Africa's pivotal role in the US–China resource rivalry

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The Shift in Foreign Direct Investment in Africa

After years of Chinese dominance, the United States has once again emerged as the largest investor in Africa. However, statistics alone do not tell the full story: Africa's raw materials have long held geopolitical significance. The term "America First" stands out when examining data on foreign direct investment (FDI) in Africa. Since 2012, China had consistently led in investments, while U.S. companies sometimes withdrew more capital than they invested. In 2023, the situation changed, with U.S. companies investing nearly $8 billion (€6.8 billion) in Africa—almost double that of their Chinese counterparts.

The dataset published in May by the China Africa Research Initiative (CARI) at Johns Hopkins University does not yet reflect the latest developments, as national governments and the UN Conference on Trade and Development (UNCTAD) require time to evaluate and validate the figures. Unadjusted FDI data can be misleading, as the current UNCTAD report highlights the Netherlands as the largest investor in Africa. This is because the Netherlands often serves as a conduit for capital from other countries, creating complex financial networks.

Analysts around the world are eagerly awaiting updated figures, as economic competition between the U.S. and China intensifies. Recent examples of potentially significant investments in Africa further underscore this trend.

Different Approaches: Profit vs. Strategy

While recent media reports suggest that the U.S. has overtaken China as the largest investor in Africa, experts like James Shikwati, founder of the Inter Region Economic Network (IREN) in Nairobi, note that the data shows fluctuations. He describes these shifts as "spasms," attributing them to the profit-driven nature of American companies. These firms focus on generating returns rather than making charitable investments.

In contrast, Chinese direct investment is backed by the government, which pursues long-term strategic goals. According to Shikwati, American companies rely on well-trained workers who can turn investments into profits, benefiting Africa by providing employment opportunities. On the other hand, Chinese investments cater to populations requiring hands-on skills, particularly in construction. Both approaches, he argues, benefit Africa.

However, despite its wealth of critical raw materials, Africa has not fully capitalized on its resources. These materials are often exported unprocessed, with value creation occurring elsewhere. To address this, the African Union (AU) introduced the "Green Commodities Strategy" last year, proposing export tariffs of 10% to ensure countries gain a share of the actual value of their mineral resources or encourage local processing.

China’s Role in Africa’s Mining Sector

Africa accounts for the majority of global production of platinum, cobalt, tantalum, and manganese. The mining sector has traditionally attracted high levels of foreign direct investment. While Western companies have scaled back operations in politically sensitive mining regions, China has become indispensable through sustained investment.

Jimmy Munguriek, a lawyer and country director of the NGO Resource Matters in the Democratic Republic of Congo, notes that China is not deterred by political or economic instability. "China is investing, and that is why many mining sectors in Africa, especially in the DRC, are now largely controlled by Chinese companies," he said. In 2023 alone, China invested nearly $8 billion in Africa, including lithium projects in Zimbabwe and Mali.

Despite these individual investments, comparing them to CARI's FDI flows is challenging, as the latter reflects the balance of all capital movements by foreign investors. High individual investments were made in copper projects in Botswana and the DRC.

The U.S. Strategy: From Aid to Trade

There are growing signs that the U.S. is shifting toward a more strategic approach to Africa’s raw material resources. During Donald Trump’s first term, the U.S. International Development Finance Corporation (DFC) was established, merging private investment and development loans. The DFC aims to promote U.S. interests and counter China’s presence in strategic regions.

At the start of his second term, Trump halted numerous development aid projects and reduced funding for USAID. "We're shifting from aid to trade," he told African leaders, emphasizing the economic potential of the continent. He claimed this approach would be more effective and sustainable than traditional aid.

Trump also pledged to treat Africa "far better than China or anyone else." As a patron of the fragile peace agreement between the DRC and Rwanda, he promised preferential access to Congolese raw materials. However, despite the peace deal, violence persists, with over 400 civilians killed in recent clashes.

Infrastructure and Geopolitical Competition

China’s strength in critical raw materials is linked to the Belt and Road Initiative (BRI), a global infrastructure project that includes ports, roads, and railways. These projects have opened transport routes for raw materials in some regions. Economist Shikwati notes that China's infrastructure strategies aim to connect across countries, extending beyond regional boundaries.

In contrast, former U.S. President Joe Biden advanced funding for the Lobito Corridor, a project connecting Congo’s copper belt to Angola’s Atlantic coast. The European Union is also supporting infrastructure projects in the Lobito Corridor under its Global Gateway initiative. Angola has become a key partner for Europe, highlighted by the recent summit of EU and AU leaders in Luanda.