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The dust has settled on the US elections. As expected, Joe Biden prevailed over Donald Trump, albeit by a slimmer margin than the polls suggested.
With the Senate likely to remain in Republican hands, the President-elect will likely have a stronger hand when it comes to foreign policy
Of particular interest will be Biden’s approach to Africa. After all, his predecessor paid the continent scant attention (apart from some highly controversial remarks about the nature of its countries). Investors with interests on the continent will be looking at his approach to trade deals and whether his government will consider extending the African Growth and Opportunity Act (AGOA) beyond 2024. But they’ll also keep an eye on whether he can end Donald Trump’s trade war with China, where Africa has become a proxy battleground.
While all those variables matter, and are worth unpacking, it’s also important to consider the opportunities and risks for investors that will remain in place regardless of who the leader of the so-called free world is.
A global agenda
One thing that’s relatively certain is that Biden will take a more global view than Trump’s “America First” approach. It has alienated many of America’s allies, including some on the African continent.
While some critics believe that there won’t be any substantive changes, he could achieve two relatively quick wins by backing an AGOA extension and supporting the African Continental Free Trade Area. With a number of countries on the continent bearing the brunt of climate change, rejoining the Paris Climate Agreement would also win some favour, as would backing Ngozi Okonjo-Iweala as the first African Director-General of the World Trade Organization, a move blocked by the Trump administration.
While some of these measures may largely be symbolic, they would illustrate that the President-elect respects Africa far more than his predecessor did.
That attitude will filter down, encouraging investors to explore opportunities on the continent. The Better Utilization of Investments Leading to Development Act of 2018 (BUILD Act), which doubled – to US$60 billion – the ceiling of private sector infrastructure projects the US government could guarantee in developing countries, provides a ready-made vehicle for expanded investment.
Beyond respect, however, the Biden administration will have to work closely with organisations on the ground to promote available opportunities that bring real, lasting returns.
One potential pitfall that investors may face reared its head in the immediate aftermath of the networks calling the election for Biden. In those moments, the US Dollar fell, making foreign investments slightly more expensive.
Over time, however, that will likely stabilise. That said, investors looking to get maximum bang for their buck will be keeping an eye on exchange rates across the continent throughout the Biden Presidency.
Finding the right guide
Even if a Biden Presidency opens up investment in Africa, as it well might, investors cannot go in cocksure and hope for the best. Those in the likes of the private equity space, in particular, need to understand the risks and opportunities present on the continent.
When it comes to ESG, for example, companies in some African countries actually outperform their developed-world counterparts. Already an emergent force in the investment world, ESG will only become more important if Biden is able to bring America back into the Paris Climate Agreement. That’s to say nothing of the complexities of local politics that investors need to understand before they make firm commitments on the continent.
It makes sense, therefore, to take guidance from players who have tried and tested experience across Africa, either using them as an investment lead or partnering with them.
While America’s outsized influence is unlikely to change anytime soon, there is no doubt that the coming months will bring a degree of flux to the country’s relationship with Africa. For smart investors, there will always be opportunities there. No matter who the president is, the most important part is identifying those opportunities and capitalising on them.
Bryan Turner is a partner at SPEAR Capital, which provides growth capital to SMEs focused on FMCG and local production in Southern Africa.
This article was written by Bryan Turner, Managing Partner, SPEAR Capital
Featured image: NeONBRAND via Unsplash