Commercial Diplomacy that Delivers for the US and Africa

The US and other major donor countries have reduced foreign assistance to Africa while signaling a shift towards new models that prioritize mutually beneficial trade and investment. This transition presents an opportunity to build a stronger US–Africa economic partnership if the US invests in the capabilities, staffing, tools, and relationships needed to make those deals happen.

Divergent Outcomes: Increased Trade and Decreased Investment

Trade between the US and Africa has steadily grown over the past five years. US exports have risen from $13 billion to $22 billion, while African exports to the US have risen from $19 billion to $33 billion. While the country and product composition of this trade remain concentrated, there are clear signs of progress despite global trade disruptions.

Meanwhile, US investment in Africa has fallen over the past decade and is now below pre-2010 levels. Much of this decline reflects the transition away from large US oil and gas investments. There are positive signs in areas such as venture capital, where the US remains the dominant external source of capital for African technology start-ups. However, more has to be done to support US investment in Africa. Africa will be a critical source of demand for US companies over the next 30 years, and private capital must drive economic outcomes like job creation.

US assistance to Africa, both historically and now, remains highly concentrated on grants in the health and humanitarian sectors, even though African governments have an appetite for expanded US investment engagement. Africa seeks US investment, technology, expertise, and access to the world’s largest consumer market. US firms bring competitive advantages across energy, technology, health care, financial services, agriculture, manufacturing, and entertainment that no other market can match.

The US needs to prioritize several capabilities:

• Country-level deal sourcing. Embassy “deal teams” require specialized staff with commercial, financial, and sector expertise to identify opportunities proactively and have them flexibly positioned to engage in Africa’s fastest growing economies and sectors. Transaction pipelines cannot depend on companies approaching Washington.
• Active commercial diplomacy. Ambassadors are needed to consistently advocate for US companies and cultivate deep, sustained relationships with African governments and business leaders rooted in mutual benefit and need the tools to be able to refer transactions quickly and flexibly to receive support.
• A wholesale approach to deal development. Handling transactions one by one won’t work. Individual transactions require expert due diligence the USG doesn’t have internally. The US needs to build new platforms that identify, prioritize, and advance large portfolios of investment opportunities simultaneously. That includes investing in proven fund managers with expertise and experience to effectively conduct due diligence on complex transactions.
• Flexible financing and de-risking tools. Existing financial instruments have gaps, particularly for smaller transactions below $15 million, which exclude more than 95 percent of US companies.
• Speed and execution capacity. Pre-competed contracting mechanisms for specialized transaction support should move opportunities forward in months, not years.
• A broader investment pipeline. Government procurement opportunities matter, but many are complex, opaque, and slow. Greater attention should go to privately developed and financed transactions.
• Mobilization of private capital. US institutional investors have limited exposure to Africa. The US needs to invest in a sustained program of targeted education, curated introductions, and facilitated engagement with African markets, projects, and fund managers to move capital into the market. This represents a low cost, high return investment.

American companies are unlikely to substantially increase investments in Africa without a dedicated US government partner for outward investment and US government-supported credit products specifically designed for American companies entering and expanding in African markets.

This represents a particularly important gap for small and medium-sized firms. Large multinationals can finance overseas expansion. The much larger universe of American small and medium-sized enterprises (SMEs) have viable African business opportunities but lack the collateral, track record, banking relationships, and scale required to obtain financing. The US Small Business Administration offers financial products for US firms exporting overseas, but not to American companies investing overseas.

If the US wants more American companies investing in Africa, it needs a new, purpose-built financing mechanism designed for SMEs.
 

Recommendations to Scale Investment

The US should prioritize five practical steps:

1. Procure a results-based transaction acceleration platform to source opportunities, support Embassy-led diligence, provide rapid technical assistance and interim grant support, structure transactions, and connect viable projects with US government, private-sector, and allied financing partners.
2. Create flexible investment de-risking instruments, including repayable grants recoverable at financial close, bridge financing, small-loan facilities, pooled investment vehicles that allow for co-investment with institutional investors, and less restrictive funding mechanisms that address known gaps in existing US government tools.
3. Close the financing gap for US small and medium-sized firms investing in Africa. The US should create a dedicated financing facility that lends to qualified US SMEs establishing or expanding operations in Africa on concessional terms, and a government loan portfolio guarantee that enables commercial lenders to lend to these companies and overcome the financing barrier that prevents viable US firms from entering and growing in African markets.
4. Establish a dedicated US–Africa investment initiative. This initiative would be anchored by regular head-of-state-level engagement and an annual US–Africa investment summit hosted in the US and complemented by a sustained, year-round investor education and engagement platform.
5. Build an institutional home for US outward investment. The US has extensive institutions and financing products supporting exports, but no agency principally responsible for helping American companies invest overseas. The US strategy in Africa should include outward investment as an objective and provide US SMEs a clear government partner with tools for financing, market entry, risk mitigation, and transaction support.

Only a handful of African projects currently receive US financing and project development support. The US needs a platform with the expertise, tools, speed, and flexibility to convert commercial opportunities into financed transactions at scale, engage a broader range of US firms, and deliver ambitious results in transactions and capital mobilization that benefit both Americans and Africans.