A few weeks ago in these very pages, Franklin Templeton’s emerging markets guru Mark Mobius set out the case for Africa’s investment potential. The numbers are compelling, with the IMF projecting that during the next five years, 10 of the 20 fastest-growing economies will be in Sub-Saharan Africa, and two will be in North Africa.
One investor which has been extremely quick to tap this potential is China. The country’s investment into the continent has been huge and it is now Africa’s largest single trading partner. To date this investment includes loans of $16bn to Ghana, $8.4bn to Nigeria and $6bn to the Democratic Republic of Congo (according to The Wall Street Journal), with a further $20bn for agriculture and infrastructure loans promised by China’s president Hu Jintao last July.
Bilateral trade hit $166bn in 2011, up 33% from the year before. Of that sum, $93bn came from African exports of natural resources and agricultural goods, while the remaining $73bn consisted of manufactured goods imported from China.
On the face of it, China’s resource-for-infrastructure investments seem simple enough: in exchange for access to African resources, Beijing underwrites major infrastructure projects necessary for economic development. This tradeoff is touted as being of mutual benefit and cooperation and a win-win for both countries.
But while this arrangement clearly helps to increase Africa’s development enormously, the scale of Chinese investment has raised concerns over just how beneficial their policies will be for Africans. In signing deals that trade African resources for easy loans and much-needed infrastructure, Beijing must be careful it is not, as some critics suggest, acting as neo-colonial power in cahoots with oppressive regimes such as those in Zimbabwe and Sudan, where it has already handed over billions of dollars.
Critics argue that when offering “cheap” infrastructure loans in return for Africa’s natural wealth, China would do well to remember the roads France paved through Vietnam, the Dutch-built ports of Indonesia and the British railways snaking their way through India.
Others meanwhile will claim that at best, the trade-off is indeed a win-win situation which can only accelerate Africa’s development and unleash its potential. At the other end of the scale, China is funding oppressive regimes which make life a misery for the people.
The economist Joan Robinson famously said: “The misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all.” One suspects that while Africa will benefit from its relationship with China, those benefits will inevitably come at a price.
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