By GURJIT SINGH
The US is moving from aid and preferential trade toward investment-led engagement in Africa, using SIWG to prioritise strategic infrastructure, private capital, and transactional partnerships
In January 2026, United States (US)-Africa relations experienced a significant transformation. The traditional pillars of American engagement—humanitarian aid, preferential trade access, and an extensive military presence—have been substantially reduced in favour of a ‘commerce-first’ approach. This new strategy, marked by the closure of USAID, the stagnation of the African Growth and Opportunity Act (AGOA), and a streamlined AFRICOM, signals a shift from a ‘donor-recipient’ framework to a ‘strategic investment’ partnership.
In the 2017 US National Security Strategy (NSS), the Global South appears as a strategic periphery. Its importance is derivative rather than intrinsic, defined by exposure to instability, vulnerability to influence, or its utility in counterbalancing rivals, particularly in Africa. In the 2025 NSS, Africa receives greater attention, but this does not reflect an elevated status; instead, it signals deeper securitisation. The continent is portrayed as significant primarily for the risks it poses, including terrorism, weak governance, and rival encroachment, casting Africa more as a challenge to be managed than a partner in shaping regional or global order.
The End of the Aid Era: Closing USAID
In early 2025, the Trump administration enacted sweeping cuts to US foreign assistance, marking a significant shift in development policy. Central to this was the dismantling of the US Agency for International Development (USAID), a key channel through which the United States had supplied roughly 26 percent of aid to Africa.
This new strategy, marked by the closure of USAID, the stagnation of the African Growth and Opportunity Act (AGOA), and a streamlined AFRICOM, signals a shift from a ‘donor-recipient’ framework to a ‘strategic investment’ partnership.
Following a 90-day foreign aid freeze imposed through Executive Order 14169 in January 2025, roughly 83 percent of USAID-funded programs were cancelled or terminated. By 1 July 2025, USAID’s remaining functions were absorbed into the US State Department, bringing an end to the agency’s independent operational role.
These cuts had immediate and far-reaching consequences across the continent. Health, education, and development programs were disproportionately affected, with serious implications for vulnerable populations. In the health sector, reductions threatened the continuity of HIV/AIDS treatment for millions, undermining decades of progress under initiatives such as PEPFAR. Essential humanitarian services—including food security, clean water provision, and emergency relief—were also disrupted, particularly in fragile and conflict-affected contexts such as Sudan. For instance, approximately 2 million people were affected when around 1,100 community kitchens were closed.
Some reductions were explicitly political. In South Africa, US aid was suspended in March 2025, reportedly linked to disputes over land expropriation policies and South Africa’s stance regarding Israel. The administration justified these measures under an ‘America First’ framework, citing a reassessment of aid based on programmatic efficiency and perceived US national interests.
The dismantling of USAID and the funding freeze triggered legal challenges within the United States and drew sharp criticism from NGOs and development organisations, highlighting concerns over long-term damage to development outcomes, regional stability, and US influence in Africa.
For over six decades, the US Agency for International Development (USAID) served as the primary face of American soft power in Africa. Its closure in late 2025 sent shockwaves across the continent. Washington’s rationale was clear: traditional aid fosters dependency and lacks ‘programmatic efficiency’. By freezing billions in disbursements and laying off most USAID staff, the administration signalled that the era of multi-billion-dollar grants for governance and social programs was over.
Responsibility for remaining essential programs has now shifted to the State Department, which evaluates every dollar through the lens of ‘America First’ alignment. For African nations, this has meant an immediate loss of funding for health, education, and climate resilience projects. The United States, however, frames this approach as encouraging a transition towards local self-reliance and commercially viable development.
The Trade Vacuum: AGOA Delay
The expiration of the African Growth and Opportunity Act (AGOA) on 30 September 2025 posed a potentially severe shock to African economies. Higher tariffs could significantly reduce beneficiary countries’ exports to the United States, reversing trade-led gains, with apparel and textiles bearing the brunt.
The African Growth and Opportunity Act (AGOA), which provides duty-free access to over 1,800 products—alongside more than 5,000 under the Generalized System of Preferences—to the United States market, is increasingly under strain amid a broader protectionist turn. Following its expiration in September 2025, the program entered a period of crippling uncertainty. While the United States House of Representatives recently approved a retroactive extension running till 2028, the months-long delay and the imposition of reciprocal tariffs have already damaged key sectors—specifically the automotive hub in South Africa and the apparel industry in Kenya.
The message to African capitals is clear: the American market is no longer a guaranteed ‘gift,’ but a space for negotiated, bilateral commercial deals.
This delay is not merely an administrative hurdle; it is a strategic signal. Washington is shifting away from non-reciprocal trade, where the US provides benefits with minimal expectations in return, toward a model of ‘durable, profitable investments.’ The message to African capitals is clear: the American market is no longer a guaranteed ‘gift,’ but a space for negotiated, bilateral commercial deals.
As of early 2026, the African Growth and Opportunity Act (AGOA) is in a transitional phase following its expiration on 30 September 2025. A proposed three-year extension to December 2028 was approved by the US House of Representatives in January 2026. Even before final Senate approval, the prospect of extension has a direct and immediate effect on African economies by partially restoring business confidence and stabilising trade-dependent sectors.
Beyond immediate relief, the extension provides time for adjustment. It allows governments and firms to plan investment, stabilise supply chains, and transition toward diversification strategies, including AfCFTA-based regional value chains. While uncertainty persists until Senate approval, even a limited three-year extension would deliver critical short-term stability, cushioning African economies against further trade shocks while longer-term trade arrangements are negotiated.
SIWG: Redefining US–Africa Engagement
To fill the void left by USAID and AGOA, the US and the African Union (AU) launched the Strategic Infrastructure and Investment Working Group (SIWG) in January 2026, forming the centrepiece of the new policy.
The SIWG is designed as a mechanism to align US and AU priorities by mobilising US private capital into AU-backed infrastructure projects, particularly in trade facilitation, logistics, and digital transformation. It represents a shift from traditional aid toward investment-led engagement, leveraging AU convening authority and US financing instruments to support sectors such as transport corridors, energy networks, critical minerals, and digital infrastructure.
Critically, the SIWG also signals a more transactional phase in US–Africa relations. Its emphasis on ‘shared strategic priorities’ and supply-chain security—especially for critical minerals and commodities—suggests that investment decisions will reflect US strategic and industrial needs as much as African development priorities. While regulatory harmonisation and infrastructure financing could stimulate growth and intra-African trade, there is a risk that projects may be narrowly tailored to serve external supply chains rather than broader industrialisation or employment goals within Africa.
By removing the ‘safety net’ of aid and preferential trade, the US is betting that private investment and infrastructure will create a more stable, prosperous Africa that is also a stronger market for American goods.
The pivot from foreign assistance to ‘durable, profitable investments’ also raises questions about inclusivity. Market-driven projects may bypass fragile states and social sectors such as health and education unless explicit safeguards are established. For the SIWG to become genuinely transformative, it will require transparency, African agency in project selection, and alignment with continental frameworks such as Agenda 2063 and the AfCFTA. Otherwise, it risks reproducing existing asymmetries under the guise of partnership.
The SIWG positions itself as a shift from aid to investment, prioritising ‘bankable’ infrastructure projects across transport, energy, and digital connectivity to attract US private capital. By aligning its approach with the African Union’s Agenda 2063 and the AfCFTA, Washington aims to present itself as a growth partner rather than a normative enforcer. Underlying this strategy, however, is the strategic competition for critical minerals essential to advanced technology and defence supply chains.
FDI Trends and the High-Stakes Investment Gamble
Foreign direct investment (FDI) into Africa declined sharply in 2025, falling by 38 percent to US$ 59 billion, with North Africa recording the steepest contraction. This contraction reflected global economic uncertainty, tighter financial conditions, and heightened geopolitical risk. Despite the overall slowdown, investment patterns were uneven. Clean energy emerged as a relative bright spot, with continued flows into wind and solar projects in countries such as Egypt, South Africa, and Zimbabwe, underscoring sustained interest in Africa’s energy transition.
In terms of source markets, the United States remained a major contributor to Africa’s accumulated FDI stock, alongside European investors such as the Netherlands, France, and the United Kingdom, as well as China. However, new investment momentum weakened. Announced FDI projects fell by about 16 percent year-on-year in the first quarter of 2025, signalling a challenging operating environment. At the same time, the data suggest a cautious recalibration rather than a full retreat, pointing to a fragile but potentially recovering investment landscape.
The emerging policy represents a high-stakes gamble. By removing the ‘safety net’ of aid and preferential trade, the US is betting that private investment and infrastructure will create a more stable, prosperous Africa that is also a stronger market for American goods.
For African leaders, this means navigating a more transactional relationship. The ‘aid-led’ past is gone; the ‘investment-led’ future has arrived. Success will depend on whether the private sector can fill the massive gap left by the retreat of the American government.
Gurjit Singh has served as India’s ambassador to Germany, Indonesia, Ethiopia, ASEAN and the African Union.
Published on March 19, 2026 – ORF (Observer Research Foundation).The views expressed above belong to the author(s).
