|
China and India understand
Africa's possibilities
By
Jonathan
Power
TFF
Associate since 1991
Comments directly to
JonatPower@aol.com
October 31, 2007
LONDON - The planned purchase of a 20% stake in South Africa’s highly successful Standard Bank by the Industrial and Commercial Bank of China, the world’s largest bank by market capitalisation, is the biggest foreign direct investment in South Africa since the demise of apartheid. This signifies a degree of engagement by China that is way beyond the “resources grab” that many have accused China of in its recent dealings with Africa.
This, as the Financial Times reported, “is evidence that China is looking for a deeper relationship”. For the ICBC this is an important step in its quest to become a global bank. Its chairman, Jiang Jianqing, says” We are focusing on merger and acquisition in emerging markets in Asia and Africa because these places enjoy high growth rates and have great potential.” Yesterday, the China Development Bank ratcheted the tone up further by announcing a partnership with United Bank for Africa, one of Nigeria’s biggest lenders.
As Chinese - and Indian - investors almost pour into Africa one wonders if their European and North American competitors have woken up to the fact that Rip Van Winkle is waking up in Africa? The fact that a top Chinese banker brackets Africa with Asia is one more sign that the Asians themselves see what is happening in Africa, a repeat of what happened to them twenty and thirty years ago. They can see the potential while western commentators, their spurious words tasting of sour grapes, point an accusing finger at China in particular, accusing it of planning to rape Africa as the Europeans did a 100 years ago.
This is not rape, by any stretch of the imagination. This is business opportunities. Africa in many countries is on the way to booming and Africa is looking for marriages of convenience with willing investors in railroads, toll roads, ports, motorbike and cement factories. Already there are over 900 Chinese companies working in Africa.
The International Monetary Fund in its new “Regional Economic Outlook” estimates that next year the growth rate in sub-Saharan Africa should reach almost 7%. This is an average figure, pulled down by including the likes of the Congo, Somalia, Zimbabwe, Ethiopia, Eritrea and the Sudan. But most of black Africa is on a sustained upswing, helped by high commodity prices (which the IMF says has not been a critical factor) and successful debt relief. It is happening, despite stagnant aid, because of increased private capital inflows and rising domestic investment and productivity. The significant decline in deadly armed conflicts has also helped. The ex war-riven states, Liberia, Sierra Leone and the Congo are growing at 5%.
Much of future growth will depend on an increase in the rate of private capital investment. This has tripled since 2003, although it is still far behind Asia’s. At the moment Nigeria and South Africa attract two thirds of it but in a number of other countries such as Ghana, Kenya, Cameroon, Uganda and Zambia, foreign investment in the bond and equity markets is on the rise.
The upward pressure on oil prices has not yet hurt Africa. African countries have built up healthy reserves and have been able to draw these down to keep growth on track. However, if oil prices continue to rise the strain will become more apparent, although most countries carry reserves large enough to meet significant terms of trade shocks. Despite the high oil prices inflation continues to fall- down to an annual average of 7% and food supplies are improving despite the higher cost of oil-derived fertiliser.
If this advance continues poverty will gradually fall, although only a handful can hope to meet the UN target of halving poverty by 2015. Nevertheless, as more of these countries stabilize their economies macro economically, sustain their external current accounts, build up their reserves and continue to grow the less they have to gear their fiscal policy towards addressing macro economic imbalances and the more they can spend on poverty reduction- improving social safety nets, education and health services. Tanzania, Ghana, Uganda and Rwanda are ahead of the pack on this.
All these countries could use more aid well, especially so this latter group. But despite the promise to double aid at the Gleneagles’ G8 summit held in 2005 they are not getting anything like it, although the increasing role of private global funds, like the Gates’ Foundation, is plugging some of the gap. Perhaps this has something to do with the Western mindset - Africa is a war-torn, aid-wasting continent. But most of it is no longer. Ask the Chinese and Indians.
Copyright © 2007 Jonathan
Power
Last 
Next
Jonathan Power can be
reached by phone +44 7785 351172
and e-mail: JonatPower@aol.com
Jonathan
Power
2007 Book
Conundrums
of Humanity
The Quest for Global Justice
“Conundrums
of Humanity” poses eleven questions for our future progress, ranging
from “Can we diminish War?” to “How far and fast can
we push forward the frontiers of Human Rights?” to “Will
China dominate the century?”
The answers to these questions, the author believes, growing out of
his long experience as a foreign correspondent and columnist for the
International Herald Tribune, are largely positive ones, despite the
hurdles yet to be overcome. Martinus Nijhoff Publishers, London, 2007.
William Pfaff, September 17, 2007
Jonathan Power's book "Conundrums" - A Review
"His is a powerful and comprehensive statement of ways to make the world better.
Is that worth the Nobel Prize?
I say, why not?"
Tell a friend about this column by Jonathan Power
Send to:
From:
Message and your name
Get
free articles & updates
|