🔒 Africa has become a hot investment destination – The Economist

LONDON — The renewed interest from foreigners in Africa as an investment destination is heartening and this time Africa needs not be a pawn in Cold War relations, a place where proxy wars took place as was the case in Angola or sit back while foreign powers plunder its resources. If the continent seizes the opportunities that are now presenting itself, it could uplift the lives of its 1.2bn people. In South Africa, President Cyril Ramaphosa is on a drive to get some of the investment pouring into Africa, $100bn over 5 years is his target, to reach the tip of the continent. While South Africa has been seen as the gateway to Africa in the past, it seems to have has lost that status. I searched the Internet and there is literally no reference to it in the last five years. This is what Ramaphosa is up against. He will have to compete with many of South Africa’s neighbours who are creating the right conditions for foreign investment, while rooting out corruption. If he manages that, the world seems to be ready to invest in Africa. The Economist is urging African countries to ensure that this time it is on their terms. – Linda van Tilburg

By Thulasizwe Sithole

In an article in the Economist, the writers draw a distinction between the scrambles for Africa in the past and present day foreign engagement in the continent and the view is that there is another surge in foreign scramble for Africa. “Governments and businesses from around the world are rushing to strengthen diplomatic, strategic and commercial ties.” But unlike the previous surges in foreign interest, this time the scramble may actually benefit the inhabitants of the continent.

Africa, investment, The Economist

The first time that there was outside interest in Africa, which was called “the scramble” was during the 19th Century when the West grabbed land and divided the countries according to their own interests. During the Cold War, the two sides, the Soviets with their satellites and Western nations fought for the favour of African states, many of whom had become independent states during that period. The Soviets backed any countries who were in support of their doctrine, while the Americans backed “despots who claimed to believe in capitalism.” The Economist believes that the third surge that is happening now, “is more benign.” Africa is becoming more important, one of the reasons for this is its growing population, which is estimated to more than China’s people by 2025. Governments and the business world “are rushing to strengthen diplomatic, strategic and commercial ties.” And unlike the previous rushes into Africa, this may actually produce opportunities and it may benefit Africans, if they seize the opportunities it presents.

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The renewed foreign engagement in Africa can be seen from the more than 320 new embassies opened on the continent from 2010 to 2016, “probably the biggest embassy-building boom anywhere, ever.” 26 embassies were opened by Turkey and 18 by India. There is increasing military engagement with the Americans and the French are boosting the fight against the jihadis in the Sahel region with “muscle and technology”, while China has become “the biggest arms seller to sub-Saharan Africa and has defence-technologies ties with 45 countries. Russia has secured 19 military contracts, while the rich Arab states have recruited mercenaries and “are building bases on the Horn of Africa.“

“Commercial ties are being upended.” In 2018 China became the biggest trading partner with Africa with India in second place and America which used to be the continent’s biggest trade partner is now in third place. France formerly Africa’s third biggest trading partner, now lies in seventh place. “Over the same period Africa’s trade has more than trebled with Turkey and Indonesia and more than quadrupled with Russia”. Growth in trade with the European Union was a “modest 41%”. China, which includes state-backed outfits is catching up to the West as a source of foreign direct investment, while India and Singapore are also keen to join in. Although firms from America, Britain and France are for the present the continent’s biggest sources of FDI.

The Economist acknowledges that the image of “foreigners in Africa of neo-colonial exploiters,” keen to gather the continent’s abundant resources, bribing their ways into deals that do not improve the lives of Africans and who don’t not use the continent’s manpower is sometimes true. “Far too many oil and mineral ventures are dirty.” It is not hard for corrupt African leaders to find foreigners who will line their pockets and the contracts with China and Russia are often not transparent. The case of three murdered Russian journalists, investigating allegations of a mercenary unit linked to the President of the Central African Republic and mining in the country, illustrates the shadiness of some deals. These cases are a reminder of “old-fashioned imperialism.”

However, unlike the previous engagements of foreign powers in Africa, the Economist writes that the new surge in Africa “has mostly been positive for Africans.” The GDP per head of the people in sub-Saharan Africa is 40% higher than it was in 2000. “Foreigners build ports, sell insurance and bring mobile-phone technology. Chinese factories hum in Ethiopia and Rwanda. “More than 50 destinations are now reached by Turkish Airlines.”

While Africans can benefit from the increased interest in Africa, the Economist feels the continent could do more.  The electorate should “insist on transparency.” While the deals by former South African President Jacob Zuma are being investigated, “even worse behaviour in the Democratic Republic of Congo has gone un-probed.” Some of the conditions for Chinese loans to African governments who are heavily indebted are secret; it is important to ensure that the people of African nations know what the terms of the deals are. They say journalists should “have a big role to play” to ensure transparency.

There is a call for a unified approach by African leaders as it has almost the same number of people as China but Africa consists of  54 countries. It could negotiate better deals if it operates as a block and “drive harder bargains.” Africa is also no longer in the position of the Cold War, where they had to choose which superpower they supported. They can also do business with countries other than the superpowers.

The Economist also cautions that Africa should “take some of what their new friends tell them with a pinch of salt” especially the message from China that democracy is a Western concept and the developing world needs a firmer hand. Although this message may appeal to Africa’s autocrats, a study by the World Bank and Cornell University found that democracy in Africa leads to faster economic growth. Education and rapid urbanisation lead to a more critical electorate in Africa and they are less scared to speak out. Support for Africa’s ruling parties have fallen from 70% in 1997 to 50% in 2015.  “As politics grow more competitive, voter’s clout will grow. And they will be able to insist on a form of globalisation that works for Africans and foreigners alike.”

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