The New Colonials?

Posted by berkeleysblog on June 25, 2009 · 1 Comment 

Russian President Dimitry Medvedev might just be flying over my head today as he travels to Namibia on a week long tour of African nations. In a sign of the times, he is taking the opportunity of the economic downturn to boost a series of energy deals with several countries on the continent (though not Zambia this time around). Yesterday’s stop was Nigeria, where he announced a massive new investment program in that country’s oil industry, even proposing to build a pipeline across the Sahara – though what the rebels of the Niger delta who are busy destroying the existing infrastructure might have to say to that is as yet unclear.

In truth, Russia is playing catch up as a huge surge of investment and expansion is witnessed across Africa since the begininng of the 21st century. What differentiates this from previous ‘African scrambles’ is that it is not the old colonial powers from Europe & the US leading the charge but the emerging economic powers of the Middle East, Asia and particularly China.

Their motivations are many but one of the most pressing is to ensure greater secure sources of raw materials. As the world’s new manufacturer-in-chief, China has become acutely aware of how reliant its own economy is upon the steady supply of raw materials in large volumes at affordable prices. It is now using the downturn (and the massive reserves it accumulated during the boom) as the perfect buying opportunity to make sure its economic development is not threatened by a scarcity of such materials in the future.

Interestingly it is not just the usual mining products which are the focus of this latest scramble in Africa. Increasingly nations are identifying arable land (and with it access to clean water) as a strategic asset to be secured wherever they can find it. So you now find the likes of Daewoo (a Korean conglomerate) signing a deal with Madagascar to lease over half the island’s land for 99 years. The deal was so controversial that it became a major reason for the political unrest that engulfed the country earlier this year.

Many western NGO types are outspoken of their concerns regarding the coming of Chinese and Russian investors. They fret that countries who have questionable human rights records of their own will place less pressure and scrutiny on the internal affairs of their African partners. This may be true, yet was it really so long ago that the same western countries were propping up  obnoxious regimes in the name of stopping the spread of communism across the continent? The Congo has yet to even begin to recover from over half a century of post colonial interference which started with the Belgian assisted execution of its first democratically elected leader, Patrice Lamumba, and his replacement with the US supported despot Mobutu Sese Seko.

Zambia’s significant mining and agricultural assets have not gone unnoticed and there have been several high profile investment trips by Chinese leaders to woo the country’s leadership of late. Chinese enterprises  have a growing presence in the mining and agricultural sectors and it is Chinese contractors that are building many of the new roads and other infrastructure across the country. Controversial plans to purchase mobile hospitals and hearses (which now outnumber the country’s fleet of ambulances) have all conspiciously been sourced from state backed Chinese enterprises. A quarter of the eggs we eat in Lusaka are said to now come from Chinese owned hatcheries.

So what is the feeling on the Zambian street about the source of this new investment and ownership? Well, mixed is probably the best description. On the positive, the country still urgently requires investment in its assets and infrastructure and is not in much position to pick and choose where it comes from as the global economic outlook continues to worsen. The lack of strings attached as compared to many western investments is certainly welcomed by some.

On the negative, it is a source of  frustration that many Chinese firms employ their countrymen to do much of the construction work and there is a certain dismay that after the many previous eras of  exploitation of resources, the nation’s family silver (or more accurately copper) is once again being pawned for too cheap a price. The leading opposition leader made an election pledge to kick all the Chinese out of the country but has since distanced himself from that rhetoric.

The challenge for Zambia (and Africa in general) to manage inward investment remain the same regardless of where it is coming from. How do they ensure that their raw assets are turned into valuable development for the economy as a whole without the investors making off with lions share and what little remains going to a privileged few?

The answer lies in a tricky balance of investment policy that is sufficiently robust to tax and police the foreign investor but straightforward, profitable and transparent enough not to scare them and their much need dollars away. Sad to say, it is an equation that is still far from solved across much of the continent, nor for that matter in Zambia.

Filed under Uncategorized · Tagged with African Economics