Africa, the U.S., China and the Economic Crisis
On the face of it, Africa has been relatively unharmed by the world financial crisis. The fact is that it remains the continent that has been the least penetrated by formal institutions of investment and credit – mortgages, bank loans, share dealings, that sort of thing. Much low-level business in Africa is done with cash or even barter. In South Africa, the continent’s leading economic power, the banks are still regulated in a way that was regarded as orthodox in North America and Europe before the doctrines of free-market globalization became fashionable, so South African bankers are actually forbidden by their government to deal in the dubious financial instruments that have brought down so many famous names in the banking world.
Good news so far, then. Yet the world is not just dealing with a financial crisis, but with a recession as well. Here, Africans are affected like everyone else. The continent still depends largely on exporting primary products. Because of a fall in demand, the prices of most commodities have fallen sharply, with exceptions only for a couple of items, including gold and cocoa. The consequence is a decline in foreign exchange earnings for most African countries, compounded by difficulties in obtaining loans, as funds are sucked into the developed world, and by a likely drying-up of donor aid, as rich governments worry about problems closer to home. We are likely to see more cash-strapped African governments, with some of them buckling under the pressure.
Now would actually be a good time for all concerned to make a brutally honest assessment of the whole development and aid business, with a view to seeing what makes sense in the twenty-first century. But it is unlikely that that will happen, as leading players will have so much more on their minds. Thinking in the development business remains rooted in mid-twentieth century notions that are pretty much obsolete.
In the longer term, strategic calculations about Africa are increasingly likely to turn on the question of access to commodities. The huge demand of recent years has fallen off as a result of the world recession, but China’s industrialization is now unstoppable. The Chinese government clearly thinks long-term and is highly pragmatic. It does not entirely trust world markets. Therefore, even if China goes slow on the implementation of the mining and infrastructure agreements to which it is already committed, we can expect to see China continue to take the necessary steps to maintain its rights to resume these projects at some future date, when conditions are more conducive. The important thing for China is to maintain a firm hold on African commodities until the day when the mines start working and the trucks start rolling again.
A key question for the Obama administration in this context will be what strategy it adopts towards Africa’s oil. Thinkers within the US Department of Defense in particular see access to oil from the Gulf of Guinea””broadly defined as the swathe from Mauritania to Angola””as a major strategic concern for the US. The neo-conservatives who wielded such influence under President Bush believed that this was best done by the projection of military power. In short, they believed that the US should plan to deploy its armed forces in such a way that it could secure Africa’s oil for the next generation, putting it into not merely a commercial competition with China, but a militarized one. This was some of the thinking behind the creation of an autonomous Africa Command, Africom. China, however, has shown no enthusiasm for supporting its commercial aspirations in Africa with military power. On the contrary, in recent years it has shown every sign of playing a greater role in some of the complex multilateral arrangements by which Africa is bound into global systems of governance. For the first time, China has committed troops to United Nations missions in Africa, for example.
How will the games of great powers affect Africa itself? There is no foreseeable future for industrialization in Africa. Some African countries were earning serious money in recent years, before the collapse of commodity prices, but there was little sign of any of them using it in the service of a serious development strategy while conditions were propitious. Now, that option has gone. In principle, a shortage of foreign exchange plus high food prices could spark a revival of African agriculture, but there is no serious evidence of that happening as yet, despite encouraging signs here and there. What we are likely to witness is a situation that is in some ways rather reminiscent of the period immediately before the colonization of Africa, during the third quarter of the nineteenth century, with few centres of power in Africa being able to guarantee the rule of law in the Western manner, and external interests investigating local permutations with a view to identifying viable local collaborators. An interesting and rather ominous twist is that sovereign states with little effective rule of law are proving to have a comparative advantage in the world of global rule-breaking. Colombian and Venezualan cocaine-traders are flocking to West Africa, most recently to Conakry since the coup of December 2008. Illegal fishing, dumping of toxic waste, and a host of other practices that are formally outlawed take place most easily in those places where sovereignty is ineffectual.
Thanks for this article.
I’ve read elsewhere that the Chinese government has invested quite a fair bit in the African economy. They’ve helped the africans built infrastructures and engaged in various economic projects.
It’ll be interesting to see how the US government will react to this African-China co-operation.
It’s really fine that Afric a wasn’t affected by crisis as all other countries.
Now around the world is a little bit more stable situation, but the best condition has only China (it’s my own opinion). They don’t trust to US dollar and immediately send it back from their country. From one side – it’s a normal reaction to protect their own economy, from other side – who knows, what it cause…
While the western countries neglected Africa long time the Chinese had the better strategy and invested wisely in order to get control over more and more natural ressources. Africa has a big future as it is a rich continent and the more democracies and stability develops there the more wealth will arrive at the normal people.