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Africa-US summit begins in Washington

Hilke Fischer (im)August 4, 2014

Top US officials welcomed fifty African heads of state at the first ever US-Africa summit that began on Monday.The summit will focus on security and developmental issues among others.

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John Kerry and Congolese President Kabila, pictured in Washington
Image: Reuters

This is mainly because Africa's economy is booming and bustling with opportunities and undiscovered potential.

Those are the sorts of headlines that have been shaping the Western view of the African continent, which many felt had been ignored on the world stage.

In 2013, the economies of African countries grew by an average of four percent, with many countries far above that figure. The World Bank has predicted an average growth rate of five percent by 2015.

Barack Obama in Tanzania
Barack Obama has been criticized for his brief visits to Africa.Image: Reuters

The African Development Bank estimates that this year, four times as much foreign capital investment will flow into Africa than in the year 2000. Africa also boasts one billion consumers, who spend more than 600 billion US dollars (850 billion euros) per year, a middle class that is developing faster than anywhere else in the world, as well as a nearly inexhaustibly large oil supply and huge expanses of land for agricultural use.

US eyes Africa

These are likely to be the things that flashed through Barack Obama's mind when he invited heads of state or government from 50 African countries to the US-Africa summit in Washington. Ayo Johnson, a Sierra Leonean journalist and the founder of the Africa platform Viewpoint Africa, explains that from the African side, expectations are high as well.

"The hopes and aspirations for many of the 50 odd African countries that are making the trip are very much about economical ties, how to form cultural relations with the US and seeing what opportunities exist," said Ayo, "Africans are seeing this as a unique opportunity whereby they can choose among investors".

So far, China is the only country that has invested immensely in Africa. It has built streets and is selling consumer goods and buying raw materials. The Asian country is Africa's most significant commercial partner, much more than the US.

Scramble for raw material

Raw materials are the reason why the economy has made progress in leaps and bound in most African states. Prices on the world market are not only high for oil and precious metals, but also for agricultural products such as coffee, cocoa and tea.

Many African governments have managed their economies well in recent years, according to Stephan Klasen, a professor of development economics at Gottingen University in Germany.

Klasen explained that at least some of the financial gains have trickled down to the population, with 45 percent of the population now living on less than one dollar per day, up from 58 percent in the mid 90s.

A man harvests coffee beans
Coffee exports are key to many African economiesImage: TONY KARUMBA/AFP/Getty Images

But in oil-rich countries like Nigeria, which overtook South Africa as the continents largest economy, the divide between divide rich and poor is still increasing, according to development expert Klasen.

"As long as growth is largely based on resources, few of the resources will be in the hands of very few people and create very few jobs," said Klasen.

"So very little of the new oil wealth actually reaches the poor. Other resources such as coffee and cocoa create have much broader benefits for the population.”

No long-term growth without industries

But the boom could end quickly, for example if prices for oil or coffee fall. In most cases, you need to create jobs for a steadily growing population – for example in the manufacturing industry – in order to stay successful. In countries like Ethiopia and Kenya, the industrialization process is already in full swing; with international companies such as the fashion label H&M having their clothes sewn there.

Oil refinery in Nigeria
Oil production in Nigeria has not benefitted ordinary peopleImage: picture-alliance/dpa

"Since 2000, under the Africa Growth and Opportunity Act (AGOA) which gives products made in Africa preferential access to the American market, many have moved their production plants to Africa. A lot of companies, some from Asia have moved to Africa to produce for the American market," said Klasen.

The "Africa Growth and Opportunity Act" will be up for discussion at the US-African summit. It officially expires in 2015, but it is supposed to be renewed. The renewal will be an important step for both the US and many African states, in order to keep Africa's economic boom sustainable in the long term.