Colonialism 2.0 – A preamble to development in Africa

Tomorrow will mark the finale of the first ever US- Africa Summit. This summit has brought together the US government, with 50 African heads of state, and over a 107 companies which are either based or founded in Africa, from a variety of sectors.

The summit has been heralded as a transformative move by the Obama administration to empower US- Africa relations, and also as a salutation to the rise of Africa’s emerging economy on the world stage.

But is Africa’s emerging economy a true sign of Africa’s rise? Although this initiative is laudable, it would be prudent to ask if this American presidential-election-soap-opera style campaign of good will, is simply an effort to cloak a struggle to regain market share in the African economy.

An initiative of such gargantuan measure is evidently based on the economic potential that Africa offers to the US. But what has been the motivation behind this momentous move and who is it actually benefitting from this equation?

Overview of the modern African economy

In terms of figures, Africa is indeed rising.

CAGR
CAGR 2000-2013 (Source: Mckinsey Global Institute)

By the end of 2013, the continents consumer market was worth over a $1 Trillion. Between 2000 to 2013, real GDP has grown at a CAGR of 4.9 %, second only to the East Asia region including China.

This growth is projected to further grow to 5.8% between 2014 and 2019.

Contrary to popular belief, it is not South Africa, but the sub-Saharan economies that are acting as growth accelerators.africa

Macroeconomic and political stability along with structural economic reforms have resulted in a spurt of strong growth. And this trend is expected to continue with forecasters expecting an average annual GDP growth of 6.2% up to 2019.

But herein lies the conundrum. Are GDP growth figures a true sign of the continents economic vitality?A country’s economic success ought to be represented by an elevation in its population’s standard of living.

However it is seen that in spite of such economic successes, the Gini coefficient has only gone down by 2% in the Sub-Saharan regions in the same time period. 69.9% of the population still lives on less than $2.00 per day. The worst case is in Tanzania where strong GDP growth has yet to change the poverty levels in the past decade.

Some officials argue that discrepancies of this sort are a result of a lack of data, further complicated by the predominance of the continents Informal economy, which constitutes 60% of its GDP. So the big question then becomes, where is all this growth going?

Colonialism 2.0

The global financial crisis was a boom period for Africa. With developed economies in turmoil, Africa stood out as place where investors could radiate the risk they were absorbing in their home markets. This was represented in stark detail in countries like Nigeria, where the average ROI was gauged at 30%.

The prime reason which allowed investors to gain such returns was because every element of business had to be built from the ground up. With most African economies lacking basic infrastructure, investors rushed to secure bids to develop every aspect of every sector in the continents economy.

This lack of development, albeit profitable to the investors, underlined an age old problem. In the early 1960’s, a number of African states began to shed their badge of colonised states as they achieved independence. At that time, it was predicted that Africa would be the next haven of economic development.

However this optimism was short lived. The cold war’s spill over effect into the continent, ensured a slew of conflicts between neighbouring states on the platform of ethnic conflict and nationalism. What began as a bright future precipitated to the rise of despots and oligopolies which bled the continent over the course of the next 3 decades.

Towards the beginning of the 21st century, and largely due to efforts of Nelson Mandela, the continent began to show signs of peace, ushering foreigners to invest in Africa so as to break away from the shackles of International aid. It was in this period, that the seeds of another form of colonialism were sown once again.

Presence of China, Europe and the USA in Africa

In most countries the liberalization of the market is viewed as a progressive step. However, accepting this doctrine prior to developing their infrastructure and basic business amenities has created an uncomfortable paradox in Africa. It almost seems like the continent has attempted to create a post-industrial state prior to becoming an industrial state.

In this vacuum, the new economic colonisers of Africa have flourished. 10 years ago, the trade between China and Africa amounted to $10 billion USD. Today that figure has swelled to over $200 billion. China’s official win-win relationship rhetoric, which positions China as a fellow developing country is viewed by scepticism by a sizeable share of Africans, and rightly so.

The presence of China in Africa is unmistakable. Today Africa is home to over a million Chinese expats who work for Chinese companies in construction sites, infrastructure projects and extractive industries in almost every city in Africa.  70% of the work force in most Chinese companies operating in Africa, are Chinese. A large number of these expats work on 2 year contracts and have their wages paid in Chinese bank accounts. In some construction sites, even the raw materials are imported from the home country.

The infrastructure projects spearheaded by the Chinese governments are pernicious as well. Following in the footsteps of ancient colonisers, the Chinese government recently terminated a $3.5 billion infrastructure project of building a port in Nairobi with the thanks of the local government. The port however will remain under their control and conveniently offContributioners a channel to export natural resources and import Chinese goods.

The deals being negotiated almost seem like a kind of barter. China secures a steady supply of resources for her growing economic needs and in return provides infrastructure to Africa. However this barter is predicated on a self-indulgent feedback loop that eliminates the host state from the majority of the benefits.

The old colonisers are not exempt from this new form of economic colonisation either.  Apart from having a web of military bases in W-Africa, La Banque de France holds the national reserves of 14 African countries. Nowhere is this more evident than in Niger, where the country’s president, Mahamadou Issoufou, who was an ex-employee of the French energy company Areva, recently signed a 40 year concession to supply France with Uranium, the country’s only non-renewable resource.

Hence, in comparison the US presence in Africa is yet quite small, as seen in the above graph. US–African trade is just one-fifth the volume of Africa’s trade with Europe, and 60% smaller than Africa’s trade with China. But is that about to change? And if does, who is the true benefactor?

A preamble to development:

Every constitution begins with a preamble. As Africa begins to move into a new frontier of growth, it needs to rewrite this preamble and establish a self-made worldview in which it measures not only its position, but also questions the reason for its current position in the world today.

Today Africa desperately needs infrastructure and investment aid. But the governments of African countries need to ensure that the price they pay for infrastructural growth does not reinstate a new chain of command in which the foreign investors pull the strings.

In order to do so, it would be important to ensure self-sufficiency and no longer depend on factor endowments to ensure globalization. Although opening up her borders to business does offer opportunities, prospects need to be created from within that are in tune with the knowledge economy of the future.

This task falls not only upon the youth of the nation, but more so on the 50 heads of state who are currently terminating their visit to Washington today. Apart from securing FDI, emphasis should be applied to the possibility of ensuring inclusive and independent growth in their countries.

By 2035 there will be more people of working age in Africa, than in China or India. Without these measures, the future of these citizens will be another cycle of a colonalistic regime, under the façade of positive GDP growth figures.

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