As Yellen woos Africa, sceptics ask: "Is the US here to stay?"

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US Treasury Secretary Janet Yellen will spearhead the US's African engagement with a three country tour of the continent.
US Treasury Secretary Janet Yellen will spearhead the US's African engagement with a three country tour of the continent.
Photo: Reuters / Denis Balibouse

BUSINESS


US Treasury Secretary Janet Yellen's three-country trip to Africa  the leading edge of a new diplomatic push by the Biden administration aims to show the continent the US is a true partner, one here for the long haul.

But, after decades of losing ground to China and the tumult of the Donald Trump years, when the former president threatened to slash aid and roll back military support, it is a tough sell.

As Africa struggles with economic headwinds caused by the Covid-19 pandemic, the war in Ukraine and, notably, Washington's own monetary policy, Africans are asking for proof that the US will stay the course this time.

Yellen, so far, is at pains to make guarantees. "I don't know how I can give assurances, honestly," she said en route from Senegal to Zambia, but Republicans and Democrats alike support long-standing initiatives, including in the areas of health and trade.

READ: Biden says the US is 'all in' on Africa's future

Yellen's trip kicks off a year of high-level US visits that will include President Joe Biden, Vice President Kamala Harris, Trade Representative Katherine Tai, and Commerce Secretary Gina Raimondo.

Washington hosted African leaders from 49 countries and the African Union at a summit in December, where Biden said the US was "all in" on Africa's future and planned to commit $55 billion (R950 billion) over the next three years.

African officials have broadly welcomed the US's renewed engagement. But the timing, two years into Biden's four-year term, is viewed by many as "late and somewhat half-hearted", said Chris Ogunmodede, a Nigerian researcher and associate editor of World Politics Review.

Ogunmodede commented:

The fears that Biden will not follow through, or that he could lose and be replaced by a hostile Republican administration, definitely exist.

China, debt and rate hikes

As the US touts its long-standing ties to Africa and a renewed commitment to ramping up trade and investment, it's playing catch-up with China and facing a growing challenge from Russia.

Chinese trade with Africa is about four times that of the US, and Beijing has also become an important creditor by offering cheaper loans than Western lenders do.

Zambian President Hakainde Hichilema leads U.S. Tr
Zambian President Hakainde Hichilema leads US Treasury Secretary Janet Yellen into State House during Yellen's visit in Lusaka, Zambia on Monday.

Yellen urges Zambia debt restructure after talks with China

US Treasury Secretary Janet Yellen said on Monday during a visit to Zambia that it was critically important to restructure the country's debt, and she believes progress could be made after her frank talks with key creditor China last week.

Yellen added that Zambia's debt overhang was a drag on its whole economy and that China had been a barrier to resolving the southern African country's debt problem.

However, she said she was encouraged that progress could shortly become possible following her meeting with Chinese officials in Zurich last week.

"I specifically raised the issue with Zambia (with Chinese officials) and asked for their cooperation in trying to reach a speedy resolution. And our talks were constructive," Yellen said.

She told Zambian Finance Minister Situmbeko Musokotwane that the timely finalisation of Zambia's debt treatment was a top priority for the treasury.

"We will continue to press for all official bilateral and private-sector creditors to meaningfully participate in debt relief for Zambia, especially China," she said.

Yellen said she was keen to continue talks with Musokotwane and other Zambian officials about the country's "impressive progress" on economic reforms, and how regional economic integration and deepening trade ties could support the country's growth.

However, there were two main sticking points with China, the official added: Beijing's insistence that local debt owned by foreign investors be included, and that multilateral development banks also take a haircut - both of which points have been rejected by the US, Zambia and other countries.

Yellen told reporters it was important for Zambia to address corruption and human rights, and to create a business environment that would promote investment and trade. - Reuters

American officials both Democrats and Republicans have criticised China's lending as lacking transparency and predatory.

In Senegal, Yellen warned Africa against "shiny deals that may be opaque and ultimately fail to actually benefit the people" and has accused China of dragging its feet on a critical debt restructuring in Zambia.

But US fiscal policy is creating its own drag.

African countries have become collateral victims of this year's rate hikes by the Federal Reserve, aimed at curbing inflation at home.

The African Development Bank (AfDB) wrote in a report last week.

Tightening financial conditions and the appreciating US dollar have had dire consequences for most African economies.

The cost of debt service is expected to hit $25 billion next year, according to the World Bank, up from $21.4 billion in 2022. In local currency terms, it's risen even faster, increasing the risk of debt distress, the AfDB stated.

African countries are also finding it harder to access capital markets to meet their fiscal needs and refinance maturing debt.

The US, meanwhile, has largely failed to offer viable alternatives to cheap Chinese credit, officials said.

READ: US makes $2.5bn pledge to alleviate food insecurity

"China is an important partner," Democratic Republic of Congo Finance Minister Nicolas Kazadi said. "It is clearly shown that it's not easy to mobilise US investors."

One senior US treasury official said the US had long been engaged in Africa, funding anti-HIV work and working on other health issues. "We don't often talk about it. It's not named bridges or highways ... but, if you think about just the sheer lives saved  estimates of 25 million lives saved with our engagement with (AIDS relief) that is real."

Russian conflict

African countries have largely rejected US pressure to take sides in the Russia-Ukraine conflict, some of them citing Moscow's colonial-era support for their liberation movements.

Russia has blocked Ukrainian grain exports, driving up food inflation and aggravating one of the worst food crises in Africa's history, US officials note.

READ: SA could lose US preferred trade rights

On Friday, Yellen said in Senegal that the war was hurting the continent's economy, and that a Group of Seven-led price cap on Russian crude oil and refined products could save African countries $6 billion annually.

On Monday, though, South Africa hosted a visit by Russian Foreign Minister Sergei Lavrov and defended its decision to hold joint naval exercises with Russia and China off its east coast next month a day before Yellen was scheduled to arrive.

"All countries conduct military exercises with friends worldwide," South Africa's Foreign Minister Naledi Pandor, standing alongside Lavrov, told reporters.

Washington, Beijing and Moscow are all courting African nations with their own interests in mind, say foreign policy experts, including Ebrahim Rasool, a former South African ambassador to the US. African leaders, hoping for greater representation in bodies such as the G20 and UN Security Council, can play that game too.

"The US sometimes has good intentions and meetings but not always the follow-through," Rasool said, adding that sometimes Russia and China were needed to stir the US into action.


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