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Perspectives

November 18, 2009
Africa remains the final frontier for economic growth

An employee of Logistique Petroliere in Madagascar. Photo: Flickr user DavidDarricau

Ayo Johnson, a Worldfocus contributing blogger, writes about extraction of natural resources in Africa. The piece is excerpted from his blog, Africa Speak International.

The truth is that Africa is the next new frontier of mineral exploration. With major stakeholders battling, wilding and conniving their charm against a complex network of shady deals to outwit the cool, smart and calculative moves of the Chinese.

Africa’s strategic importance cannot be underplayed nor its value cheapened. Its geographical positioning and untapped mineral wealth make it a unique selling proposition to any investor. The trading ability of any multinational company is dependent on contracts signed and memorandum of understandings reached between hosts and investing governments.

African countries, dissatisfied by unequal trading relationships with the rest of the world, have hardened their political stance. China’s current interest in Africa is only a convenient opportunity for African governments to support another would-be investor.

China’s relationship building with Africa over the past 10 years has left the continent in relatively decent shape. African governments have realized that they need trade far more than aid. They need fair term without carrot and stick approach linked to investment. Africans clearly understand that they can choose between China from the East versus the rest of the world.

China has stolen the lead in Africa with over $60 billion worth of investment and untold influence.

Virtually in slow motion, overnight the Chinese had taken a grip of mineral extraction with Europe and the U.S. a distant fourth. Behind Russia and Brazil — both major players in their own right.

Industrialized nations’ appetite for oil goes unabated despite calls from pressure groups. Governments need to diversify into large scale production of new greener cleaner technologies of wind, solar and hydro. Wars in the Middle East, combined with strained relationships with many other oil-producing countries, have forced the West to look for new suppliers of oil.

China is also desperate; its rapid growth and technological advancement have increased its appetite for energy to fuel its enormous economy. This is the central driving force that justifies it presence in Africa. China’s dominance across the continent has come at a price. The Chinese have built bridges, road and general infrastructure all for free — in a bid to guarantee access to Africa’s precious minerals.

China has also provided soft loans to African governments, namely Angola, Sudan, Zambia, Congo and Rwanda as a means of raising much needed private capital outside of the framework of the IMF and the World Bank.

The Chinese have not imposed conditionality packages as part of their loan agreements, unlike the stringent and detrimental conditionality packages imposed by industrialized nations. Instead China has requested that African governments in receipt of Chinese money do business with Chinese companies and buy goods from Chinese firms.

Guaranteeing that the circulation of money is kept strictly with the China-Africa trade zone squeezes Western products and firms out of the picture. There are now little Chinatown enclaves popping up all over Africa with cheap Chinese goods replacing Western brand names.

It is therefore not surprising that President Obama visited Africa, flagged by an extended trip to various mineral hot spots by Hillary Clinton. The U.S. is eager to show support to Africa and to rekindle influence in a bid to up root and dislodge the Chinese iron grip on the continent.

African leaders and their advisers have finally awakened, realizing what the new type of global politics is all about. Who are the new major players, and what choices have to be made?

Africa finds itself in a very unique position to be able to choose among multiple investors all bidding for the same job. This increases the value of Africa’s currency, ensuring that the best deals are signed.

Africa’s choice will be at the expense of Western governments and their respective multinational companies. A liberalized continent is voting with its feet and changing suppliers, manufacturers and investors all at the same time. This is ground-breaking and truly unprecedented.

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Comments

32 comments

#32

Very true Ayo you are indeed a true African , keep it up bro

#31

Interesting article and it will remains to be seen whether China will remain friendly in their pursuit.

#30

[…] The truth is that Africa is the next new frontier of mineral exploration. With major stakeholders battling, wilding and conniving their charm […] Read more at http://worldfocus.org/blog/2009/11/18/africa-remains-the-final-frontier-for-economic-growth/8451/ […]

#29

Let’s see if the East African Union can leverage economic power in China investments.

#28

Very interesting, well done Ayo. It is good to read and find about what is really happening in Africa. Anticipating your next article.

#27

The future of Africa depends on its repentance from sin and embracing Jesus the Christ. Natural resources are of no benefitting consequence to lives and development.
North Africa has a crisis of Islamisation. Muslims can suck up all resources and enslave all in terrorism and oppression. The real physical enemies of Africans are their own sinful brothers and sisters.
The only solution is in bringing Africa back to Christ Jesus. All other paths are sinking sand.

#26

Same Story new day. All the wars going back at least to the 11th century were fought over the wealth of Africa. Kept the news coming. Much appreciated.

#25

This is a good job well done sir. My only concern is that most of the money made by Africa is like ‘back to the sender’; the money come from outside Africa and later go back through mismanagement of public funds.

#24

Brother Ayo Thank you for your keen analytical focus on Africa from a contemporary global perspective.The China Investment Corporation has 2 trillion dollars under management and China’s investment in Africa was 107 billion in 2008. The value of cobalt, gold, iron, copper, oil, to name a few resources demands a larger share of this CIC holding. This is the time for our Pan African Dream to manifest in pragmatic economic realities. Africa must move ahead to form economic unity that will allow for effective leverage of its mineral wealth for a larger share of CIC investment portfolio.

#23

A well written informative piece.

#22

It’s time that Africa’s leaders know the value of continent. They should negotiate from a position of strength but also remember that not all Western Companies are out to rip them off. The deals with China are fine, but the Chinese governments must exert more pressure for good governance and accountability across Africa.
The article was an excellent synopsis though readers should be aware that there are far more complex politics at play that Ayo cannot delve into with a one pager.

#21

Great piece. Great work. Africa my Africa.

#20

Uncle Ayo, This is great. You have really called our attention to something fundamental at this point in time. Only one who is attuned to sensitivities of Africa development will apreciate this article. Keep up the good work.

#19

Thank you Ayo for this opportunity to discuss foreign investment in Africa at a time when Africans should be rethinking their responsibility to reclaim Africa from foreign influence. I am sure this discussion coincides with China’s impending investment in Guinea at a time with the people of guinea were being killed for daring to reject a military dictactor succeeding himself as a civil dictator in the country’s democratic election scheduled for 2010. What Africans should be asking themselves is the integrity of China’s proposed investment in a country where democracy is being endangered and the people being killed.
Africans need to remind themselves of the fact that our colonial masters first arrived with business propositions and then once they convinced us that their intention is to assist us make wealth, they became the oppressors whose arrival continue to haunt Africans to this day.
Africans need to ask themselves why it is so important to attract foriegn investors to a Continent so impoverished? Africans have the expertise to do the sort of expertise and business investments that China is spreading across the Continent. Look at the countries where China is already doing business, China appears to be supporting the genocide in Darfur by investing in the country where untold human rights abuses are taking place against the Darfurians who are the oil producing region of Sudan. Now, consider China’s attempt to supply arms to the Zimbabwe’s Robert Mugabe at a time when Robert Mugabe was intensifying his brutal hold over Zimbabweans.
The list is long.
Africans cannot continue to migrate into foriegn countries in search of greener pastures due to the lack of opportunities in their own Continent, whilst China and other Western Governments are busy earning billion of US Dollars from their investment in Africa. Most of the time the foriegn investors come along with their nationals to benefit from these investments. Every show that Africans become the cleaners and security guards for them and their employees.
Until Africans see the need for them to take responsibility for the advancement of our Continent, the exploitation and thus enslavement of Africans will not end.
To my mind, the issue should not be what world power would benefit Africa most by their exploit of Africa’s natural resources, the discussion should be, when will Africans tell the foreign multinationals already destroying our environment, impoverishing the Continent, forcing Africans to remain second class citizens in foriegn countries increasingly living in hostile environments, when their own Continent is rich enough to sustain them and their future generations.
The activities of foreign investment in Africa is partly the reason some African politicians (Governments) are so corrupt and brutal towards their own citizens who dare to challenge their corruptness and destruction of the Continent.

Sorry Ayo but I feel that we need to open discussion on how and when Africans should start addressing the 500 years of Africa’s direct and indirect enslavement, offer of aids in exchange for reckless exploitation of our natural resources. Africa has paid her debt so, Africans need to take their destiny in their own hands.

Africa has enough natural resources to keep Africans fully employed,put enough food in our childrens belly and to pay for every necessity of life.
Africa has enough to be the GREATEST Continent in the whole world. But Africans must look inward and NOT outwards for the liberation from poverty and disease. There is no need for Africans to escape to foreign countries. Africa NEED Africans.

#18

Good job Ayo.

#17

Ayo, you have nailed it right in the head. What I would add is that whilst the Chinese have been able to come up with the required goods without asking much questions, in part due to their huge energy requirements, but also by the desire entrench themselves in the African leaders’ business minds and thereby hope to lock out the West, their attitude of looking the other way in the face of atrocities committed by our African leaders does not augur well for the continent.

I am aware that the art of looking the other way when convenient has been perfected by the West, but if we are only keen to accept the Chinese Yuan with open arms because the Chinese are unlikely to see or hear any evils, we will loose our bargaining power after being locked in. We should appreciate our true value, and the magnitude of our natural resources, and that way we will negotiate with any potential investors as equal partners. We both need each other.

Keep it up Ayo,

#16

Keep doing what you are doing bcoz you so good at it im really impress with your work it so good to see such a young vibrant and wonderful jurnalist who is so truthful and dedicated to what he does i pray that the good Lord will continue to flrish you with his bleesings keep it up

#15

Ayo I think this article is really well done. The Chinese are definitely a welcome trading partner to Africa. However we should always remember that China is not doing all this to help Africa. They are growing rapidly and need resources badly to fuel their economic growth. Europe did the samething when they where going through their industrial revolution. The trick that African leaders have to learn is how to convince China open up their markets to a lot of African goods. If not this phase of Chinese investment would end with the Chinese walking away with the resources and Africa gaining very little in the longterm.

#14

A good article Ayo!The chinese believe that a thriving economy supports entrepreneurship and the small business sector.

#13

Well done Ayo a piece of straight talking. I also commend the contributors for their thoughtful coments. I think Phillip makes a particularly valid point about the fact that Africa has had its mineral resources nimbly removed from her over man years by forward thinking companies and former colonial powers.
Nevertheless it is clear that Africa now needs trade more than aid. The advent of the Chinese must be seen as a good thing – regardless of how they have been viewed in the past. It is important to note that they have made an impact and perhaps even showed the more traditional partners that Africa has come of ae and can now be dealt with on serious business level.
It is also clear that the mind set of those who are in positions ofauthority must change to enable long term planning and strategic development rather than subscribing to get rich quick schemes.
This means that Africans have to be more responsible themselves and prepared to return home, atleast preiodically, to give their motherland the benefit of their experiences abroad. It is necessary that we learn to be open with each other, listen to each other, respect each other and act together to bring about a better, more developed Africa.

#12

Ayo, great analytical write up and observation. Africa should wake up to its responsibilities. It’s been known for a long time that the minerals available on the continent is stupendous, yet we lack our own database to begin activities on this basis. I see the shift in investors to the Chinese as another problematic issue, b’cos they have struggled so much in savings and investment to reach the level they are now. Our problem still lies in the lack of selfless leaders who can and should see their followers as brothers in progress. I believe if we harness what the US, Europe and Asia have attained in techno-socio-economic and cultural development, we may also avoid or contain/control the unforeseen repercussions in earth extractions, for sure! Statistics is the beginning of development! Remember that Chinese products which have been labeled as substandard was at the request of the buyers/sellers, so we need to be cautious and insist on quality items. BTW, I still favour a situation of comparative economic cost advantage, so we should also aim for the manufacturing and construction industries than to repeat the sad history we’ve with the Europeans and Americans in the scramble for Africa in the late 19th and early 20th century!

#11

Ayo,

Excellent post. My only exception is the view that Africa is a new frontier of mineral exploration when the continent of Africa has been ravaged and pillaged for her rich resources for centuries. But as the natural resources of Western nations deplete, new frontiers are being pushed to the brink, and China is suddenly playing a major hand in wild-catting all over Africa. This portends bad for all concerned.

Good post, Ayo

#10

I have no problems with investors and other nations coming to Africa for our resources. All i have to say is that the African people should also benefit from the natural resources. Mr Ayo trust me i have been following your work for a while now and i realize how much you have done to inform people about issues concerning Africa.

#9

Ayo, first off, I want to say a job well done. I have said it all along that a deal and a contract suppose to be without stipulation. The Chinese, as you say, are the only ones doing business without any “strings attached”. Again, Thank you very much for your contribution in Africa.

#8

Africa has and will always be a haven of sort for investors and the likes. The chinese have seen the light though late but timely. My advice to the leaders of the African nations, is to ensure that they dont sell off the continent at the expense of their precious metals; development has to get to the host communties, even distribution of wealth, greater concern for its citizens and more importantly speak of the good of/from the land and not the bad/ugly side.
Mr. Ayo, this article is well written and should be published in daily newspapers. there are so many untapped precious minerals in Nigeria and our government should look into it reduce the reliance on oil.
Remain Blessed

#7

Ayo
Good topic…..African leaders need to align themselves more, stop accepting short term wins and like you rightly identified, understand “New global politics” with a view to playing to win.

#6

This article makes me very proud to be an African, it’s good we have a voice like you to put these issues across the globe (SO THEY KNOW THAT WE KNOW WHATS GOING ON). well done show them that you r a product Prince of Wales School. Once again let your voice be heard.

#5

Hey bro, good article – makes good reading with salient points, keep up the good work. God Bless.

#4

Dear Ayo i really commend your effort of making our (Africa) voice to be heard around the globe. may God continue to strengthen you. we are proud of you.

#3

I concur. A fellow among fellows.

#2

My Brother i like your wording on sfrica as your right on the spot. May God almighty continue to use you to broadcast and write the truth of our african brothers and sisters. As a sierra leonean living in the Uk, its so good to see a journalist of your calibre saying the utmost truth concerning africa. May God richly bless you and guide youn in all your work that you are doing in the mighty name of our lord Jesus Christ.

#1

It’s no secret that 75% of the world’s natural resources comes from Africa.Africa is in a unique position if it can do what the Arabs did.ie. develop their country using their resources instead of the unscrupulous leaders trying to amass wealth be illegal means which they will eventually loose.

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