What the U.S. Political Transition Might Mean for Africa Generally and Its Oil and Gas Sector in Particular
December 30, 2020
By Jude Kearney*
US Africa relations will likely improve by virtue of Trump’s exit.
2021 could be the beginning of a much needed reset for US relations with Africa and its various countries and regions. To date, most African governments have responded positively to the results of the recent U.S. presidential election, with many African leaders offering their congratulations to Joe Biden. That is no surprise: Donald Trump’s presidency has been, at best, a mixed bag for Africa and Africans.
President Trump’s Africa Legacy
Unfortunately for Donald Trump, his widely reported use of profane and vile language in a closed door meeting to describe African and other developing countries is now viewed by many, including most Africans, as clear evidence that he is uninterested in any meaningful or supportive relationship with Africa. While I accept it as fact that such derogation of a whole continent of peoples displays bigotry and disdain towards Africans, it is nonetheless true that, by some measures, his administration’s substantive policies and actions towards Africa are not all negative. For instance, it is a fact that Trump played a role in facilitating the April 2020? “OPEC plus” deal which helped to stabilize the oil industry and gave African oil-producing nations new opportunities to recover from COVID-19-related economic hardships. Certain of his administration’s senior officials and agencies have championed policies devoted to creating openings in Africa for US and Western investments, though primarily as a geopolitical hedge against our nation’s chief international hegemonic rivals. Indeed, the Prosper Africa program was launched by his administration pursuant to the stated intention to utilize the resources of the, including the balance sheet of a new, highly capitalized US Development Finance Corporation, to more forcefully compete for partnerships and commercial opportunities for US businesses in Africa.)
But let’s be clear: Among Africans and those in the private sector dedicated to partnering with and developing countries and regions in Africa, the net effect of Trump on US Africa matters is deeply negative. He didn’t win any friends in Africa by the above-mentioned disparagement of Africa as a monolithic “shithole”, nor through his spontaneous and otherwise unsubstantiated issuance of orders restricting travel to the United States from several African states beginning in 2017. In a move that drew criticism from many observers (including myself), his administration also withdrew from the Extractive Industries Transparency Initiative (EITI) in 2017, thereby weakening the critical war against corruption in the extractives industries (including especially the hydrocarbons sector). And the shithole reference was troubling beyond its arresting and unpresidential nature: that comment came as a flourish, of sorts, meant to punctuate his view of the unattractiveness of Africans as immigrate to the United States. As retold by an official present at the meeting, Trump would prefer instead emigres from Norway.
All, in all, where the Trump administration is concerned, US Africa relations will likely improve by virtue of Trump’s exit, even as observers seek to retain and expand on the few Trump policies and initiatives which are useful to the relationship. What remains is therefore to see what in particular the Biden Administration portends for the relationship.
How Substantially Better Will US Africa Relations Be Under Biden?
For a host of reasons, including his standing with the African American community, his reputation for stability and reason, and his renown for foreign policy expertise and diplomatic good will, Biden as president is already viewed by Africans and Africanists as an improvement over Trump. Certainly, Biden is expected to strike a different tone. In addition, throughout his presidential campaign, Biden engaged a group of dedicated Africa and foreign policy specialists to help him define and convey a positive and substantive Africa polity. Indeed, the Biden transition team has already pledged to aim for “mutually respectful engagement toward Africa with a bold strategy,” so it seems safe to assume that the new administration will take a much less confrontational approach to Africa, with an important nod to improving trade and diplomacy relationships between the US and African countries.
It is thus at least reassuring that there will be earnest and polite interaction between the US Government and its various bilateral counterparts in Africa. But will politeness good will be enough? Will the Biden administration be willing to work with Africa in ways that are productive and substantive, or will it offer mostly warm regards and rhetoric? In particular, will the new administration craft true partnerships with certain African governments and, importantly, will the Biden administration navigate a path in its Africa policies that advances US goals while acknowledging the unique juxtaposition of Africa’s continued and growing demand for power generation and poverty abatement, on the one hand, while on the other hand it must rely overwhelmingly on extractive resources, including hydrocarbons, to capitalize the installation of power and abatement of poverty.
Africa’s Energy Conundrum
So, looking more granularly at future of US Africa policy on Africa’s economies, what does the impending US presidential transition mean for Africa’s oil and gas sector? By virtue of my role at the African Energy Chamber, I simply have to ask: How will the Biden administration approach African oil and gas? Is it likely to exert itself to strengthen one of the most important pillars of the continent’s economy, or will it focus on other issues? How will it deal with energy poverty issues? Will the US help to fund an energy transition for Africa and brainstorm with leaders in Africa on the balance of optimizing Africa’s extractive resources while likewise planning a sustainable future for Africa and the planet? Or instead, on these thorny issues, will African countries be left to fend for themselves seek partnerships and support on these issues elsewhere? (It is a safe bet that China and Russia and others will be happy if that latter tack is taken.) Though I certainly don’t expect it, a related question should also be asked: Will the Biden Treasury Department continue policies where its default position is to distrust and punish Africa’s governments through sanctions and punitive monetary and banking restrictions, increasing the chances that certain countries will never get the developmental traction to pull itself out of stagnation? Will there be, in particular, an abrupt anti-funding posture towards Africa’s biggest commodity, hydrocarbons? Will the new administration utilize the good will that it will enjoy with Africa upon inauguration and the administration’s agency initiatives to foster stronger private sector alliances between US and African companies? In regards to expanded trade between the African continent and the US, how might the US provide input and partnership with Africa on the development of the proposed African Free Trade Agreement and how might the US Africa Growth and Opportunity Act be improved and strengthened so as to substantially improve direct trade advantages between the US and certain African countries?
Biden administration answers to these and similar questions will have profound influence on the tenor and success of renewed engagement between Africa and the US.
Relationship Between US Africa Policy and US Domestic Priorities, Especially Including Climate Change
First of all, the incoming administration’s top priority is likely to be COVID-19 — and specifically, the domestic implications of the pandemic. For despite the recent roll-out of several types of vaccines, infection rates are rising in the United States — and may continue to do so for some time yet. At the same time, the U.S. economy has not yet regained the momentum it lost in the spring. The outbreak is still causing companies to go out of business and people to lose jobs.
Under these circumstances, it makes sense for Biden to focus on the home front. What that means, though, is that he’ll inevitably devote more attention to the question of how best to compensate for the loss of many thousands of jobs in the U.S. oil and gas sector than to the question of how best to support upstream, midstream, and downstream projects that might create many thousands of jobs in Africa.
In short, the Biden administration is probably not going to make Africa’s oil and gas sector a priority.
But that’s not just because of the pandemic. The second reason why is that Biden has identified climate change as an urgent threat that requires immediate attention. He said so explicitly at a news conference on Dec. 19, as he named his picks for three cabinet-level posts at the Department of Energy (DoE), Department of the Interior (DoI), and the Environmental Protection Agency (EPA).
“Folks, we’re in a crisis,” he declared. “Just like we need to be [a] unified nation that responds to COVID-19, we need a unified national response to climate change. We need to meet the moment with the urgency it demands, as we would during any national emergency.”
Biden also described climate change as “the existential threat of our time.”
These statements are all perfectly in line with the lofty goals outlined on the Biden campaign website. They suggest the incoming U.S. administration will come down decisively on the side of renewable, zero-emissions energy initiatives at the expense of oil and gas. They suggest the Biden team might not provide any backing, financial or otherwise, for projects that aim to help African and international companies turn the continent’s abundant hydrocarbon reserves into fuel for domestic industry. And they suggest Washington might not be overly sympathetic to African countries that are trying to reduce their carbon footprint by expanding the use of natural gas as a fuel for electricity generation.
China’s Role in Africa: Africa Requests the Favor of US Attention and US Business Practices as Alternatives
If a strictly anti-hydrocarbon policy dominates US posture towards African economies, African states are left with little choice but to push back against such cut-and-dried policies which would essentially disregard the continent’s primary source of economic survival. And it may have the clearly unintended consequence of pushing African states deeper into the arms of other geopolitical suitors who acknowledge the unavoidable role that hydrocarbon resources play in Africa’s economy.
That push back will come not just because gas-fired power stations, a creative and growing use of Africa’s abundant hydrocarbon resources, generate less carbon dioxide other petroleum products–while also supplying the electricity that Africans need to improve their own lives and build their own economies—but also because other foreign investors, while not necessarily favored in many countries, in Africa, don’t place the impossible burden on Africa of ignoring its most prevalent source of income . China is chief among the countries sending such alternative investors into Africa.
I’m hardly the first person to notice that Beijing has taken a strong interest in Africa — in its resources, in its strategic locations, in its potential as a market for Chinese goods. And I’m also not the first person to notice that this interest has led multiple African countries to accept loans from China, which does not follow Western creditors’ practices of imposing requirements for transparency and human rights protections. But I want to add my voice to those who have pointed out that Chinese loans may be a net drag on Africa, since they often do little to support local workers or local companies and are so hard to repay that they sometimes leave borrowers with no option but to forfeit control of important assets.
I also want to point out that billions of dollars’ worth of Chinese credits have flowed into Africa’s oil and gas sector — especially in cases where sanctions and other restrictions have limited opportunities for Western investors. Chinese companies have, for example, played the leading role in developing oil fields in Chad, Sudan, and South Sudan. They have also established footholds in key producer states where sanctions are not a consideration — as in Nigeria, where a Chinese company is building the cross-country Ajaokuta-Kaduna-Kano (AKK) gas pipeline.
In short, China is looking to play a significant role in Africa’s oil and gas sector. What’s more, it’s making clear that it’s ready to invest in hydrocarbons even when the United States and other Western countries won’t do so.
Certainly, African countries aren’t going to be turning their back on Chinese investments any time soon – and they shouldn’t. Even so, I’d like the continent’s oil and gas producers to have as many options as possible. As I’ve already said, I’m concerned.
And I think the United States ought to be concerned, too. Partly because China doesn’t always play fair with respect to trade and currency policy. Partly because China doesn’t necessarily share the U.S. government’s stance on transparency and accountability.
The Biden administration will be in a better position to do the watching if it looks for ways to help U.S. businesses compete in the same sectors that China has been targeting in Africa. It therefore ought to give serious consideration to projects that involve hydrocarbons. It should look for ways to provide financing, risk insurance, and other forms of support for African oil and gas initiatives, and it should pursue closer diplomatic and trade ties with African states that don’t fall in line with Beijing’s demands. It could, for example, back the Sudanese interim government’s decision not to renew PetroChina’s contract for Block 6 in the Muglad basin at the end of 2020.
U.S. DFC, Among Certain Other Agencies, Offers Great Potential for Both the U.S. and Africa
The one key initiative taken by the outgoing Administration which can be most useful to the development of an improved US Africa relationship in the coming years is the consolidation and focus of US developmental objectives through the establishment of the US Development Finance Corporation. The substantially increased balance sheet and proactive charter given to the agency can be used to greatly enhance African development initiatives and foster stronger bilateral ties between the US and many African nations. However, as is widely known in Washington, personnel is policy: the use and treatment of this agency and its resources by new Biden administration appointees will go a long way toward defining the tenor and effectiveness of Biden Africa policy. could also make better use of existing institutions — especially the International Development Finance Corporation (DFC).
The Trump administration had a point when it gave the DFC — which is described as the provider of “an economically viable form of private sector-led investment, offering a robust alternative to state-directed investment which often leaves countries saddled with debt”— the task of promoting U.S. trade and economic interests in the face of stiff competition from China.
What’s more, I don’t expect the Biden administration to set DFC aside — at least not initially, while it focuses so closely on the pandemic and climate change. Instead, I expect the incoming team to let the corporation continue along its current course for the time being.
The problem is that DFC’s course doesn’t do much for the oil and gas sector in Africa. The agency has lent its support to several gas-to-power schemes, such as the Central Termica de Temane (CTT) initiative in Mozambique, but it has shown much more interest in renewable energy projects such as solar farms.
This imbalance doesn’t seem to be the product of any institutional biases against fossil fuels. After all, DFC has awarded funding to a number of upstream and midstream projects in the Middle East and Latin America. Nevertheless, there is an imbalance, and African oil and gas producers could try to correct it by asking this U.S. government agency for help in financing oil and gas production, transportation, processing, and distribution initiatives.
If they succeed, they’ll be in a better position to seek alternatives to Chinese creditors as they work to develop some of their most valuable natural resources. And along the way, they’ll also extract more of the fuels they need to produce more electricity, support local industries, and raise their earnings.
*Mr. Kearney collaborated on this article with NJ Ayuk, Executive Chairman of the African Energy Chamber and CEO of Centurion Law Group
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