There was more good news for the successful implementation of the African Continental Free Trade Area (AfCFTA) agreement in December 2022, when a Memorandum of Understanding (MoU) was signed between the United States (US) Trade Representative and the AfCFTA Secretariat at the US-Africa Leaders’ Summit (Summit) in Washington DC.
The MoU covers expanded engagement between the two regions and intends to “promote equitable, sustainable, and inclusive trade; boost competitiveness; and attract investment to the continent.”
It was also announced at the Summit that US intended to invest USD 55 billion in Africa over the next three years, and that USD 15 billion would be deployed in “two-way trade and investment commitments, deals, and partnerships that advance key priorities, including sustainable energy, health systems, agribusiness, digital connectivity, infrastructure, and finance.”
The trade partnership between the US and Africa has been strengthening for some time. In July 2021, the Biden Administration announced that it would renew the US Prosper Africa initiative, started in 2019, with a focus on increasing reciprocal trade and investment between the US and African countries.
At the time, the US said that the initiative would focus on improving trade and investment in sectors such as infrastructure, energy and climate solutions, healthcare and technology. Seventeen US government agencies working as part of this initiative were given a mandate to, among other things, empower African businesses, offer deal support and connect investors from the US with those in Africa.
The renewed Prosper Africa initiative also focuses on projects that support women, and small and medium enterprises in Africa. It was further announced at the December 2022 Summit that, through the Prosper Africa initiative, plans were being made to boost African exports to the US by USD 1 billion through investments and partnerships, and to mobilise an additional USD 1 billion in US investment in Africa.
The US has often expressed its support for AfCFTA, stating that it wants to see the growth of Africa’s economic power in the world. All future trade agreements signed between the US and African countries will have to align with AfCFTA’s trade stipulations and, considering the Biden Administration’s environmental stance, new agreements will likely also include climate change provisions and tariffs on high-carbon imports.
The Administration has also been focusing on trade agreements that don’t disadvantage US businesses and consumers. In July 2022, the US-Kenya Strategic Trade and Investment Partnership (STIP) was signed, outlining the enhanced engagement and high standard of commitment between the two countries, and focusing on increased investment and sustainable and inclusive growth that will be of benefit to both countries’ citizens and businesses.
The agreement also included the intention to support regional economic integration in East Africa. Further reciprocal bilateral and regional trade agreements between the US and African countries are expected to be signed in the near future.
Such agreements are expected to eventually replace the non-reciprocal African Growth and Opportunity Act (AGOA), which allows duty- and quota-free exports from eligible African countries into the US, and which is due to expire in 2025.
Trade between the two regions is steadily rising. At the Summit, the Biden Administration noted that since 2021, the US has assisted in closing more than 800 two-way trade and investment deals worth around USD 18 billion across 47 African countries.
In addition, the value of private investment deals from the US into Africa since 2021 is valued at USD 8.6 billion. The US focus on increased engagement and continued, trade and investment in Africa has clearly already led to an increase in trade and investment opportunities in both regions.
Authors: Virusha Subban, Partner Specialising in Customs and Trade, and Head of the Tax Practice, Baker McKenzie Johannesburg