DUBAI, 12 May 2008 — The World Bank is “broadly optimistic” that Africa is undergoing a fundamental change.
After decades, Africa’s real GDP grew by over six percent in 2007, outpacing the world economic growth of about five percent. This is considered just short of the seven percent growth needed to reduce poverty.
Further, over the last seven years, Africa’s real GDP growth has averaged over 4.5 percent — the strongest since 1970s.
This transformation is not the result of increasing or better utilization of Western aid, but mutually beneficial and growing Asia-Africa economic engagement.
The bank states that Asia’s growing trade and investment in Africa holds great potential for African growth. Asia now gets 27 percent of Africa’s exports, three times more than in 1990, and Asian exports to Africa is growing 18 percent per year, faster than anywhere else.
Accelerating Asia-Africa engagement is part of a new global trend toward growing “South-South commerce among developing countries.”
The chief architects of this are China and India, whose trade bills with Africa, for example, have risen from less than $1 billion each in 1991 to $56 billion and $30 billion, respectively, in 2007.
The trade approach is contrastingly different from the emphasis on aid as a way of ending African poverty.
In his book, “The white man’s burden: why the West’s efforts to aid the rest have done so much ill and so little good,” William Easterly asserts that the aid industry is deeply flawed.
Challenging the Western notion that African nations are stuck in a “poverty trap” from which they can extricate themselves only with outside help, Easterly argues that some of the Asian countries that battled poverty effectively received very little aid per capita.
“Economic development in Africa will depend — as it has elsewhere and throughout the history of the modern world — on the success of private-sector entrepreneurs, social entrepreneurs and African political reformers. It will not depend on the activities of patronizing, bureaucratic, unaccountable and poorly informed outsiders,” he stresses.
Further, in a column aptly titled “The West can’t save Africa,” Easterly criticized G-8 doubling foreign aid to $50 billion and forgiving the debt incurred to fund previous “big pushes.” (It is another point altogether that aid averaged only about $14 per person annually in the poorest countries over the last 50 years and estimates show the G-8 missing their 2010 aid target by almost $30 billion)
While the West focused on genocides and their casualties, child soldiers, AIDS patients and famine, Asia tackled the African crisis from a practical, and not moral, viewpoint. It engaged Africa in trade and made it the beneficiary of a process that it created and benefited from.
To condemn Western efforts as futile would be wrong, but the fact is while aid is a one-way commitment, trade makes both parties stakeholders, thereby making transformation of poor societies easier.
The other difference is that while aid has a patronizing quality to it, trade partnership is based on the “fundamental principles of equality, mutual respect and understanding...for mutual benefit.”
Thirdly, Asia does not look at Africa in a homogenous fashion; its partnership is based on reality and particular conditions of the countries involved.
This is reflected in the African Union’s statement that Asia has “truly understood” Africa’s needs and aspirations. “Today, Africa does not need a guiding hand...we are equal partners in this race like everyone else.”
In fact, Asia’s engagement with Africa is not new. Among others, India was an unflinching supporter of Africa’s independence struggle against Western colonialism. But the gradual Asian shift toward Western alliances amid market reforms took the sheen of their African ties.
The Asian economic boom, however, mandated both raw materials for their manufacturing sector and a huge market for their finished products, which Africa meets. Apart from hydrocarbons, Asia has helped push up the prices of other African exports such as platinum, iron and copper, all commodities used in manufacturing. As a result, copper prices, for example, increased six-fold since 2001 and platinum prices tripled.
Moreover, after being written off by many Western governments and companies, Africa has also witnessed a dramatic rise in Asian investment.
Even the Gulf countries are not far behind in contributing toward African resurgence. This region’s investors have had a big influence on Africa’s foreign direct investment doubling to $36 billion between 2004 and 2006. Saudi Arabia, Kuwait, Qatar and the UAE are actively involved in a range of sectors, focusing primarily on infrastructure, telecoms, banking and tourism.
As part of its expanding businesses abroad, the UAE, for example, is the second largest investor in Sudan after China with total investments of $7 billion. And, IAS International, a Qatar-based investment company, announced in March the launch of about $6 billion worth of projects in the Central African Republic.
Though the George W. Bush administration has outspent Bill Clinton government’s African aid by three times, Bush has visited Africa only twice after taking over as president. In contrast, Chinese leaders visited nearly 50 African countries during 2006-07.
Apart from presidential and prime ministerial visits, China also hosted the Forum on China-Africa Cooperation in Beijing in November 2006, during which China proposed measures to increase bilateral trade to $100 billion by 2010.
To realize this, Beijing committed to double aid and offered $5 billion in loans and credits by 2009, as well as promised to cancel “more” debt owed by African countries. Reiterating that “common development is the shared aspiration of the Chinese and African peoples,” it also announced a $5 billion development fund to encourage Chinese companies to invest in Africa.
India too hosted its first-ever summit with 14 African countries this April — not only to strengthen ties by pledging to work as partners to solve economic and development challenges, but also to ensure that it is not eclipsed by its continental competitor — China.
India has assured that it will ease access for not just African exports, but for several other poor countries as well. “No one understands better than India and Africa the imperative need for global institutions to reflect current realities and to build a more equitable global economy and polity...Under this scheme, India shall unilaterally provide preferential market access for exports from all the 50 least developed countries,” 34 of them in Africa.
As a way of combating Asia’s growing influence, European and African leaders signed a pact promoting free-trade and democracy in December 2007, but failed to make a breakthrough on formal trade agreements between the two continents. The meeting, the first in seven years, wanted to meet a December 31 deadline set by the World Trade Organization for securing a new trading system with former colonies, including those in Africa. But only 15 of the 76 “poor countries” involved in talks have signed economic partnership agreements with Europe.
Senegal said a majority of African leaders opposed such agreements. In claiming that Asia’s approach was winning more friends and “Europe is close to losing the battle of competition in Africa,” the statement underlines the new approach and predicts the future trend.
(Dr. N. Janardhan is a UAE-based analyst on Gulf-Asia affairs, and can be contacted at [email protected])
