AFCFTA and the new scramble for Africa

By  OBINNA EZUGWU

One of the most ambitious free trade-based economic movements, the African Continental Free Trade Agreement, AfCFTA is kicking off in Africa at the moment. A scheme that is designed to boost inter-continental trade, among several other benefits for the nations and peoples of the continent, it is also one that is being accompanied by an underlying push for influence in Africa by the various global powers.

Given the interconnectedness of the world today, nothing just passes by in one small hamlet anymore. And so as African leaders gather in Niamey to formally flag off the treaty, every one that knows anything about economics the world over is taking positions. In our interconnected world of markets and peoples, a scheme that is designed to inaugurate a market of 1.2billion people cannot just be ignored.

Some speak of it as the “new scramble for Africa,” an allusion to the ‘sharing’ of the continent among leading European nations at the 1884 Berlin Conference that officially birthed the colonial enterprise. The motivation then was the continent’s vast, untapped natural resources and its cheap labour. But there was also religion and the quest for political and military leverage.

As the years progressed, African nations fought colonialism and got independence. Now there may not be any question about physical takeover of the continent. But it would appear that centuries down the road, the interests remain the same: economy, power and religion.

The end of colonialism meant the end of direct European political control of the continent, but it didn’t necessarily mean the end of economic control and some sort of subtle political hegemony – what came to be known as neocolonialism. Britain maintained strong political and economic ties with its former colonies, particularly in West Africa, so did France in the much of the continent. Both countries have been blamed for a number of coups and violent uprisings on the continent as they sought to topple governments that didn’t protect their interests. The US having emerged the global superpower, extended its influence, too. This was in the form of investments in oil and other industries and aids, while Russia, leader of the then Soviet Union also remained visibly present.

At least 250,000 Africans were trained in or by the Soviet Union before its demise in 1991, with its role in Central Africa Republic being the most high-profile. In Nigeria, the Ajaokuta Steel Industry remains as a testimony to Russia’s presence in the country, but its present state of abandonment has parallels with what later became of Russia in the country and on the continent.

But it is the emergence of China as a global economic player that has tipped the tide against Europe and America currently. While Western influence seemingly slacked at the turn of the century, China emerged big on the continent.

Chinese influence picked at the turn of the millennium, starting in 2000 in the form of strategic consultations. The first formal summit, the Forum for China-Africa Cooperation (FOCAC), took place in 2006 in Beijing where President Hu Jintao pledged $5 billion of concessionary loans to Africa. From this period, specifically between 2005 and Chinese investments and contracts in sub-Saharan Africa totalled $299 billion according to the China Investment Global Tracker. China has become Africa’s largest trading partner. And in at the 2018 FOCAC Summit, Chinese president Xi Jinping pledged to invest additional $60 billion into African nations.

Mr. Xi said the figure includes $15 billion in grants, interest-free loans and concessional loans, $20 billion in credit lines, $10 billion for “development financing” and $5 billion to buy imports from Africa. He had noted also that China will encourage companies to invest at least $10 billion in Africa over the next three years.

China has extended more than $86 billion in commercial loans to African governments and state-owned entities between 2000 and 2014, an average of about $6 billion a year. China has become the continent’s largest creditor, accounting for 14 percent of sub-Saharan Africa’s total debt stock, according to Foresight Africa 2018.

The investments leave China well primed to take advantage of the continuing economic developments in Africa. Many Chinese firms investing on the continent are state-owned, which gives them competitive edge in bidding procurement contracts in African countries, since the companies can obtain substantial subsidies from the Chinese government.

Some of China’s key motivations include the desire to secure a solid base of raw materials to fuel own rapidly growing economy. A key lure is the continent’s abundance raw materials. Africa is estimated to contain 90 percent of the entire world supply of platinum and cobalt, half of the world’s gold supply, two-thirds of world manganese and 35 per cent of the world’s uranium. It also accounts for nearly 75 percent of the world’s coltan, an important mineral used in electronic devices, including cellphones. These remain largely unexplored.

Mining and oil have formed the critical focus of China’s investments, but their reach extends to virtually every market sector, including everything from infrastructure to food processing. China’s investments in the largely undeveloped infrastructure of African nations are particularly strong, encompassing key areas such as utilities, port construction and railway. Most construction works in Nigeria, from railways to monorail are done by the Chinese, indeed critical infrastructure on the continent seems to be taking a Chinese identity increasingly. The country is currently financing more than 3,000, critical infrastructure projects across the continent according to the AidData Project.

But there is also the corollary desire to increase China’s global political and military influence. China has also been expanding its military presence into Africa and rivaling the United States on investment and military activity on the continent.

While China pushed for greater influence, the US, for a period appeared to have overlooked the continent, which gave the country greater impetus.

Indeed, by contrast to China’s growing influence over the past two decades, the US held its first ministerial in 1999, when former Secretary of State Madeleine Albright and nine U.S. cabinet officials hosted 180 ministers from 43 African countries to discuss what it called a “Partnership for the 21st Century.”

The only summit occurred in 2014 when former President Barack Obama hosted leaders from 50 African states, resulting in $14 billion worth of commitments from U.S. companies to invest in Africa. President Obama also convened a U.S.-Africa Business Forum several months before leaving office.

The Donald Trump administration seemed, initially, to take US isolation of Africa to a new level, describing the continent once as ‘sh*t-hole countries.” Besides former Secretary of State Rex Tillerson’s meeting in Washington with 37 foreign ministers in 2017, President Donald Trump’s lunch for a group of Africa leaders on the sidelines of the U.N. General Assembly in 2017, and White House meetings with President Al-Sisi of Egypt, Muhammadu Buhari of Nigeria and Uhuru Kenyatta of Kenya, not much had happened in the context of Africa engagement, although….

But it would appear that there is a sudden realisation by the US of China’s leveraging on Africa to build global capacity, hence the recent push to counter China. But analysts suggest it might be late in the day.

“China is now the leader of the world despite all the pretentions, China is going up while America is going down,” noted Prof Anya O. Anya…  “That’s the new world order.

Trump’s national security adviser John Bolton at a press conference in November 2018, the country had come up with plans to counter the “expanding Chinese and Russian economic and political influence in Africa, calling business practices of the two nations “corrupt” and “predatory.”

“Great-power competitors, namely China and Russia, are rapidly expanding their financial and political influence across Africa,” he said.

“They are deliberately and aggressively targeting their investments in the region to gain a competitive advantage over the United States.”

Bolton’s remarks had come days after the passage of the Better Utilization of Investments Leading to Development (BUILD) Act in October. The Act provides for the establishment of the $60 billion U.S. Development Finance Corporation. The new agency is aimed to boost US investment in Africa. USAID’s Private Sector Engagement Policy is likely to further increase U.S. commercial engagement on the continent.

But there had been other US engagement in Africa, such as the African Growth and Opportunity Act, the President’s Program for Emergency AIDS Relief, the President’s Malaria Initiative, the Young African Leaders Initiative, Power Africa, Feed the Future, the Trade and Investment Hubs, and the Millennium Challenge Corporation, all of which have made degrees of impact. But perhaps not on the scale that China’s new push has.

Russian influence in Africa waned with the collapse of the Soviet Union but as the game for greater political and economic influence intensifies, the country is also returning to the continent. Russian political advisers have been busy in countries like Egypt, Guinea, Zimbabwe and Madagascar. Russia is presently building an Industrial Zone in Egypt’s Suez Canal Economic Zone, the first megaproject inaugurated by the Russian Export Centre.

Mr. Kanayo Awani, Managing Director of African Export-Import Bank (Afreximbank’s) Intra-African Trade Initiative, projects that trade turnover between Russia and Africa would double within the next three years.

The volume, he said, grew by 18 percent in 2018 to reach $17.5 billion, while the volume of their non-energy non-commodity exports within the same period also grew to 14.3 billion dollars, with Egypt, South Africa, Zambia, Angola, Algeria, Nigeria, and Kenya as key consumers.

Speaking at the Annual General Meeting of the Afreximbank held in Moscow last month, Russian Prime Minister, Dimitri Medvedev noted that globalisation had shifted growth to developing countries, making Africa a more important partner for Russia. He said Africa and Russia account for half the world’s resources and should harness the resources to foster greater economic future for their people.

Medvedev regretted that Russian influence in Africa began to fade in the 1990s, but said there is already a push for its revival.

“We are promoting humanitarian ties, both as part of international assistance to Africa’s comprehensive development and on a bilateral basis. In this new era of Russia-African cooperation, the Government of the Russian Federation will do everything in our power to make our partnership a success,” he said.

European nations have complex colonial past with Africa, but both continents have somewhat maintained close ties. The emergence of China as the leading player on the continent also meant that the EU became second fiddle players.

In 2007, the EU launched the Africa-EU Strategic Partnership and the first-ever summit between the 27 members of the EU and the 54 nations of Africa in 2007 which was an attempt to strengthen relationship between the two continents.

The fifth EU-Africa Summit took place in Abidjan in 2017 against a background in which two-way trade exceeds $300 billion. In association with the summit, the EU pledged to mobilize more than $54 billion in “sustainable” investment for Africa by 2020.

But still lagging behind China, the EU is shoring up its commercial position through a web of free trade agreements, or Economic Partnership Agreements (EPAs), which it is has concluded with 40 African nations in sub-Saharan Africa. The EPAs provide European companies with preferential access to markets across the region and will liberalize about 80 percent of imports over 20 years.

The EU has been one of the critical stakeholders in the Continental Free Trade Agreement which was signed by most African Union members in Kigali on March 21, with Nigeria which had dragged foot accepting to sign at the upcoming Niger Summit.

A comprehensive EU trade strategy combined with a private sector that has historic ties to local markets sets the stage for continued growth and influence by European firms in the African market, but the question remains, where does it leave Africa?

Dr. Boniface Chizea, former banker and CEO BIC Consultancy, argues that since the continent, especially Nigeria has shown lack of capacity to drive own development, the growing attention from the West and China can only be welcome development.

“For the consumer, once you introduce competition and the competitors are trying to outdo themselves, you are the ultimate beneficiary,” said.

“If they are competing to come and invest here, then we stand to benefit. Even though it has some political undercurrent, but regardless if they invest, it is still an investment. They can’t put whatever they have built here on their heads and move back.

“I don’t have any issue with Chinese investment really. If they develop rail lines, the rail lines will be there. And obviously we have shown that we lack the capacity to develop ourselves. People are dying, you have poverty everywhere. People are migrating and dying in the Atlantic Ocean. We cannot develop on our own. Look at debt service.

“Right now, we are using about 60 percent of our income to service debt. And we are still borrowing and borrowing. Soon we’ll get into debt trap again. The states are not viable, you refuse to restructure. So the states can’t compete. Every month states go to Abuja to share money.

“So yes, if they want to come let come. Let them build railways and roads for us. What was the U.S. doing before? Let them come. Let them bring companies that are competitive, then we are happy,” he said.

India is often the less talked about country in terms of influence in Africa, but theirs is also growing rapidly with numerous state sponsored companies springing up at every corner. Narendra Modi, India Prime Minister has visited eight African countries during his five years in power.

But Africa has also increasingly witnessed subtle religious cum political influence from the Middle East, particularly the Arab world. The influence of the Saudis have grown substantially as seen in its role in crisis ridden Sudan.

A Turkey based Foundation; Turkiye Diyanet Foundation has built the largest mosque in east Africa Djibouti. Since 2008 Turkey’s leader, Recep Tayyip Erdogan, has paid more than 30 visits to African countries, most of them sub-Saharan.

According to the Economist, The Horn of Africa has become part of the broader competition between Saudi Arabia and the United Arab Emirates on one side and Iran, Qatar and Turkey on the other.

“In 2017 Turkey built its largest overseas military base, and its first in Africa, in Somalia. Saudi Arabia and the uae have launched attacks into Yemen from their positions in the Horn. Saudi Arabia has also recruited soldiers from Sudan, some of them children. It is also thought to be keen to open a base in Djibouti; the UAE is set to open a new one in neighbouring Somaliland.”

Clearly, Africa is open for business. But it also remains open to be influenced and taken advantage of, if the people of the continent do not smell the tea leaves themselves; and go ahead to act in their own best interests.