Report: Kenya may struggle to get US aid in Trump era

Demonstrators rally outside Los Angeles City Hall to protest the election of Donald Trump as President. (Photo: AFP)

Kenya is among other economies in Africa that may have to learn to do without much aid from US if President-elect Donald Trump actualises his plan to cut expenditure in Africa.

A new report by the Institute of Chartered Accountants in England and Wales (ICAEW) has warned that the Trump presidency raises the risk of America constraining development aid to pave way for more infrastructure expenditure.

“Some spending cuts may be necessary to accommodate increased infrastructure expenditure. This raises the risk that the world’s largest economy could rein in development aid, adversely affecting dependent countries such as Ethiopia, Kenya, Tanzania, Nigeria and the Democratic Republic of the Congo,” warns ICAEW.

Trump has already expressed plans of favouring expansionary fiscal stance which could mean increasing government expenditure and cutting taxes. He has pledged to cut corporate tax from 35 per cent to just 15 per cent. This added to his protectionist policy could scuttle the African Growth and Opportunity Act (Agoa), which is still relied upon by many African states.

“A number of African countries still benefit immensely from the Agoa and would be harmed by more protectionist policy making towards agricultural and manufacturing trade,” says the report.

This will be despite Trump’s initial target having been seen as pointing to China and Mexico. It will come at a time when US-Africa trade has declined sharply in recent years, mostly as the US shale boom reduced the need for African crude oil.

According to the Organisation for Economic Co-operation and Development (OECD), the US is Sub-Saharan Africa’s principal benefactor in terms of bilateral official development aid.

In terms of official development aid receipts to East Africa, OECD says that Kenya has received $2.5 billion (Sh250.9 billion). It’s only Ethiopia that has received more at $3.5 billion (Sh351.2 billion) - while Uganda has got $1.5 billion (Sh150.7 billion).

Could impact Africa

According to Michael Armstrong, Regional Director for ICAEW Middle East, Africa and South Asia, businesses will be watching keenly the steps that Trump will take. “Aid is one of the main channels through which a change in US policy under the new president could impact Africa. Policymakers and businesses across the continent will be keen to see President-elect Trump’s plans for development policies once he takes office,” he said.

In the entire Sub-Saharan Africa, the report says over $9 billion (Sh904.7 billion) has been distributed by US. The UK is second in line with just under $4 billion (Sh402 billion), followed by France with just over $2 billion (Sh201.6 billion).

The reports come after Famine Early Warning System Network has warned of irregular recovery in harvests in East Africa which could put pressure on prices of staple foods.