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African "Quest" Safari: The New Destination

Updated: Jul 26, 2021

by Sitendu De

“When the missionaries came to Africa, they had the Bible and we had the land. They said 'Let us pray.‘We closed our eyes. When we opened them, we had the Bible and they had the land.”

-- Desmond Tutu

Colonization of Africa -

The above quote quite aptly sums up what other countries did to the African countries. The scramble for Africa mainly began between the years 1884 and 1914. The reasons being mainly economic, political, social, and religious. Many European countries became involved in a race to acquire more territory on the African continent, to ensure trade. Britain and France were the two main imperialist nations that controlled most of the territory in Africa.

It developed in the nineteenth century following the collapse of the profitability of the slave trade, its abolition, and suppression, as well as the expansion of the European capitalist Industrial Revolution.

England jumped into the bandwagon early as they wanted to control the Suez Canal to ensure a shorter route to India. Another factor was gold and diamonds were found in plenty all over Africa. Europeans wanted colonies to provide raw materials for their factories and to sell their goods in the new colonies. Some nations wanted to gain colonies to show their national strength.

In recent times almost every country seems to be interested in doing business with Africa. Prominent among them are:

  • USA

  • Israel

  • China

  • India

  • Canada

  • Japan

  • Russia

  • European Union

But why all these countries have suddenly shown their interest in the African continent?

Well, they are interested as the African continent has these things to offer to the world:-

  • 54 sovereign states which mean 54 votes in the United Nations General Assembly (UNGA)

  • Africa has 17% of the world’s population which means it has huge middle-class consumers

  • 9.6% of global oil output

  • Africa supplies 90% of Platinum

  • Africa has 90% of Cobalt

  • Half of the world’s gold comes from Africa

  • It produces 2/3rd of Manganese

  • 35% of the world’s Uranium comes from Africa

  • Africa produces 75% of the world’s total Coltan, mainly used in almost every kind of electronic devices

  • Africa has emerged as a viable alternative source of “Rare Earth Minerals” though China is the first

Why are all countries lining up to invest in Africa?

· Africa needs good infrastructures

Sub-Saharan Africa is in badly need of roads, rails, ports, airports, power grids, and IT backbone to improve African economies. This lack of infrastructure hinders the growth of imports, exports, and regional business.

Africa is poor on electricity generation. On average 700 hours of power disruption occurs, this leads to loss of productivity, adding cost and leaving businesses to look for alternative power options.

Roads and rail lines are less, decrepit and over-burdened. There is a limited intra-African air connection. Africa’s lack of efficient storage and distribution infrastructure hinders businesses, entrepreneurs, and farmers. Up to 50% of African perishable items get spoiled before reaching the markets.

· Intra-African trade holds enormous potential

Within the 54-nation African states Free Trade Area – Africa’s mega-trade deal – even the smallest African economies could see an enormous lift. If duties are lowered and incentives introduced, then manufacturers could see benefit from setting up production and assembly operations in multiple African countries. That could lead to development in electronics, machinery, chemicals, textile production, and processed foods.

· Customers are changing

The growth of Africa’s middle class brings in a lot of new expectations. Educated young urban professionals are brand-aware and sophisticated in terms of their consumption. Retailers and consumer brands should capitalize on their buying preferences in fashion, home, and lifestyle products that are of international quality.

· Digital transformation

Africa leads the world in mobile adoption, which is one of the biggest economic opportunities. Mobile payment networks have opened up the global economy to the poor, unbanked city and rural dwellers.

· Africa is diversifying

African economies are gradually beginning to diversify beyond commodities, though this is still in the early stages.

Realizing that they can no longer count on growing investment from China, every country now has “Investment Promotion Agencies”, which act as one window for investors, assisting with registration, taxes, and other steps to establish companies locally.

· Africa can lead in sustainable development

Africa can develop flexible fuel grids that generate power with a mix of abundant wind, solar, hydro, and bioenergy, alongside conventional fuels such as oil and gas, which are also abundant. Nowhere else there is so much unused or poorly used arable land, so agricultural breakthroughs and productivity gains in food production in Africa can be possible.

Out of all countries in the world, China is way ahead in the race to invest in Africa. It has already put in $2 trillion of investments. The longest railway line in Africa of 6,200 km connecting Ethiopia and Djibouti has already become functional. Out of every 5 infrastructure coming up in Africa, 1 belongs to China. Chinese ports have already come up in Sudan, Mauritania, Senegal, Ghana, Nigeria, and Namibia. The final arc of this corridor connects Walvis Bay to Chinese ports in Mozambique, Tanzania, and Kenya.

In return what does China get?

China-Africa Synergy by ORF

  • Geo-political influence

  • A strategic base at Djibouti

  • Controlling the shipping route from the Mediterranean Sea to the Indian Ocean via Suez Canal

  • Controlling the strategic “Horn Of Africa” (Djibouti ) base with 10,000 troops stationed

  • The largest trading partner

  • 10,000 Chinese companies are presently operating in Africa

  • China has access to one-third of the African mining sector.

  • Securing natural resources

  • Debt trapping many nations while claiming benevolent motives for the aid it provides

Today, China is using this leverage to out-compete the United States in Africa by using a kind of warfare that blends the diplomatic, information, military, and economic instruments of power into a coherent strategy, using every facet of a country to achieve strategic objectives. China is discreetly gaining influence and seizing control of both resources and governance in most of the African states. Loans are provided to African nations to gain access to commodities such as oil, natural gas, and minerals ---- in the garb of BRI which is an essential component of China’s objectives to achieve national rejuvenation and restore China as a Great Power.

China’s increasing national influence in Africa is also evident in its investment in African media. Beijing is building Confucius Institutes, designed to promote Chinese language skills and Chinese cultural influence, across the African continent. China has shared technologies to enhance intelligence collection, surveillance, monitoring, and response capabilities across the region. This includes facial recognition technologies, which were recently supplied to Angola, Ethiopia, and Zimbabwe which have become a matter of concern.

China and the United States have a military presence in Africa, and there is potential that the escalating trade war rhetoric could result in instability on the continent.

India’s stakes in Africa

With the opening of 18 new embassies in Africa, regular high-level visits, increasing diplomatic footprint, diversified engagement across sectors, and a vibrant Indian population -- the India-Africa relationship has picked up momentum in the recent past.

Areas of Cooperation

  • Social Infrastructure: The India-Africa social infrastructure especially in education, health, skills cooperation is multidimensional, comprehensive, and involves national, state, and sub-national actors working toward augmenting African institutional and individual capacities. India has provided 50,000 education scholarships yearly for African students to study at different universities in India.

  • Common Geo-Political Interests: India and Africa have common interests on international issues; UN reforms, counter-terrorism, peacekeeping, cybersecurity, and energy security.

  • Economic Cooperation: India’s economic engagement with Africa is substantive.

  • In the last decade and a half, trade between India and Africa has multiplied and diversified–bilateral trade of $63.3 billion in 2018-19 made India the third-largest trading partner for the continent.

Is China losing its sheen?

  • China has a longer and deeper association in the continent, but it is facing a backlash over the pandemic worldwide.

  • China has gained a reputation as an economic colonizer–exploiting the need for capital by under-developed economies to hand over big infrastructure projects to China.

  • Chinese investment is seen as neo-colonial as it focuses on money, political influence, hard infrastructure projects, and resource extraction.

  • India’s approach focuses on building local capacities and with an equal partnership with Africans.

  • Though Africa has been actively engaged with China, it wants India to act as a balancer.

Africa once described as a ‘hopeless continent’ has now entered a phase of high growth during the last two decades. Africa emerged as an attractive investment destination on account of high growth, rising middle class, and resource abundance.

India’s investment in Africa between 2008 and 2016 was worth $52.6 billion or about 21 % of India’s total FDI - though most of that was concentrated in Mauritius, a tax haven. Mauritius totaled $47.6 billion and only $5 billion went to the rest of Africa, i.e. only 2%. A large share of Indian FDI to Mauritius is round-tripped back to India, which means that the actual volume of Indian investment in Africa is much less. Secondly, Indian investments in Africa are highly concentrated geographically - 63 % in Eastern Africa and 22 % in North African regions, Mozambique being the most desired destination due to gas fields. Thirdly, Indian outward investment in Africa is concentrated within a few large firms. Although about 597 Indian companies invested in Africa during 2008-2016, the top eleven companies account for about 80% of the total Indian investment flows.

Indian investments in Africa are typically characterized by large-scale investments in oil, gas, and mining sectors by public sector enterprises but they have not fared very well in Africa’s energy market. Though the private sector’s footprint has grown, its footprint is much smaller than India’s public sector.

India’s investment in the African continent is sporadic, unplanned, without any proper strategy and Government initiative. The energy sector is the critical pull factor behind the growth of Indian investments in Africa and the private sector is yet to fully exploit the opportunities that Africa presents. In short, India is way behind other countries in the race of Africa.

About the Author

Sitendu De got his education from St.George's Grammar School, Hyderabad and Post graduated from Osmania University, Hyderabad. He joined Cabinet Secretariat, New Delhi as an officer and was posted at different places in India. After serving for 20 years he joined the corporate world as a business strategist and recruiting new talents. He did Strategic Management Course from IIM (Calcutta). He is a prolific writer, specializes in geopolitical and human interactions. He lives in Kolkata with his wife and a son.

The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of Ytharth.

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