The United States (US) presidential election came to a nail-biting photo finish. The world watched and braced itself for what could be a stark change in leadership ideology and approach to diplomacy, or an even more disruptive four years if Donald Trump won a second term.
He didn’t so Mr. Joe Biden is President-elect and a restoration of normalcy is expected – one that will re-shape the outlook for industries and the global economy. The US will seek to mend strained relationships, ditch the “America First” rhetoric that was the bed-rock of the Trump administration and re-assume its place as “the” global leader.
We expect greater global coordination of fiscal and monetary policy led by the US, co-optation with China, rapprochement with the European Union (EU) as well as constructive engagement with Russia.
But what does restoration of normalcy mean for sub-Saharan Africa (SSA)?
East vs. West
First of all, the consensus is that Africa was effectively ignored by Donald Trump as he never set foot in SSA after assuming office in January 2017. Africa has been at the centre of economic and political struggle between the US and China – a struggle the Americans seem to be losing.
Even before Trump, China’s economic rise and its increasingly important role in global economic affairs and development meant it deepened its presence and links with the African continent.
This coincided with the move by the West to relinquish its traditional role as donor and financier and channel its resources towards more strategic interests and domestic challenges. In more recent years, the US has acted more out of fear of a perceived “take-over” by the Chinese than anything else.
This strategy is inadequate and may well be counterproductive in the grand scheme of things. The Chinese strategy effectively combines aid, investment, trade and labour cooperation in ways that ostensibly seek to find solutions to African challenges. The Biden administration will need to be seen to be providing solutions to re-gain any kind of foot-hold on the continent.
SSA Debt Debacle
Right now, the debt crisis in SSA provides the first test. The COVID-19 pandemic has devastated the fiscal picture in many SSA economies as trade, capital and remittance flows have plummeted significantly.
In the face of increased healthcare obligations and the need to provide adequate stimulus, many countries are unable to meet debt obligations (of which a significant part is owed to China). The region is in dire need of bailouts and longer debt moratoriums which the US government (given its influence) could insist on.
This is in addition to increased flexibility on Special Drawing Rights at the IMF. Trump was already blaming China for the region’s woes. His exit hopefully stops the blame game and opens doors to unload SSA’s debt overhang.
Multilateralism and Stronger Institutions
The bilateral approach of Trump to trade will give way for the return of a multilateral approach. Biden is likely to support the African Continental Free Trade Agreement (AfCFTA) as well as other continental initiatives. Its bilateral free trade agreement with Kenya will be monitored closely by other African countries as it could potentially trigger regional tension as it is anticipated to complicate and disrupt intra-African trade.
However, the African Growth and Opportunity Act (AGOA), which expires in 2025, is likely to be renewed and deepened to encourage more trade and investment flows as it seeks to regain some ground on the Chinese. Economic prosperity, security, power and influence (in areas such as human rights, democracy, and American values) constitute the fundamental drivers of US foreign policy.
As the US seeks to ensure democratic principles across the world, Africa is likely to have the searchlight turned on and focused on it to ensure the advancement of democracy, rule of law, human rights and justice. This is positive for strengthening institutions and political stability across the region as well as being a way around the region’s security challenges – especially terrorism.
Biden’s Green Revolution
At the centre of Biden’s economic recovery plan is the creation of 10 million clean-energy jobs by spending over $7trn on initiatives such as infrastructure. These clean energy jobs will also be supported by Biden’s pledge to rejoin the Paris Climate Agreement and continue the Obama administration’s climate-change-mitigation policies, which were aggressively rolled back by Trump.
There was an acceleration of greenhouse gas emissions under Trump, who was bent on leading the US down the path of energy independence by encouraging US shale oil output – which also served to suppress oil prices.
Coal could take a back seat to renewables as the biggest source of power generation across the world by 2022 if Biden has his way. An essential part of Biden’s campaign was a promise to decarbonize US power generation by 2035. By implication, this would mean a more than 100% rise in US solar and wind capacity in the next five years.
According to the Executive Director of the International Energy Agency, Fatih Birol, “This would have major implications for the decarbonisation of the US energy system as well as global implications for the growth of renewable energies and release of global CO2 emissions….I would expect it would either be 2022 or 2023 . . . and it could be a very good present from the US to the rest of the world”.
This adds more gloom to the demand outlook for oil in the medium to short-term and will have major implications for the oil markets and oil-dependent economies which include two of the three biggest economies in SSA – Nigeria and Angola. In addition, the Iran nuclear deal is likely to be reinstated which means sanctions on Iranian oil output will be eased – adding up to a million barrels a day to an already bloated market.
However, there is a scenario where Biden’s regulations to impede US oil and gas production have a positive impact on prices. This is hinged on OPEC members holding their fire and keeping supply steady – a possible but unlikely scenario.
SSA silver producers (South Africa, Burkina Faso and Nigeria) should benefit from the anticipated surge in silver prices as the demand for the commodity which is a major component of solar panels is expected to increase in the coming years.
In addition, US relations with China are also likely to be less hostile, boosting global growth and demand. This will accelerate the global economic recovery which is positive for trade, capital and remittance flows which many African economies rely crucially on.
In all, Trump’s re-election would have meant more of the same while Biden’s victory means we expect a return to pre-Trump normalcy and less uncertainty.