The new scramble for Africa – The London Economic

The new scramble for Africa

By Stephen Angus Peter Junor

China Africa

It is well-known that China has invested heavily in Africa for some years now and it is no coincidence that Africa is beginning to record increasing levels of growth.

The World Bank estimated 2013 growth at 4.7 per cent with growth this year set to be around 5.2 per cent, supported by strong foreign investment primarily from China. The recently announced New Development Bank (NDB), founded by BRICS will further increase the influence of China on Africa as the NDB is expected to provide more favourable capital to developing countries than is currently provided by the US dominated World Bank and IMF. Not only does this represent a geopolitical shift of power away from the West, it represents a form of South-South cooperation without the colonial past that haunts Euro-African relations.

China overtook the US in terms of trade in 2009 while the China Chamber of International Commerce calculated that trade between China and Africa last year totalled $210 billion, higher than total US trade with BRICS excluding China. Furthermore, China has committed to providing $1 trillion worth of finance up to 2025. China represents a substantial partner to many African countries, for example, it is the highest export market for the Democratic Republic of Congo and Ethiopia, two countries with vast mineral and metal deposits. China is also the second highest export market for Zambia, where copper comprises 85 per cent of Zambian exports.

Concerns over copper prices at the turn of the century contributed to a lagging economy and double digit inflation, but rising prices and Chinese investment have led to annual GDP growth of 7 per cent and a slightly more comfortable inflation rate of around 7-9 per cent. The importance of China to the Zambian economy is underlined by the fact that 10 per cent of Zambian GDP is a direct result of Chinese investment.

Strong economic growth figures and a plethora of development projects suggest that Africa will be a profitable market for many years to come and China is utilising its position as a developing partner and growing economy to support Africa. China clearly recognises the global economic and political importance of valuable minerals and metals, investment in Africa allows access to these goods at welcome prices while simultaneously providing investment and developing important infrastructure which will continue to help African economies in the future.

Despite the obvious benefits to each country, it remains to be seen whether the investment will actually benefit the hundreds of millions of poor in Africa. 60 per cent of Nigeria lives in extreme poverty and there are signs that much of the growing middle class could easily slip back under the poverty line if economic growth slows. China could find itself indirectly (but nonetheless importantly) supporting the economy and population of other countries as well as contending with its own changing economy and growing middle class. There have also been concerns over the use of Chinese labour rather than local workers and in some cases this has led to conflicts. Further protests have also taken place over working conditions and wages at some mines. One incident two years ago in Zambia led to the death of a Chinese manager as there were delays in implementing a minimum wage. A 2011 report by the Human Rights Watch supported the claims that Chinese-owned mines tended to have worse safety conditions than mines owned by other countries.

Europe is now seeing the potential of Africa as a trading partner as a trade deal was recently agreed between the EU and 16 West African states. Within Europe there is growing support for a shift from aid to trade and investment with the idea that it is more likely to improve growth and poverty reduction. In the UK the Conservative Party manifesto at the last election highlighted their view that “trade and economic growth are the only sustainable way for developing countries to escape poverty.” The idea is that trade fosters a more equal relationship than aid, perhaps heralding a new era in Euro-Africa relations. Although, as we can see from China’s trade with Africa, some partners could be considered to be more equal than others and Europe would do well to take note of the potential dangers here. There is also a possibility that Africa inadvertently becomes the centre of a geopolitical power struggle between China and the West; for Africa to develop successfully its intentions and requirements need to be considered as much as that of other trade partners.

China is investing heavily and its motives can be questioned (calls of neo-colonialism are never far away), but there is no doubt that China is offering something that Africa has lacked and Africa is beginning to grow as a result. The benefits of trade and growth however are usually slow to trickle down to citizens, this will be more pronounced in Africa where many governments are considered to be corrupt and the gap between the poorest and richest in society is greater than we see in the West.

The new scramble to connect Africa to global trade markets is underway and there is potential for Africa to flourish and realise its massive potential, however strong economic growth and high investment disguises a lot of problems (lack of education, poor sanitation, extreme poverty and hunger) within the continent. Can trade and investment solve these problems and will China continue to support Africa when the metals and minerals begin to dwindle are two questions whose answers could make or break the future of Africa.

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