A Historic Economic Shift

In a landmark reversal of a decade-long trend, the United States has become the largest foreign direct investor in Africa, eclipsing China for the first time since 2012. According to definitive data released by the China Africa Research Initiative (CARI) at Johns Hopkins University, U.S. investment flows into the continent reached $7.8 billion in 2023, nearly doubling China’s $4 billion during the same period. This pivot marks a significant recalibration of economic influence on a continent central to global supply chains and future growth.

For over ten years, Beijing’s state-backed Belt and Road Initiative (BRI) dominated Africa's development landscape, funding extensive infrastructure projects. In Kenya, this was most visibly demonstrated by the Mombasa-Nairobi Standard Gauge Railway (SGR), the Nairobi Expressway, and upgrades to the Mombasa Port. However, the new figures suggest a strategic shift, with Chinese investment slowing while a revitalised American approach gains momentum.

The New U.S. Strategy: Minerals, Technology, and Transparency

Driving the American investment surge is the U.S. International Development Finance Corporation (DFC), a government agency established in 2019 with a clear mandate to provide a transparent, private-sector-led alternative to state-directed financing. The DFC’s strategy focuses on high-growth, high-impact sectors, including renewable energy, digital connectivity, health, and, crucially, critical minerals.

Africa holds some of the world's most significant reserves of minerals like cobalt, lithium, tungsten, and rare earth elements—the essential building blocks for electric vehicles, smartphones, and advanced defence systems. With China currently dominating the processing of these minerals, Washington views investment in African mining and local refining as a matter of national and economic security, aiming to diversify supply chains away from its primary geopolitical rival.

This renewed focus is already materialising in Kenya. In May 2024, during President William Ruto's state visit to Washington, the DFC announced a financing package of over $250 million, elevating its total investment exposure in Kenya to over $1 billion. Key Kenyan projects receiving DFC funding include:

• Affordable Housing: A $180 million loan to Acorn Green Housing for the construction of affordable and green-certified student housing.
• E-Mobility: A $10 million loan to Mogo Auto Limited and another $10 million to Roam Electric Ltd. to expand the availability of electric vehicles and charging infrastructure.
• Digital Connectivity: A $51 million loan to M-KOPA Kenya to help underserved communities access affordable smartphones.
• Healthcare: A $10 million loan portfolio guaranty to KCB Bank Kenya to support lending to small and medium-sized healthcare providers.

To further anchor its regional strategy, the DFC also announced plans to open a permanent office in Nairobi to better identify and support private sector development across East Africa.

Implications for Kenya: An Era of Opportunity and Complexity

This shifting investment landscape presents both significant opportunities and complex challenges for Kenya. The influx of U.S. capital offers a chance to diversify its sources of development finance, potentially reducing its reliance on Chinese debt, which stood at over $8 billion as of September 2024. American investments, often tied to high standards of transparency and environmental, social, and governance (ESG) criteria, could also foster better project management and long-term sustainability.

However, Nairobi must navigate the intensifying rivalry between the two superpowers. President Ruto's administration has actively engaged both nations, seeking to secure benefits from each. This balancing act is delicate; U.S. lawmakers have already raised concerns about Kenya's close ties with Beijing, proposing a review of its status as a Major Non-NATO Ally. Furthermore, the future of crucial trade agreements like the African Growth and Opportunity Act (AGOA), which is vital for Kenya's textile industry and expires in 2025, is intertwined with these broader geopolitical dynamics.

While U.S. investment is on the rise, China remains a formidable economic partner for Kenya and the continent. Its role in building foundational infrastructure remains unparalleled, and Chinese firms continue to invest in sectors from manufacturing to technology. The current trend is not one of Chinese withdrawal but of a more competitive environment where African nations have greater agency. For Kenya, the key will be to leverage this competition to secure favourable terms, promote local value addition—particularly in the mineral sector—and align foreign investments with its national development goals as outlined in the Vision 2030 and Bottom-Up Economic Transformation Agenda.