Engaging in Africa: Promoting a Virtuous Circle of Democratization and Economic Growth

By K. Riva Levinson

With the presidential debate on foreign policy around the corner, there is one topic that likely won’t get much attention, even though it should: American aid and investment in sub-Saharan Africa. As Todd Moss, vice president and senior fellow at the Center for Global Development, pointed out in a recent Foreign Affairs article, the Obama administration has paid scant attention to this increasingly important continent in the past four years. No matter which party wins control of the White House and Congress on November 6, things need to change.

The success of another country with a high-stakes, highly competitive election coming up this year, Ghana, is instructive in how we might approach the region. After decades of semi-authoritarian rule, Ghana has become one of West Africa’s most stable democracies. The December 2008 election, which the incumbent New Patriotic Party lost by less than 50,000 votes, was considered a major milestone in that it marked the second time since the return of democratic elections that power had peacefully changed hands between the incumbent party and the opposition. The smooth transition in July after the death of President John Atta Mills was another triumph for Ghana’s institutions and a demonstration of political maturity. The country also has one of the fastest growing economies in the world. Ghana’s real GDP grew at a 13.6 percent rate in 2011, bolstered in part by the recent discovery and production of oil.

Ghana’s democratic stability and strong economic performance is no coincidence. A number of experts, both liberal and conservative, agree on the mutually reinforcing power of democratization and economic growth.

In his 2010 book, “Emerging Africa,” Steven Radelet, USAID’s chief economist and formerly a senior fellow at the Center for Global Development, documents the “virtuous circle” connecting accelerated economic growth, democratization, and improved governance. Radelet argues that democratic governance helps to put in place better economic policies, while economic growth helps create material dividends of democracy, increasing support for the democratic regime. These governments then provide the enabling environment for investment – i.e., the key ingredient for sustainable growth.

Conservative policymakers like retiring Representative David Dreier (R-Calif.) also support this view. Congressman Dreier has traveled to more developing countries than almost anyone else in Congress and cofounded the House Democratic Partnership, which works to strengthen legislative bodies around the world. “I happen to believe passionately in the interdependence of economic and political liberalization,” he said in a recent speech at the International Federation for Electoral Systems (IFES).

Regardless of who wins, the approaching elections provide an opportunity to reevaluate American engagement with Africa. Our foreign assistance menu is vast and includes programs like PEPFAR, Feed the Future and the President’s Malaria Initiative. While these are essential programs to save lives and meet basic human needs, they do little to promote the empirical “virtuous circle” of good governance and sustainable growth. Creative approaches are needed to combine these programs with those that promote democracy and good governance and unlock the full potential of African economies by partnering them with the most potent weapon that exists to generate sustainable, equitable development and economic growth – the American private sector.

One tool in the U.S. foreign assistance arsenal that connects democracy and good governance to economic gains is the Millennium Challenge Corporation (MCC). Established in 2004, the MCC awards compacts, large five-year grants, to countries that perform well on 17 policy indicators, which are drawn from independent sources like the World Bank, UNDP and Freedom House. The indicator scores, which rate a country’s performance on everything from control of corruption to primary education expenditures, are made public each year, and effectively compel improvements in government policy while also guiding the way for U.S. businesses to enter emerging markets. Countries at similar levels of development compete for the compacts which amount to hundreds of millions of dollars for country-owned projects supporting sectors such as infrastructure, agriculture, health and education. Since 2004, the MCC awarded compacts to 13 sub-Saharan African countries, including Ghana, which is now negotiating its second.

Unfortunately, funding for the MCC has dropped off significantly over the past four years, down from $1.49 billion in 2008 to $900 million in 2012. The MCC should not be an afterthought. It should be definitional in how the US approaches development.

More also needs to be done to promote private sector investment. A review of the African Growth and Opportunity Act (AGOA), which provides trade preferences to select African nations and is due to expire in 2015, is a good place to start. Despite the successes of the law, oil and gas and other extractive industries still represent 80 percent of imports covered by it. AGOA needs to be integrated into a more robust strategy that ties together the Overseas Private Investment Corporation (OPIC), the U.S. Trade and Development Agency, the Export Import Bank and programs of capacity building and technical assistance from USAID, the U.S. Trade Representative and the State Department into an integrated framework.

During the Obama administration, policies addressing investment and trade with Africa have been ad hoc and lacked integration into a broader strategy for the continent. Take, for example, a trip which Johnnie Carson, Assistant Secretary of State for African Affairs, made this spring. Carson visited nine African countries with a group of business leaders in tow, encouraging U.S. companies to increase trade with and investment in Africa. While this mission was commendable, it was one trip over four years and was not grounded in any new initiatives or institutional commitments from the White House.

After the dust of the American election clears, Ghana will still be in full campaign mode for another month. The December elections, which are expected to be some of the most competitive ever conducted in Africa, will determine the next generation of leaders who will guide the country on its continuing journey to middle income status. And the United States should be a part of that journey. Our policies should nurture the “virtuous circle” and advocate for American business engagement in Africa. Otherwise, Africans could miss out on the benefits of strong connections to the world’s largest economy and American interests could be sidelined as other nations compete for resources and markets. As Carson said in congressional testimony in June, “This is a continent on the move.” America cannot afford to be left behind.

K. Riva Levinson is the founder and managing director of KRL International LLC, a consultancy dedicated to work in the world’s emerging markets. She has worked in Africa for more than 20 years and has been an advisor to Liberian President Ellen Johnson Sirleaf since 1996.