How the outcome of the US election could affect investment in Africa

The outcome of the US presidential election usually influences the direction of investments and economic trends on a global scale.

However, they have historically had less impact in Africa, where a bipartisan political consensus has largely prevailed in Washington.

From one administration to the next, Washington’s basic strategy for the continent hasn’t changed much.

According to Statista, the United States exported about $28.69 billion to Africa in 2023. The world’s largest economy pledged to invest $55 billion in Africa over a three-year period. This policy specifically seeks to offset China’s growing influence, which has significantly boosted investment and infrastructure development.

The US presidential election in 2024 could influence investment in Africa through several channels:

Commercial policies and economic relations: The outcome of the US election could affect trade relations with Africa, particularly through policies such as the African Growth and Opportunity Act (AGOA). Depending on who wins, there could be changes in trade priorities, with possible changes in tariffs, trade agreements or support for African exports such as textiles, cut flowers and other products.

For example, a more isolationist policy could reduce US engagement, while a policy aimed at fostering global trade could improve opportunities for African exports. Historically, Trump’s “America First” approach leaned toward protectionism, characterized by tariffs and trade negotiations aimed at protecting American industries. This could mean less favorable terms of trade for African countries under programs like AGOA, which could affect Africa’s exports to the US. Investors could perceive this as a risk, depending on how these policies are renegotiated or maintained.

Foreign Direct Investment (FDI): Different administrations have different approaches to investing abroad. A Kamala Harris victory could encourage more US companies to invest in emerging markets, including Africa, which could lead to greater job creation, technology transfer and skills development in regions like South Africa. Conversely, a different approach could prioritize domestic investment or focus on other regions, potentially reducing FDI flows to Africa. Trump has expressed skepticism about foreign aid, which could translate into a reduction in US investment or development aid in Africa. However, if Trump continues or expands initiatives like “Prosper Africa,” aimed at increasing trade and investment with Africa, there could be opportunities for investors. The unpredictability of policy continuity could make investors cautious.

Geopolitical influence and stability: The impact of the US election on global geopolitics may affect the stability of African markets. For example, continued strong engagement with US foreign policy could deter other world powers from exerting undue influence in Africa, which could stabilize markets. Conversely, a less committed US could lead to increased competition or conflict in Africa, which could deter investors due to uncertainty.

Financial markets and economic policies: The election’s influence on US interest rates, inflation and the value of the US dollar could indirectly affect African markets. Lower interest rates or a weaker dollar may make African assets more attractive to US investors seeking higher yields. Conversely, higher rates or a stronger dollar could drive capital away from Africa.

Direct political initiatives: The election could influence specific policies or initiatives towards Africa, such as aid, debt relief or new trade deals. For example, support for initiatives such as the Power Africa program or stronger responses to conflicts could directly affect investment environments. Trump’s stricter immigration policies could hit African countries, potentially reducing remittances, which are important to many African economies. This could indirectly influence investment by affecting economic stability or growth forecasts.

In summary, while the direct impact of the US election on investment in Africa may not be as dramatic as in other regions due to Africa’s diverse economic landscape, it could significantly influence trade deals, FDI flows, geopolitical stability and investor sentiment. If the new administration focuses on resource extraction or infrastructure in Africa to counter China’s influence, it could increase investment in sectors such as mining, oil or renewable energy, especially where these resources are abundant

The variability in results suggests that investors may need to prepare for different scenarios, each offering unique opportunities or challenges for investing in Africa.

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