As US President Barack Obama makes an official visit to Kenya and Ethiopia next week, the two East African nations will have a chance to use the media spotlight to showcase the investment opportunities they offer. The US, in turn, could also gain from the trip.
US President Barack Obama waves from the podium at a ceremony to mark the end of his visit to the West African nation of Ghana in 2009. Obama’s trip to Ethiopia and Kenya in late July will be his second official visit to African countries in eight years of presidency. (Image: White House)
On Monday, after seeing off Nigerian President Muhammad Buhari, US President Barack Obama will make his way to Africa. He will become the first American president to make an official visit to each of the East African nations of Ethiopia and Kenya.
All four countries – Nigeria, Kenya, Ethiopia and the US – could reap rewards from Obama’s historic trip. So too could the broader community of nations in the African Union.
Beneficial economic partnerships
There are many similarities between East African neighbours Kenya and Ethiopia, and their economic relations with the US. Both could benefit from the Africa Growth and Opportunity Act and have huge trade imbalances in favour of the US.
In 2014, US-Kenyan trade was US$2.2-billion. American exports to Kenya made up US$1.64-billion of this. The Ethiopian numbers are similar. American exports to Ethiopia were US$1.67-billion in 2014 with US importing only around US$207-million worth of goods from Ethiopia.
The US mostly exports aircraft, machinery and agricultural products to the two East African countries. In return, they export mainly coffee, tea and apparel. American investment into the countries focuses on commerce, light manufacturing and tourism.
Both countries must use the media spotlight of Obama’s visit to showcase their investment opportunities. Ethiopia, for instance, can ride the momentum of recently being named the world’s best tourist destination by Europe’s key tourism body. Tourism contributed an estimated 4.5% to its GDP last year, which equates to nearly one million jobs and more than US$2-billion in revenue.
Kenya can use the spotlight to show international investors it is one of the best African emerging economies to invest in. Its attractions are infrastructure development, a stable political and macroeconomic environment and a stronger services sector compared with other African economies that are largely focused on commodities.
Ethiopia and Kenya have big plans for the future. Ethiopia has its growth and transformation plan, while the Kenyan government aims to become a newly industrialising, middle-income country by following its Vision 2030.
Kenya and Ethiopia both need more electricity to expand their industries and to diversify into new ones for these plans to succeed. In addition to being beneficiaries of the US’s Feed the Future global food security initiative, both have benefited greatly from Power Africa launched during Obama’s South African visit in 2013.
The Eastern Africa Power Pool, established in 2005 to foster interconnectivity between the power systems of the members countries of the Common Market for Eastern and Southern Africa (COMESA), will soon turn Ethiopia – where it is based – into a renewable energy powerhouse. The country has an abundant amount of renewable energy resources from hydro to wind and solar. But it has minimal experience in such projects and is getting much-needed assistance from the US government as well as American companies.
In Kenya, Power Africa provides financing, grants, technical assistance and investment promotion. The goal is to mobilise over US$1 billion in private investment for geothermal and wind projects.
In total, around 600-million people – 70% of the population of sub-Saharan Africa – are without electricity. The US government has committed US$7-billion to combat this problem and has helped raise more than US$20-billion in private capital from more than 100 private sector partners.
Promoting peace and stability
Ethiopia and Kenya both face challenges when it comes to domestic and regional peace and security and have been working with Washington to overcome the problem. They are long-term partners with the US military through the Africa contingency operations training and assistance programme, one of the most successful long-term American programmes on the continent. Ethiopia joined in 1998, Kenya in 2000.
America’s security efforts focus on peacekeeping and preventing conflict, strengthening the security sector of its African partners, and countering terrorism and other international threats to the US. Ethiopia and Kenya support this by contributing to UN and AU peacekeeping missions.
Ethiopia is continuously in the top five of countries that contribute to UN missions. It has 8141 personnel in UN missions, with Kenya contributing 956. The country also hosts the international peace training centre in Nairobi.
Addis Ababa and Nairobi both allow the US military to operate from inside their borders. The Arba Minch Airport in Ethiopia hosts Reaper flights for the fight against al-Shabaab in Somalia. The US military also has a base in Manda Bay, Kenya, which serves as an all-purpose location. The Pentagon, specifically the US Navy, recently paid to upgrade the runway.
The future of US-African Union relations
The relationship between the US government and the AU continues to expand under the framework agreed in 2013. Last year, an amendment was signed to increase funding.
Specifically, the partnership focuses on accelerating the implementation of policies and programmes set out in the AU’s strategic 2014-2017 plan. This includes growing areas of partnership in youth, vocational education and higher education.
The AU also has bold plans for the future and has set out priorities for the continent for the next 50 years in agriculture, education, economics and health. The ambitious plan includes a continental free-trade agreement, a customs union and infrastructure for a full regional trade agreement between Africa and the US.
Steps are being taken in the right direction. The AU recently formed an African centre for disease control modelled on America’s centre based in Atlanta.
Nevertheless, the AU is terribly underfunded. The AU budget was approximately US$300-million in 2013 and US$425-million in 2014. On average, 33% is raised from AU member states and the rest is sourced from international and development partners such as the UN, European Union and US.
Expect a large monetary donation announcement during Obama’s speech at AU headquarters in Addis Ababa, a building funded and built by the Chinese. The US wants to see improvements in the AU so that African nations can deliver regional peace and security. In the end, Africa also has to invest the necessary resources if the continent is going to rise as many predict it will.