Monday, November 09, 2015

The scramble for Africa continues

Africa has been thrust into yet another episode of global geopolitical competition as world powers stake out their positions on the continent in a new scramble for Africa. The only thing that has changed since the Berlin Conference in 1884, which shared out the continent among European powers, is that African leaders now have a seat at the table.

China, the European Union, the United States and Japan are the leading global powers that have set up international initiatives to cultivate stronger ties with Africa aimed at expanding their markets, securing supply of raw materials and seeking political support.

Two weeks ago, India hosted the largest gathering of African leaders in New Delhi since the seventh summit of the Non-Aligned Movement in 1983. The summit, described by Indian officials as a reconnection of “old friends and family,” is New Delhi’s biggest push to reset its political and economic ties with an emerging Africa. More than 40 African leaders attended the summit, which was big on trade, terrorism and international politics. The impressive attendance by African leaders is a major statement by India on its ambitions of cementing its footprint on a continent projected to have a $29 trillion GDP by 2050 — which is in the same range as India’s projected $35 trillion economy in 35 years.

The India-Africa summit is however only one of four other similar international initiatives to cultivate stronger ties with African states. The European Union-Africa Summit was held in Brussels in April 2014, while in the same year, the United States inaugurated the US-Africa Leaders Summit in August, which was attended by all African leaders in Washington DC. Japan’s Tokyo International Conference on African Development (TICAD) is scheduled to take place in early 2016 in Nairobi, Kenya, while China, will hold its Forum on China Africa Co-operation (FOCAC) this December in South Africa.

After a decade of growth, African economies appear to be in trouble. In the wake of falling copper prices, Glencore, the second-largest mining company in Africa, has announced it will halt its production in Zambia for 18 months. Since copper accounts for 70 percent of the country’s exports and its sale provides a significant portion of its tax revenues, the halting of copper production puts serious strains on Zambia’s economic stability.

Over the past decade, China’s rise as an industrial power supported high levels of growth in Africa. As one of largest recipients of Chinese investment, Zambia has been a chief participant in this larger phenomenon with China making substantial investments in the country’s infrastructure, particularly its copper and coal mining facilities. However, as Zambia flourished economically, it became more and more integrated into China’s supply chain. By 2012, exports to China constituted almost 45 percent of Zambian exports and over 10 percent of GDP. While African leaders initially welcomed the surge in investment and interest, there are growing concerns that the continent’s economies have become uniquely overexposed to a Chinese slowdown. As China’s growth has slowed, its excess production capacity is placing a drag on the commodities that have fueled high levels of growth in Zambia and other countries. As a symptom of the deteriorating relationship, bilateral trade between China and Africa has been dropping sharply since late 2014 and the prices of many of the commodities that China purchases from Africa have fallen by 40 – 60 percent within the last two years. Zambia has already announced plans to increase its trading relationship with surrounding countries such as the Democratic Republic of the Congo (DRC), which itself is suffering greatly from the decline in Chinese demand.

Also China now appears to be rebalancing its economy away from manufacturing, construction, and exports – the sectors that most readily consume commodity exports from emerging markets – toward the services sector and consumption. Therefore, even if China resumes higher growth rates in the future, African countries, especially those that are currently dependent on commodity exports such as Zambia, Angola, and others, will be less able to rely upon it as an external engine that can fuel their domestic growth.

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