risk to the government as firms assess the bankability of projects amid an uncertain global macroeconomic backdrop. The U.S. International Development Finance Corporation plays a key role in making available government-backed loan guarantees that can shift risk allocation and boost investor confidence. There are two types of financial products that can be leveraged. The first is a partial credit guarantee, which provides unconditional commitments to fulfill a share of the borrower’s debt obligations in the instance of a default. The second is risk insurance, which provides protection against currency volatility and specified political risks.

The energy sector is one area in which direct loans or guarantees backed by the U.S. government would de-risk private investment in Africa. Globally, just 14% of direct investment in renewable energy is publicly funded. But in Africa, public financing plays a more dominant role, as only a few projects have been able to mobilize sufficient private capital due to legal, economic, and political risks. Debt accounted for 88% of all public financing for renewable energy between 2010 and 2020. Financial de-risking instruments in the energy sector can bring the private sector to the table, thereby reducing the fiscal burden on heavily debt-laden countries.

The PAC-DBIA report makes a second essential cross-cutting recommendation, namely, the development of infrastructure in virtually every priority sector, including energy and environment, digital and ICT (information and communication technologies), agribusiness and food security, and health.

The report highlights the importance of blended finance and optimizing the U.S. government’s resources to develop bankable projects and catalyze the private sector. Africa has some of the highest infrastructure costs in the world due to underperforming, or an absence of, quality infrastructure. In 31 out of 43 sub-Saharan African countries, for example, freight costs on imports are 50% higher than the average for developing countries. At the same time, according to Moody’s Analytics research and as cited by the African Development Bank, Africa has the lowest default rate on infrastructure projects among the world’s regions–5.5%– compared to 12.9% in Latin America and 8.8% in Asia. Infrastructure development should be a top priority for the U.S. government.

The importance of commercial diplomacy

It is against this backdrop that commercial diplomacy can help address perceptions and misperceptions of risk, reduce trade barriers, support foreign procurement, facilitate export transactions, and create a more enabling environment for foreign direct investment.

In fact, the importance of commercial diplomacy cannot be underestimated. As Meg Whitman, former business leader and current U.S. ambassador in Kenya, remarked last month to a high-level business gathering in Nairobi, “When I was CEO—I’ll be honest—I probably thought of Africa about 1% of the time.” The ambassador’s refreshing candor underscores that most U.S. business leaders do not see Africa as a target market.

In fact, the U.S. has significantly stepped up its support of the private sector in vital ways, including the creation of the DFC and Prosper Africa and, most recently, Vice President Harris’ recent visit, to name a few of the impactful initiatives. However, since Commerce Secretary Penny Pritzker and the DBIA undertook a fact-finding mission to Nigeria and Rwanda in 2016, U.S. commerce secretaries have spent a cumulative one day on the continent (Wilbur Ross visited Ghana on July 6, 2018, with the advisory group).

We recommend that the secretary of commerce lead a PAC-DBIA trade mission to Africa on an annual basis. Not only would this signal to U.S. business leaders that Africa is a priority market for the American government, but it would be an opportunity to begin the implementation of the many relevant recommendations made by the PAC-DBIA since its inception.

Moreover, robust commercial diplomacy inevitably will play an important role in fulfilling the private sector commitments, worth $15.7 billion, that were made at the 2022 U.S.-Africa Leaders Summit and reversing the decline in in U.S. investment in Africa.

Witney Schneidman is Coordinator for Prosper Africa - USAID and former Brookings expert, and Gracelin Baskaran is nonresident Fellow - Global Economy and Development, Africa Growth Initiative, at Brookings . 


Read related news articles

Nigeria: US to 'create jobs for Africans through trade, investments in tech, infrastructure'

The United States govern­ment has expressed its willingness to create jobs through increased trade and investment in sectors such as agriculture, technology and infrastructure, as well as boost innovation and elevate the living standards of mil­lions of Africans. The U.S. Consul General, Will Stevens, disclosed this at the Africa Social Impact Summit 2023, themed: “Global Vision, Local Action: Reposi­tioning the African...

10 August 2023

'Here’s why US-Africa trade under AGOA has been successful for some countries but not others'

Has the African Growth and Opportunity Act (AGOA) achieved its goal of improving trade and investment between the U.S. and Africa? Created in 2000 and renewed in 2015, AGOA is a U.S. government trade program that gives countries in sub-Saharan Africa preferential access to U.S. markets, allowing them to export products to the United States tariff-free. AGOA has certainly helped boost African exports to the United States,...

11 July 2023

Ghana trade minister calls for strategic US investment in African agribusinesses

The Trade and Industry Minister, Alan Kyerematen, has advocated for intensive investment in the agricultural sector as part of major plans to economically empower the African continent. The Minister made this pronouncement during the recent summit of US- African leaders in Washington DC. The US-Africa Leaders’ Summit was anchored on the shared values of fostering new economic engagement; reinforcing the US-Africa commitment to democracy...

20 December 2022

South Africa: JSE delegation visits US to promote South Africa as an investment destination

A delegation from the Johannesburg Stock Exchange (JSE), along with a high-level delegation of South African business leaders and public sector representatives, visited New York this week to promote the country as a favourable investment destination to US-based institutional investors.  The South African delegation hosted the South Africa Macro Seminar in New York, where discussions focused on the importance of boosting bilateral...

11 October 2022

US seeks more investment opportunities in Africa

The US government is exploring ways to expand trade and investment opportunities in Africa, in a bid to scramble for the control of the continent’s raw materials with other world’s powerful nations such as China and Russia. The US Deputy Assistant Secretary of State Akunna Cook said the country has yet to deepen its presence in Africa, which has a population of about 1.3 billion people.  “We have been behind the curve for...

25 February 2022

Opinion: Foreign investment is Africa's best shot at growth, but its share is still pitiful

US Secretary of State Anthony Blinken's visit to Kenya, Nigeria and Senegal in November 2021 was a rare event for an administration's first year, cautiously signalling the US's aim to reconnect with Africa and to recover confidence in the former's commitment to democracy. With various promising moves in the pipeline, such as the appointment of a programme head for the Prosper Africa initiative, there may be movement with the African...

22 January 2022

How the Biden administration can make AGOA more effective - Brookings

The African Growth and Opportunity Act (AGOA) has served as the cornerstone of the U.S.-Africa commercial relationship for more than two decades but it is set to expire on September 30, 2025. While the legislation’s unilateral trade preferences have provided economic benefits for countries across sub-Saharan Africa, AGOA as a whole remains underutilized. To ensure continuity in U.S-African trade ties, the United States must grapple with...

15 November 2021

Blog: 'It’s Time for AGOA 2.0'

The African Growth and Opportunity Act (AGOA) is set to expire in 2025. That may be the distant future for some but given the time required to pass trade legislation in the U.S. Congress, it’s the functional equivalent of tomorrow’s mid-day meal. Preparation for the post-AGOA trade relationship between the U.S. and Africa needs to begin now. AGOA has had important successes but improvements need to be made to the program. The...

25 September 2019

Africa in Focus: Is the US keeping pace in Africa?

Editor's Note:  Below is a viewpoint from Chapter 6 of the  report, which explores six overarching themes on the triumphs of the past years as well as strategies to tackle the remaining obstacles for Africa.  What do India, Turkey, Japan, China, and the European Union have in common with Africa that the United States does not? Each country and the EU have held two or more summits with African heads of state. While there...

04 March 2019

The 2018 AGOA Forum: A turning point for US-Africa commercial relations?

The 2018 AGOA Forum —named for the African Growth and Opportunity Act passed in 2000 and extended three years ago to 2025—could be a turning point in U.S.-African commercial relations. AGOA abolished import duties on more than 1,800 products manufactured in eligible countries sub-Saharan Africa (those with established or making continuous progress with market-based economy, rule of law and pluralism, elimination of trade and...

06 July 2018

You are here: Home/News/Article/How to drive US investment to Africa - Opinion