US Treasury Secretary Janet Yellen leaves Tuesday to visit three African countries central to President Joe Biden’s strategy to rejuvenate ties on the continent and counter China’s influence in the developing world.
The 11-day trip comes just a month after Biden hosted more than 40 African leaders in Washington, where $15 billion in new commitments and agreements were announced.
“The United States wants to build on that progress,” said Razia Khan, head of research for Africa and the Middle East at Standard Chartered Plc in London. “They are trying to reinforce that there is a different model of how to develop” than relying on China.
Their meetings in Senegal and South Africa will mark a visit to Zambia, seen as a testing ground for democracy in southern Africa and for prospects for debt relief among heavily indebted countries around the world.
Yellen will deliver in Senegal on Friday what Treasury is billing as “important observations on the US-Africa economic relationship.” Senegal, where she will meet President Macky Sall, is expected to have the fastest growing economy in Africa this year and is currently chair of the African Union.
In Zambia, he will meet President Hakainde Hichilema, a once-imprisoned opposition leader who has sought democratic and economic reforms.
Under Hichilema’s predecessor, Edgar Lungu, the United States threatened sanctions against then-ruling party officials if they tried to rig the 2021 election. Meanwhile, Chinese companies won billions of dollars in government tenders, all financed by debt that he ultimately helped bankrupt the nation.
“Zambia is the best democracy story we have right now on the continent,” said Michelle Gavin, former US ambassador to Botswana and senior fellow at the Council on Foreign Relations. “It is the best opportunity to demonstrate that more democracy, more rule of law generates results for citizens.”
Zambia defaulted on its debt in 2020 and has since requested a restructuring of around $12.8 billion under the new G20 Common Framework. The program seeks to unify the position of sovereign and commercial creditors and smooth the path to relief for the most indebted countries.
China owns about a third of Zambia’s foreign debt, but has stalled in the process, leaving Zambia and the entire Common Framework project in limbo. That prevented other struggling governments from seeking help from the program and drew sharp criticism of China from Western officials, including Yellen.
“Zambia is a key test case,” said Khan of Standard Chartered. “If something can be done in the case of Zambia that speeds up the process, that could encourage other countries to act early, well before they reach the point of non-compliance.”
That’s especially important, he added, at a time when Covid-19, the war in Ukraine and a strengthening dollar are pushing many emerging markets to the brink of collapse. Ghana became the latest country to default when it suspended interest payments in December.
The last stop is South Africa, which has just assumed the presidency of the BRICS club of nations, and may try to admit new members to that political and economic grouping of major emerging markets. Expanding the body, which includes Brazil, Russia, India, China and South Africa, could increase its role as a counterbalance to the global dominance of developed economies like the United States.
Yellen is expected to press the government of President Cyril Ramaphosa to continue its nascent transition to cleaner energy and away from a heavy reliance on coal. South Africa has been promised $8.5 billion from rich nations to help, but most of it is loans, not grants, and the country is grappling with an energy crisis that risks slowing economic growth.
Although the US is among the countries supporting the project, the authorities may request additional financial support from it.
© 2023 Bloomberg
