Wednesday, June 29, 2016

The New Colonialists?

Are China and India the new colonial powers in Africa? Africa has seen increasing trade with China and India since the 1990s; however, the pattern of trade has not changed much despite more diversification in trading partners. Historical trade data recently released by French research institute CEPII shows that the share of Europe in Africa’s total trade has steadily declined from around 68% in 1990 to 41% currently. Asia has surpassed Europe as Africa’s biggest trading partner today, accounting for around 45% of the continent’s total trade. In particular, it is China and India which have seen a dramatic rise in their trade with Africa since 1990s. The continent’s trade with India and China closely resembles that in colonial times: Africa exports raw materials to the emerging Asian giants, and imports manufactured goods from them.

The prospects of increasing oil and gas exports too does not offer much hope as they need not necessarily translate into greater prosperity given the fundamental differences between the sparsely populated oil-exporting states of the Middle East and the African oil exporters with larger populations. one-third of Africa’s exports to China and India consist of crude oil, natural gas and other hydrocarbons. However, there appears to be no one-to-one relation between oil exports and prosperity or lack of poverty. For instance, Nigeria, a member of OPEC and dependent on oil and gas for 90% of its exports, reported a relatively high poverty rate of 53% in 2009 using the global poverty line of $1.9 per day, according to the World Bank . In contrast, Namibia reported a much lower poverty of 23% in 2009, despite hardly exporting any oil. The real reason behind the difference in prosperity between African oil producers and Middle Eastern nations like Qatar is the difference in the per capita oil production. The theory, as explained by a Chatham House report , says that since the petroleum sector creates few jobs directly, therefore countries with relatively large populations, like Nigeria, need a big non-oil sector to absorb the large population.

As a result, the continued concentration of commodities and natural resources in Africa’s export basket raises questions over whether increased trade will boost the continent’s economic prosperity. One particular strand of thought has always blamed the colonial pattern of trade for Africa’s impoverishment and delayed journey towards economic development. Thus, the fact that Africa has reduced its dependence on its former colonial powers should theoretically brighten its economic growth prospects?

Of all the exports from Africa to China and India, 90% are commodities and natural resource-based products. In case of Africa’s exports to the rest of the world, excluding the two Asian giants, the share of such commodities and natural resources in total exports is much lower, at an estimated 63%. Thus, the fact that Africa today exports mostly raw materials and natural resources, as a much higher proportion of total exports than other comparable countries of Asia, many of whom attained independence around the same time, should worry those who wish to see the continent making quick leaps towards prosperity.

In India, colonial trade is associated with the “de-industrialization” of the sub-continent when the British exported manufactured cotton-piece goods to India, thereby destroying the local textiles industry, while often sourcing raw cotton from India itself. Around a century later, China is being accused by some observers of bringing similar ruin to the domestic textile industry of Nigeria through its exports which have been often termed as dumping, that is, selling below cost. Chinese companies in Africa are also sometimes charged with mostly hiring Chinese labour, leading to eventual repatriation of most of the salaries back to the “mother nation”. Thus, there remain apprehensions in some quarters over the increasing role of China in Africa. India, perhaps, escapes such scrutiny due to the much larger size of China’s presence.

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