GBR Team 20/02/2020
The United States Government has a far-reaching agenda for Kenya this year, it has emerged, and it could set the stage for a return to the Cold War dynamics of the 60s and 70s on the African continent. This time, pitting the Americans against the Chinese; with Kenya as the launchpad.
US officials speaking both in Washington D.C. and also at local engagements most recently at an American Chamber of Commerce in Kenya breakfast meeting, have stated the global superpower’s blueprint for Kenya and the region.
The US Agenda 2020 for Kenya, will mainly revolve around Defense/Security cooperation, and Trade and Investment engagements.
Primarily, according to US officials that GBR can quote, this will consist of military cooperation and cybersecurity (read Huawei) on one hand, as well as pushing the Kenyan government to restructure the business landscape, to make it not only more viable to have a bilateral trade agreement between the two countries, but to also make it more attractive for American companies to do business here through regulatory reform and matchmaking.
From a trade perspective, the US Government through USAID said at the meeting, is that it does not want to do a trade deal with a Kenya that is not economically structurally organized to offer value in a trade treaty. This, we shall return to later.
The mid game in all this, as far as American international trade concerns, is to develop a framework or template from the US-Kenya trade deal once it is done, to be replicated in bilateral deals America plans to make with other African countries. (The military and global cyber-security angle, will be dealt with in a separate GBR article).
The endgame, however, is to checkmate China on the continent.
This in itself is not a bad thing, so long as Kenyan foreign policy makers understand international relations from first principles of national interest.
To deal with China, the US has first retooled itself for this Kenyan, and regional engagement, as well as a global fair-deals agenda, with new and revamped institutions and money.
It is also betting on a different approach to the “debt-pumping” approach of the Chinese to vulnerable economies which, American officials feel will collapse sooner or later.
The thinking in Washington, echoed by Adam Boehler, the boss of the new billion-dollar development finance institution created to take on the likes of Chinese project lenders and other DFIs playing on the continent, is that the Chinese approach in Africa is headed for disaster.
The US International Development Finance Corporation (DFC) is looking to take a more muscular role on the global development finance stage than the US has previously intended or aspired to in recent years. It has been reshaped from OPIC (Overseas Private Investments Corporation), and a section which has been hived off from USAID. It’s establishing Act of Congress signals intention. Called the BUILD Act, it stands for, “The Better Utilization of Investment Leading to Development” Act.
And the American DFC that Mr. Boehler heads, has been capitalized by the US Congress to the tune of USD60billion, to take on not just China/Asia’s new infrastructure bank, meant to fuel the so-called Belt and Road programme, but it looks primed to also take on other lenders including the Bretton Woods Institutions, the European DFIs such as KWF (Germany) and AFD (France) as well as the African Development Bank, if it does not toe heel.
Quoted in the Financial Times, Mr. Boehler said it is not a matter of if, but when the Chinese approach to lending money to highly vulnerable indebted countries will collapse. The US, however, he said, will be around to pick up the slack.
“We have to be there as an alternative because I could see China take down a whole bunch of emerging countries . . . there will be more and more cracks and then the glass will break,” Mr. Boehler said.
Specifically, in Kenya, DFC in partnership with USAID officers in Kenya, will mobilize American finances for investment in counties as mentioned later in this article.
Diane Jones, is the American commercial counselor at the US Embassy in Kenya. She outlined the agenda, at the American Chamber of Commerce in Kenya meeting.
Among the activities for US-Kenya engagement slated for this year, she said, would be the Trade and Investment Group meeting in Washington in February. This already took place after the announcement by President Trump of the commencement of trade negotiations between the US and Kenya. There will follow, the second Bilateral Strategic Dialogue between the two countries in May also in the US. This dialogue is looking to do four things:
1. To maximize the remaining years of the Africa Growth and Opportunity Act that allows certain African products into the American market duty free. This will be done either before the current AGOA expires or a new partnership comes into being.
2. To work towards the US-Kenya trade agreement that Presidents Trump and Kenyatta announced in Washington D.C. earlier this month.
3. To increase commercial relations e.g. companies from each country doing business in the other at favourable conditions.
4. To reform areas that are placing hurdles in each others’ respective commercial businesses ability to thrive in the other country.
According to the Ms. Jones, there are four areas that will be priority for the envisaged engagement, though GBR picked five.
Contacted by email by GBR, Ms. Diane Jones did not respond, but other US officials’ statements did help clarify some of the issues.
On Security, not much information was given, but from statements elsewhere by US officials, it is certainly military cooperation (especially on terrorism and regional security issues including Chinese military presence), but also the issue of 5G networks and Huawei’s preeminent position with most African telecommunications networks.
While Kenya’s Safaricom is said to be planning a 5G network launch, it is pretty clear it is a fixed wireless network, and not the sort of networks that US is fighting the Chinese over. Many Safaricom engineers have also been loth to hand the entire network to Huawei, because it leaves them vulnerable, and it is not clear what the US might also seek to work out, if only to keep Huawei at bay.
Militarily, the US has stepped up cooperation, not just with Kenya, but also in the region with US military commanders routinely visiting east African countries and approving sale of US military hardware. Besides delivering attack helicopters to Kenya, the US government has also established an FBI-led Joint anti-terrorism investigators training task force. 42 Kenyan investigators, the US said, will be trained at the world-famous FBI Quantico Offices (fans of Criminal Minds will know about Quantico, and criminals behaviour profiling), to come back and apply the same-level approach to investigations and monitoring of terrorism activities.
There is also further cooperation in sub-Saharan Africa to establish US security interests viz a viz China and other powers on the continent.
More importantly, are the trade and investment objectives of the US in Kenya and next the African continent.
The Kenya Case
As Bilateral (country-country) trade agreements have emerged as the favoured tool of international engagement for US President Donald Trump’s administration, nowhere will this be more manifest or apparent than in Kenya in 2020.
At the American Chamber of Commerce in Kenya meeting, where the GBR reporter was present, the US government officials made it clear that:
A Bilateral Trade Agreement between Kenya and the US is planned. This was later confirmed by President Trump in Washington.
Kenya, however, the US officials told GBR, is not ready to commence trade negotiations with the US, until it makes some structural economical changes.
So the US Embassy in Kenya intends to embark on a rigorous programme to get Kenya ready to sit and negotiate a trade pact.
The readiness means, not only Kenya having capacity to conduct such negotiations, but also to offer, a reorganized business regulatory landscape that American companies will feel they can operate in, legally, regulatory wise and so on.
To this end, the US feels it has to work with the Kenyan government to first of all have better data to understand the business landscape, but also to reduce unnecessary regulatory and legal hurdles.
“Kenya, is not trade ready,” a US official told GBR.
US view on Business Landscape Change
American business is information and data driven, officials said. Kenya, while it has some good transparency, has a lot of data in unusable or hard to decipher format. US government will participate to digitize government and other data that will improve visibility of the landscape. (The ICT goal. This may also include bringing in a big data synthesizer/user like Salesforce.com by the Americans to keep track of some metrics, according to a US official GBR spoke to).
Over 200 Kenyan parastatals need to be eliminated. This is the US view. Part of creating hurdles for doing business, is that too many unnecessary state or regulatory bodies exist. US Embassy officials feel that to help the process of getting “trade ready” will be to get rid of institutions that are not needed, duplicate duties or are just trader barriers. The goal, is to cut the 400 parastatals in Kenya, by half.
American companies would like to do business in the counties of Kenya. It is the American officials in Kenya view, that working with the counties to open up high-potential areas for American businesses would spur investment.
As DFC’s Boehler noted, the US thinks, a more sustainable engagement with African countries, is if incomes are increased to be able to do commercial business with American companies, rather than give money to projects.
The US will this year in Kenya be pushing to finish a pilot Africa Prosperity program in Kenya. To this end, they have picked eight counties: Kiambu, Mombasa, Nakuru, Kakamega, Isiolo, Kisii, Kajiado, and Kisumu to identify high potential investment areas, which can be developed into a business case, and that can then be used to match American companies to come in and invest in. The thinking is, if this works, then it can be rolled out to the rest of the country. The counties were picked on the basis of either urbanization, high investment potential, high human resource skills and so on.
It has also been identified that countries like Kenya have not maximized on the duty-free exports to the US under the African Growth and Opportunity Act, and that Kenya in these talks will seek to maximize on the AGOA deal before its next expiry, even as it works for a bilateral trade deal (GBR will this week issue an analytical article on the proposed Kenya-US Bilateral trade deal).
According to Mr. Peter Biwott, the Chief Executive of Kenya’ export promotion body, Kenya’s exports to the USA, amounted to only about US$661m (Sh66billion). And most of this (61%) was taken up by apparels and textiles, and these are mostly done by foreign firms.
Farming products like coffee, fruits, flower and tea make up only about 23%.
A Template? Second Cold War?
US officials have repeated that Kenya and US relations have never been stronger than they are. It is also apparent that the US wishes to strengthen relations with most African countries.
It has been stated by the US that the trade pact that will likely emerge from a US-Kenya bilateral trade agreement, will be used to replicate similar agreements with other African countries.
It is the US contention, that these deals ultimately are more reliable and bring more common prosperity than what they feel will soon-to-be discredited Chinese debt diplomacy.
That it makes more sense to have a partner who stays afloat for a sustainable business engagement.
China will obviously disagree….and coupled with the very clear military expansionism the US has embarked on, with whirlwind meetings of top generals with their African counterparts, from Kenya to Ethiopia, Angola to Mauritania, Eritrea and so on, it seems only a matter of time, before a time to choose allegiance, will be upon the African continent.
A Second Cold War, may be Africa’s wake-up call. Winter is Coming!