When the Chinese construction conglomerate, Shanghai Zendai, bought 4000 acres of land in the outskirts of Johannesburg in 2013, it promised to build the ‘New York of Africa’. The company pledged a whopping USD 7.8 billion to transform the sleepy district of Modderfontein into a metropolis, with a forest of skyscrapers along with an oasis of green space, hosting prime residences, business and entertainment centres, like never before in Africa. The planned city exemplifies and is a symbol of China’s seemingly unbridled ambition across the African continent.
The iconic African (AU) headquarters at Addis Ababa, Ethiopia, its tallest building, further represents China’s growing engagement in Africa, and with most of the other 54 AU member states. This $200m towering complex funded by China, was a gift to the AU, but it enabled Beijing to strengthen its influence and grip over Africa.
In the last one decade, China gobbled up bulk of the commodities that Africa produced, surpassing the US to emerge as the continent’s single largest trading partner—witnessing an exponential growth of over tenfold, in the last one decade. According to projections made by Standard Chartered’s global research, Sino-African bilateral trade is poised to hit $385 billion by 2015.
In its quest to secure resources in Africa, China engages in commercial diplomacy that most other countries cannot match. Beijing pitches vast trade, aid, and investment deals to resource-rich countries, and retains an almost unparalleled ability to provide low-cost financing and cheap technicians for infrastructure projects. The African model of China has largely been to provide low-interest gigantic loans with low credit ratings, and in turn, receive favourable rights to develop its nascent oil, energy and mining sectors. Through the Chinese support, the African nations augment their revenues, create jobs and further address the crying energy and infrastructure needs of their respective countries. Unlike other rich nations that impose conditions before aid is given, China’s relationship with African countries is strictly sans a business one—but in the capacity of a democracy and human rights advisory. This makes the African-China party a win-win situation for both.
As China is interested in Africa’s natural resources, it is in return investing heavily in African infrastructure development. Chinese companies are involved in hydropower projects in Zambia, Gabon and the Democratic Republic of Congo. China built a mega shopping mall in Zimbabwe’s capital Harare, laid a ring road and an airport in the capital of Mozambique, and invested billions in Nigeria’s newly refurbished Lagos-Kano rail line. China has also funded coal-power stations, roads and schools in Botswana, mines in Namibia, and in Malawi it provided funds for a new parliament, a university, hotels and conference centre. The red dragon supports housing projects in bulk of the African countries. The list is endless and even includes construction of sprawling bungalows for the president and also plush ministerial buildings in some countries to ease visa hurdles. This further helps them earn lucrative favour for advancing business interests. It is difficult to come across even one African city devoid of significant Chinese presence. Such has been the spread and influence of China in Africa, over the last one decade.
But with the Chinese economy melting, the pace and magnitude of China-Africa collaboration may lose its steam. As China grapples with a weak consumer and a bleeding stock market, the ongoing Sino-Afro big-ticket infra projects could be under considerable threat. A large number of ongoing infrastructures, mining and hydrocarbon projects in Africa are expected to slow down or get aborted as a result. China’s ambitious future road map for Africa is likely to get significantly curtailed.
Most of the African countries have been drunk on China’s growth. As the party is over, the hangover is likely to spill across Africa too. Like China they too heavily relied on the commodity market. Commodity prices have already fallen to a 16-year low, according to the Bloomberg Commodity Index, tracking 22 raw materials. Hence the China slowdown would exacerbate problems in African countries that depended on high commodity prices to balance their books. This would further paralyze the African nation’s ability to continue with the existing mining and hydrocarbon projects, let alone investing in any new exploration. Having burnt their fingers, African economies will learn to wean their extreme reliance on commodities as China is presently doing the same. As China re-balances, other commodity driven economies in Africa too needs to re-balance. This would not only see a significant spurt in the number of the Stressed Assets but also availability of future hydrocarbon and mining asset at a splendid premium, in Africa.
Despite the perceptible worries, it will be overblown to say that China will no longer be a major player in Africa. However the stage is perfectly set for India to take the baton of African growth, in the wake of deepening economic crisis in China.
India is lagging far behind China in Africa, with bilateral trade limping to clock a staggering USD 100 billion in 2015. Prime minster Modi needs to give a facelift to the relationship between India and Africa, and central to accomplishing that will be enhancing the economic ties with the African nations. It is imperative for India to ride the China slow-down and aggressively expand its economic footprints in Africa.
Finance Minister Arun Jaitley should explore the possibility of shoring up the financial capacities of the PSU oil and energy majors, so that they can go for an extended shopping of stressed hydrocarbon assets and mining leases available at a premium now. The PSU giant can further bid for the newer ones with the Chinese resistance on the wane. India should spare part of its swelling foreign exchange reserve for the said purpose, if required. This would secure the long-term energy supplies needed to sustain India’s rapid industrialization and further support its aim to emerge as the global manufacturing hub for the World. Key players of the private sector should be encouraged to lock down favourable heavy infra projects like mass transit systems and power projects by creating an enabling environment, with desired political back up.
India has always suffered from myopic view when it comes to engaging with Africa. India’s inherent weakness in foreign policy lies in pursuing the entire Africa with one bloc-one strategy, despite the countries being so diverse in terms of their political and economic outlook and needs. This has shackled India to register an impressive growth in trade and bilateral ties. Like China, it is imperative for India to build a privileged relationship with African countries by comprehensively engaging with each of them independently, while respecting their larger identity in the AU. India should develop country specific road map and aid packages for the smaller African nations. This would provide the leeway to advance its political and business interest.
A few may argue the prudency of the strategy of doling out resources to others, when it has a never-ending list of problems, of its own. India will always have its share of problem, but that should not deter India from playing a broader international role, if it aims to be a global superpower. India is further blessed with a rather prosperous diaspora in bulk of the African nations. Unlike Middle East, the Indian diaspora in Africa enjoys tremendous political clout and influence due to its contribution in building local economy with successful commercial ventures. Like the US, the diaspora in Africa too can weave the same magic, if the South Block can carefully harness the untapped potential.
India must think beyond hosting the monotonous and magnanimous African summits, as it holds no value other than rubbing shoulders with the second rung African leaders of not much relevance. The event does not have the rigour and bite to dig deep in Africa and expand India’s political and commercial footprints in Africa. A comprehensive and progressive policy of pro-actively engaging with AU should be developed instead of a peripatetic posting at AU. The next driver of global growth is going to flow from Africa and India should not be lagging behind in the race. It is time to catch up in Africa, if Indian aspires to retain its global ambition.
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