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.