Europe and China competing for influence in Africa
It seems Europe’s leaders have rediscovered Africa. Angela Merkel’s African travel schedule became frantic after the refugee crisis in 2015; Emmanuel Macron has visited 11 countries on the continent since becoming French president last year; and Theresa May’s recent visit to South Africa, Nigeria and Kenya was the UK’s first top-level visit to Africa in five years.
However, all of that is easily topped by the Chinese leadership. Its upper echelon (president, prime minister and foreign minister) have visited 79 times over the last 10 years. Their trips have taken in 43 countries, including 33 of the 44 poorest countries on the continent.
Leaders do not engage in official visits without having their national interests at heart. For Macron, this has to do with tackling the migration crisis and national security, which is why Mali features high on his agenda. Macron is concerned about Al-Qaeda affiliates and other terrorist groups wreaking havoc on the continent and what that means for France’s national security. This is understandable looking at the terrorist attacks in Paris, where immigrants from North Africa have played a part.
Germany’s Merkel has similar interests. Her CDU’s sister party and coalition partner, the CSU, is vocal about the need to stem the flow of refugees and migrants. The EU decided it wanted to set up processing centers for refugees in North Africa at a summit in late June. They had few takers in the Maghreb and Egypt’s foreign minister rejected the proposal with indignation. To sweeten the pill, European countries look at economic cooperation both at the official level (aid) and at the private sector level. Germany has a lot of catching up to do; of its 400,000 companies engaged abroad, only 1,000 have interests in Africa.
May’s motivation was different. She was looking for new friends and trading partners for when the UK leaves the EU next year. Africa has one of the youngest populations in the world and, by 2050, Nigeria alone is forecast to have the world’s sixth largest population. Some African countries have emerging middle classes, which may become consumers of European goods.
May’s ambition is for the UK to ascend to being the largest foreign investor from the Organisation for Economic Cooperation and Development nations by 2020. She is nearly there. Africa’s league table of foreign direct investment in greenfield projects between 2003 and 2018 is topped by the US and the UAE at about the $100 billion mark, but on their heels are China and the UK. When it comes to exports to the continent, everyone looks insignificant compared to the Chinese. More than 16 percent of imports by African nations hail from China — while Britain’s share is a mere 3 percent.
This brings us to China’s involvement with Africa, which has undergone a major transformation over the last decade. Previously, it was all about securing access to natural resources, and the Chinese leadership would do whatever it took to get there. Since then, China has been a significant force behind building infrastructure, roads, railways, ports and dry ports. This obviously had a lot to do with securing trade routes for the raw materials needed to secure China’s economic growth.
So far, China has invested $130 billion in Africa in the form of aid, state-sponsored investments and FDI
In the early stages, Chinese investors employed few Africans, instead preferring to bring in their own workforce. But now more Chinese companies are employing the local population. So far, China has invested $130 billion in Africa in the form of aid, state-sponsored investments and FDI. A lot of this came in the form of grants and credit lines and analysts worry about a careful debt trap being laid. The famous example is Sri Lanka, which had to cede its Hambantota Port to the Chinese in lieu of debt payments it could not afford. Djibouti may soon follow suit.
This is why observers were anxious when President Xi Jinping announced a further $60 billion of investment at the Forum on China-Africa Cooperation in Beijing earlier this week. The announcement saw $5 billion earmarked for importing goods and services from Africa, the private sector was encouraged to invest a further $10 billion, and the rest is debt in the form of credit lines, grants and development financings. It was noteworthy that Xi focused on agriculture and technology transfer. This has a lot to do with feeding the young and growing population on the African continent, but is also about food security for China. Let us not forget that the Chinese last year bought the Swiss speciality chemicals company Syngenta and now control a good share of the worlds seed, pesticide and herbicide technology.
The other remarkable part of Xi’s speech was his interest in the security side of the equation. He talked about peace-keeping but we should be aware that the Chinese military apparatus is becoming more prominent in Asia. It is only a matter of time until these military interests expand through the One Belt One Road Initiative. A military presence in Pakistan or Djibouti may well be next.
We have looked at the motivation behind China’s and Europe’s forays into Africa, but the question is what do African nations want and need to get out of these advances?
The reason many African potentates like China’s investment packages is simple: They come with no strings attached. Europeans are more values-driven (their values). When an African nation wants a road, the road will be built by the Chinese, no questions asked. European leaders will put forward conditions with regard to good governance, democracy and human rights. Many of the young African nations struggle with regard to those values: Corruption is rampant, human rights are often not a priority and democracy comes and goes in many countries. In that sense it is easier to accept the helping hand from China than from Europe and the West.
In the end, it is up to each African nation to determine what is in their long-term interest. While the Chinese method of engagement is deep and in many ways seductive, Africa’s leaders should be aware that they are in danger of falling into a debt trap and they should weigh up very carefully if that is what they want. When they look at OECD investment, they have to weigh up whether the conditions will help them develop their economies and countries flourish.
All in all, more engagement with Africa and its growing population is better than less. A multipolar interest in the African continent provides choice for its leaders, but they need to choose wisely and in the long-term interests of their nations and their peoples.
- Cornelia Meyer is a business consultant, macro-economist and energy expert. Twitter: @MeyerResources