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Africa’s new suitor and the dilemma of many investment partners

30 Jul

Odomaro Mubangizi

2013-07-24, Issue 640

 


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Among the investment suitors lined up for Africa, Brazil has close historical and cultural links with Africa and this makes her a more likely partner than other rivals. Africa should develop the chemistry that exists between her and Brazil

That Africa is on a roller-coaster economic growth trajectory is not in question among economics and development experts. From Cape to Cairo, from Ethiopia to Nigeria, private and public investments, especially in banking, infrastructure, telecoms, retail and general trading, health and pharmaceuticals, mining and metals, insurance, oil and gas, consumer goods, construction and materials, and information technology, have turned Africa into the most coveted investment destination of choice. This has made the African continent a much sought after suitor, to use, a romantic term, by the major world economies such as India, China, Brazil, EU and the US. But the most interesting recent global development is the economic block known as BRICS (Brazil, Russia, China and South Africa). Of interest for this article is the role of Brazil as a potential investor or trade partner for Africa. The article seeks to analyze the merits and demerits of Africa’s courtship with Brazil amidst the stiff competition with other more powerful rivals such as China, US, EU and even South Africa itself. The theoretical framework will be that of international political economy, in the context of globalization, pan-Africanism, regional integration and emerging geo-politics. The analytical and conceptual framework is deliberately ambitious to capture as many variables as possible so as to get a full picture of what is at stake in this exciting complex scramble for Africa’s resources and economic glamour.

AFRICA AS AN EMERGING GLOBAL ECONOMIC POWER: CAN SHE CLAIM THE 21ST CENTURY?

Discerning observers of Africa’s development process since independence seem to all agree on one evident fact, that Africa is now the fastest growing continent, thanks to her untapped natural resources, and cheap young labour force. Another major factor that is making Africa an emerging global economic power-house is the new investor confidence she has gained from the developed economies at time when the global economy is experiencing recurrent crises. It is as if African ancestors have finally been appeased and they are returning favours to their long-suffering descendants. The IMF and the World Bank in their annual reports, are all in agreement that Africa is about to experience an economic take-off. On average, Africa is estimated to be experiencing an economic growth of at about 5 percent per annum. Of course the gross income inequality can be masked by such an impressive growth both within individual states and across the continent. South Africa is not on the same level of economic growth as Malawi, Botswana is not at the same level of economic prosperity as Uganda, Angola with its double digit growth cannot be compared with South Sudan.

Over all, there is renewed optimism about Africa’s economic prospects. Some analysts point to the relative political stability of the continent. Also to note is the general increase of countries that have embraced democratization. The 1990s saw the decline of one-party states giving way to multiparty democracy, and some countries such as Ghana, Mauritius, Botswana, Zambia, Malawi and Mozambique, having free, fair and regular multi-party elections under the rule of law. While countries such as DRC and Somalia are still trapped in armed conflict, overall, armed strife has declined across the continent. Such peace dividends are a prerequisite for rapid economic growth and boosting investor confidence.

At a geopolitical and international political economic level, the emergence of a multi-polar world has left Africa relatively free from externally instigated armed conflict for ideological and strategic interests as was the case during the cold war. This is not to suggest that external forces have completely been obliterated. Far from it. The new challenge of global terrorism has once again brought Africa face to face with the choice of taking sides in the global war on terror. But the current impact on the global war on terror cannot be compared to the infamous cold-war rivalry. Africa now has more rational options in pursuing foreign policies that will be advantageous to its individual countries. After all, Africa has a continent-wide integration model under the rubric of the African Union and its specialized agencies such as NEPAD.

Africa’s population estimated at about 1 billion with its youth population of between age 15 and 24 is expected to double to 400 million by 2045. The market and productive potential of such a continent needs no further elaboration. Key to the vibrant young population’s contribution to economic growth is the easy use of Information Communication Technology (ICT), especially mobile phones for banking and other business transactions. For instance in Uganda, it is estimated that the amount of money transacted through mobile money has reached $ 4.5 billion USD by 2012 with about 2.9 million users. Kenya took the lead in mobile money transfer with its innovative M-pesa launched by Safaricom. Kenya’s Equity Bank has also come up with innovative financial services to become one of Africa’s fastest growing banks in the region.

Intra-African trade has also increased considerably thanks to regional trade blocks such as SADC, East African Community, ECOWAS, and COMESA. The two giant economies of Africa, Nigeria and South Africa have increased their bilateral trade with more than 100 South African companies doing business in Nigeria. The major catalyst for investment and economic growth in Africa is African Development Bank (ADB) under the able leadership of Dr. Donald Kabaruka who seems to have got the economic policies right. This is manifested in ADB’s current private sector portfolio that stands at $ 8 billion USD and is expected to grow to $ 10 billion by 2014. The private sector is now considered the engine of economic growth, despite the fact that some African government still get tempted to embrace a state controlled economy with little room for the private sector. The other major policy shift that stands the chance of boosting power is for instance the World Bank and ADB have signed an agreement to fund Ethiopia-Kenya power line that will cost $ 1.2 billion USD. If such cross-border power grids can be developed across most African counties, the shortage of electricity would be solved and the once labeled ‘Dark Continent’ would begin to shine.

THEN COMES CHINA: LOOK TO THE EAST

The common mantra on every one’s lips these days is how China has invaded Africa for trade and investment. China-African summits are a common occurrence and one often hears African heads of state invoking the phrase: ‘We look East’ as if to make the West feel a bit jealous. Is this ‘look East’ mere hubris or it is a new paradigm in Africa’s foreign policy? China symbolically welcomed this new policy imperative making rounds in Africa by donating the headquarters building of AU in Addis Ababa that cost $ 200 million USD. Never mind the counter argument that China actually gets about $ 130 billion USD in trade and investment! China has indeed funded massive infrastructural projects in Africa with grants and loans. Just by way of examples: between 2001 and 2011 China funded some African countries as follows: Rwanda $ 469 million USD; Burundi $ 165 million USD; Kenya $ 1.6 billion USD; Tanzania $ 4.6 billion USD; and Uganda $ 4.5 billion USD. Others countries that China has good investment with are both Nigeria and Angola in oil and construction.

The most dramatic development in Africa’s geopolitical and international economic re-alignment is the emergence of China as the world’s second largest economy after the United States. China’s attractiveness as Africa’s new trade partner is premised on China’s policy of not interfering with internal politics of partner countries. This of course has its own drawbacks for Africa’s new young democracies. Tyrannical regimes would gladly welcome such a policy that will not make them accountable to the electorate. It also raises a deeper question of whether one can sustain economic growth without a corresponding growth in democratic systems such as free and fair elections, rule of law and free media.

THEN FOLLOWS BRICS: A NEW POWER CENTER ON THE RISE

While observers of global politics are still making sense of the Chinese ascendance on the global scene, a new power center has emerged under the acronym BRICS (Brazil, India, China and South Africa). This is the first time in world politics that a South-South economic block has emerged to challenge the Western hegemonic control of the global economy. The Bretton Woods institutions such as the World Bank and IMF are popularly known, have now to face the reality of another economic power center especially if the BRICS go ahead and set up a bank of their own. For Africa, BRICS is an exciting possibility given that it will once again break the monopoly over the global economy that the West has enjoyed for centuries. But most importantly, South Africa, Africa’s leading economy is part of this economic block. This is very significant given that South Africa has the top ten of Africa’s 250 largest companies. And most importantly, Brazil another emerging economy is part of this economic architecture. If these two can team with the rest of Africa, the BRICS can help Africa meet some of its strategic goals in the international political economy.

Some critical questions about BRICS of course is the danger of Africa being torn apart by multiple offers from the various suitors wanting a hand in the investment marriage. What will happen to the China-Africa trade and investment deals if BRICS has other interested parties equally greedy for Africa’s immense resources and economic potential? Is Africa united and cohesive enough as an economic block to negotiate deals with Russia, China, and Brazil? Does South Africa side with Africa while it is part of BRICS in the case of complex trade and investment deals without falling into the trap of a conflict of interests?

WILL BRAZIL WIN THIS COURTSHIP CONTEST FOR AFRICA?

We now turn to Brazil the main focus of this discussion. I want to argue that Brazil, given its cultural and economic similarities with Africa, has a better chance of being Africa’s trade and investment partner even if the BRICS framework is maintained. Brazil has about 60 percent of its population who are people of African descent. This brings some cultural proximity to Africa. Economics is also about chemistry. The vibrant Afro-Brazilian culture manifested in dress, food, dance and belief systems can provide a basis for close economic cooperation. The only challenge being language—Brazil uses Portuguese while most African counties use either French or English as official languages. Only Angola and Mozambique use Portuguese. This might be another opportunity to explore in Brazil’s foreign policy, to think of promoting Portuguese in Africa while at the same time introducing French and English in Brazil. Language is a tool for cultural exchange and trade.

Brazil can also help link Africa with the rest of Latin America, a continent that has a lot in common with Africa in as far as colonial history is concerned. Again Latin America has a vibrant religious and cultural landscape that is akin to that of Africa. This can help create stronger bonds of South-South cooperation. Asia can be part of this geopolitical re-alignment via India and China. Only then can the end of Western hegemony be accomplished in an increasingly globalized world.

The other advantage that Brazil has over other competitors for Africa’s economy of affection is its relatively recent economic take off. As Africa learns to jump, it is better to learn with some one of equal strength.

Brazil is also experiencing birth-pangs of state consolidation judging by the recent streets protests about high public transport costs, unemployment and restless youth. Brazil is to host three major events: this year, World Youth Day led by the Pope Francis, then next will follow the World Cup and Olympics. These three global events can help show-case Brazil as an economic force to be reckoned with. But the unrest that Brazil is experiencing has to be addressed strategically. If the protests in Brazil turn out to be harbingers of a ‘Brazilian Spring’ then Africa’s new suitor’s credibility and image is in question.

WHAT AFRICA NEEDS TO GET RIGHT: STRATEGIC FRAMEWORK

When all is said and done, what strategic options does Africa have vis-à-vis the emerging economies of the South and East, especially Brazil? Africa has been experimenting with all kinds of policy frameworks and strategies for decades: modernization; Lagos Plan of Action; Structural Adjustment Programs (SAPs); neo-liberalism; private sector; import substitution; and recently, developmental state inspired by the East Asian model and China. From all these varied approaches, one conclusion can be made: Africa has been marked by policy uncertainty for decades.

This calls for a more careful scrutiny of strategic options available lest past mistakes get repeated. As George Santayana aptly observed that, ‘If you forget history you are condemned to repeat its mistakes.’ Some of the past mistakes to be avoided are the following: 1) Over-depending on foreign policy experts to find solutions to Africa’s problems; 2) Designing short-term policies that come and go with particular regimes; 3) Operating in colonial political economic frameworks; 4) Failure to link development with democracy; 5) Not utilizing indigenous knowledge systems.

The next step is the complex strategic analysis of what comparative advantages Africa has in engaging Brazil more instead of either China or India. On close inspection one notices that the BRICS model masks certain fundamental philosophical differences among these five emerging global economic powers. A quick appraisal of each is in order. Brazil has a dynamic civil society and private sector and has also embraced democracy. India and South Africa are in the same category as Brazil as far as economic liberalization and democratization processes are concerned. Not so China and Russia which are unapologetically state-controlled political economies. Africa needs to be careful when it comes to what political economy to follow. Some countries such as Kenya, South Africa, Ghana, Mauritius and Botswana are fully committed to development that has democracy as an essential element. The AU through its NEPAD framework demands that states be accountable both politically and economically. Why then all of a sudden is this rhetoric of seeking economic development first while democracy waits for some time? Why would African countries claim to be upholding the rule of law and still argue that they do not want to be subjected to international justice systems such as the ICC, a system that they willingly became signatory to? Even if there were other rogue states that violate international law, that is not a good argument to want to emulate them. So Africa needs to get right the essentials of democracy as the various African constitutions spell them out: rule of law, a democratic constitution, free media, bill of rights, and respecting the international conventions that each country subscribes to.

Finally, on the question of how Africa will navigate through the competing suitors, some suggestions. In a multi-polar that we now live in, Africa can no longer think in terms of either or, when it comes to selecting who to do business with. In choosing Brazil, Africa cannot say it has nothing to do with China or the USA. Africa will have to develop a complex integrated model of constructive engagement with whoever has something to offer in the global market. This is not different from what the developed economies are doing. The EU does business with China just as it does with USA. There are other economic groups such as the G8 that control the world economy but they also have widened the net to now comprise the G20. This kind of strategic flexibility is what Africa needs. Some countries in Africa are already experimenting with this strategic flexibility. For example Tanzania belongs to both the East African Community and SADC. Africa will have to learn the age-old lesson that economics like politics is an art of the possible.

Strategic areas that both Africa and Brazil need to invest in include: industrialization; tourism; agriculture; infrastructure development especially power, roads, air travel; human resource development and South-South cooperation.

CONCLUSION

In conclusion, the role of Brazil in Africa cannot be divorced from the BRICS initiative. But a case has been made for a strategic option for Brazil as far as Africa is concerned given the unique common characteristics that the regions have in common. Africa should exploit the chemistry that exists between her and Brazil. However, a key element that will make the bonds between Brazil and Africa strong and sustainable is stable democracy and inclusive development. Both Brazil and Africa have a certain charm and mystique that is mutually beneficial, and they are not rivals in this regard.

*Odomaro Mubangizi (Dr) teaches philosophy at the Institute of Philosophy and Theology in Addis Ababa and is also Editor of ‘Justice, Peace and Environment Bulletin.’

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Posted by on July 30, 2013 in African News

 

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