Tracking the future. Daniel Silke

Tracking the future

Tracking the future - Daniel Silke

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and machinery[23].

      Far from these deals being heavily subsidised from the Chinese side, which could create dependency, African financial institutions such as the African Development Bank play the defining role in securing finance. These trends are important in assessing the manner and style in which China has identified Africa’s growth potential. Hard-nosed business deals exporting Chinese-made capital goods will be critical to the advancement of the continent. And it is only the tardiness of Western counterparts who have failed to muscle in that makes the Chinese look as though they have a different agenda.

      China’s single largest direct investment in Africa so far is certainly not a strategic oil or mineral concession or mine acquisition. Instead, the country has understood the future importance of banking to a continent growing rapidly. In 2007 the Industrial & Commercial Bank of China purchased 20 percent of South Africa’s Standard Bank for about $5 billion.

      Ironically, it has been the West whose interaction with Africa in the past has been confined largely to strategic political and commodity partnerships, often with very dubious regimes. Zaire’s dictator, Mobuto SeseSeko, stands out as a pivotal example. However, it would be similarly naive to expect Chinese economic ties not to embody a political element. With 53 countries on the continent, there are 53 important United Nations votes waiting for a Chinese-sponsored initiative to secure support. By establishing well-financed diplomatic missions in just about all countries (with a few notable exceptions, some of which still recognise Taiwan), China has bolstered its high-level diplomatic forays alongside the economic.

      So, while continued – and expanded – Chinese trade is likely to be with us for some time to come (and as long as the country can continue to grow at anywhere between 8 and 10 percent a year), so will its political influence. The size of the deals and linkages between Chinese companies, the Chinese Communist Party and African governments adds a political dimension to trade. And for African leaders who have still not made the transition to democracy or a human rights culture, trade with the Chinese comes with little conditionality in this regard. A recurring theme of China’s engagement with less-than-savoury developing world governments is its lack of innate commitment to pressurise for democratic reforms or domestic accountability in governance – as seen repeatedly in relations with Zimbabwe.

      Does this present another side to the optimism of trade? In a sense, yes. On the one hand, a key trend is the way China is helping Africa build infrastructure in genuine business deals that are beneficial to Africa. Yet at the same time China clearly is filling the void created by the West – not just economically but also politically.

      Perhaps the real trend that China brings to Africa, apart from enhanced trade figures, is its own ability to take millions of people out of poverty over the last 20 years – without caving in to democratic change. The authoritarian nature of the Chinese political model may well be attractive to African governments not keen to embrace democratic reforms. And the linkages between the Chinese Communist Party and ‘private companies’ can be very appealing to Africa’s political parties keen to shore up their own finances through lucrative state-sponsored deals. Expect the Chinese model to prove increasingly attractive to less-than-democratic African heads of state and political parties.

      Most importantly, African heads of state are likely to vastly prefer the Chinese for their lack of sanctimonious preaching – often characteristic of the West. Doing business with China will be easier and less bound by accountability issues but, as we suggested earlier, the sting in the tail is diplomatic or political favours that the Chinese may call in when confrontation looms with the United States or Western nations.

      Economic growth alone is not enough

      Economists are producing glowing reports of economic growth in Africa – statistically a very real trend for the foreseeable future and the focus of this chapter. These must, however, be tempered with a question about whether the current statistical growth pattern will set a trend for the real improvement of life conditions for the 1.4 billion Africans by 2030. Africa will need to do the basics right and not just trade (through elite-driven government sector finance projects) or building prestige infrastructure projects that similarly benefit the elite but offer little to the poor.

      Firstly, societies that will succeed in future will still need to innovate. This can only be done through improving educational opportunities and encouraging skills retention. Secondly, African countries will need to produce goods that are in demand globally. Production can only occur in an enabling environment where red-tape, corruption and impediments to social growth (human development aspects) can be brought under control and in line with best practice and globally competitive standards. Once these standards are met, real trade can springboard millions out of poverty.

      Countries that get these basics right will be the winners in the Africa of the future, but expect a very patchy outcome. From a purely business perspective, the demand for goods and services is palpable and growing. Yes, invest in Africa and the projected demand from the public and private sector should bring substantial rewards. But from a governance point of view, a lack of transparency and continuation of elite-sponsored business agreements (often with foreign companies and firms keen to do business at any cost) can continue to prevent Africa from reaching its true potential.

      Africa is still perceived far too negatively in Washington and London, and it is not as if issues of hiv/Aids, poverty, corruption and ethnic/political conflicts will disappear any time soon. A massive 66 percent of the continent’s long-suffering 160 million destitute people still live in slums, but on most social development indicators the continent is showing substantial progress in uplifting the poor. In contrast, Beijing, Delhi and Brasilia clearly see the potential and are acting on this with their pocketbooks.

      Although there is a long way to go in terms of rolling out democratic accountability, substantial strides have been made in key social indicators. This bodes well for Africa. For business less concerned about governance issues, the continent is wide open for a plethora of commercial opportunities. This trend is clear and barring a ‘black swan’ series of incidents, looks set to spur on the continent.

      As unscrupulous African leaders grasp the leverage of the discoveries of new oil fields or value of the agricultural land to foreign investors, however, less-than-savoury leadership can again turn towards new and more sophisticated elite-sponsored deals with foreign entities, preventing real benefits from filtering down to Africa’s people.

      Africa therefore stands on the cusp of a critical opportunity. If it can grasp its own global importance in an era of unique opportunity and simultaneously understand the need for a lesser role of its political elites in favour of spending on its people, it can start to really provide rather than squander its resource leverage. The continent is well positioned in a world less dominated by the West and more open to input and influence from the developing world. The quest for scarce commodities has tied the African continent to the needs of major economic players more than ever before. As the economic recession leaves an enduring mark on the spending habits of those in Boston, Bordeaux and Birmingham, so global corporates will increasingly look to add profit from exposure to new markets – thus making Africa so attractive.

      The real trend, therefore, is a continent with great potential, operating in a changed era of global conditions when it should have its best shot at success, but still with a leadership corps uncertain whether it can grasp the future or put it in its back pocket.