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Arrival Of Partners Or Predators?
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Rayale To Spend Several Millions $ On A Private Trip To The UK, Germany And USA

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Islamic Victory In Somalia A "Seismic Shift," Says Davidson Professor


Somalia’s High Stakes Power Struggle

Editorial: Exposing The Lexicon Of The Anti-Somaliland Camp

Through The Danger Zone

Arrival Of Partners Or Predators?

Arrival Of Partners Or Predators?

Food for thought


New Parliament: Weighed In The Balance And Found Wanting

The Somalia Tragedy Part II


Is Rayale An Honest President?

By Greg Mills and Steve Stead

THE conventional wisdom is that China presents Africa with major threats and opportunities, and that there is growing tension between the US and China over the latter’s evolving African interests. A recent high-level meeting of African, US and Chinese specialists held at Tswalu in the Kalahari found that there was no strategic conflict between the US and China, though this situation was dynamic and could change. And the prospects for such conflict may be heightened by the pursuit of China’s African commercial interests almost exclusively through state-owned firms.

There is less clarity on whether there is conflict between African interests on the one hand, and those of China and US on the other.

Certainly African countries face a conundrum with regard to China’s changing relationship with the continent. African domestic industries, in textiles and other areas, risk being swamped by cheaper Chinese products. Such concerns are raised by the investment trends of China (and the US) in Africa, which have tended to be in the oil sector, which traditionally has not benefited African citizens — for a few reasons, including the nature of governance in these countries and macroeconomic causes such as currency overvaluation. Oil booms have generally enriched African elites, not their populations.

These concerns relate to Africa’s emergence as a commodity superpower in a commodity super-cycle. Currently the US imports two-thirds of its oil needs, and 15% of this comes from Africa. This could increase to 25% by 2015. Africa produced 6,8-million barrels of oil a day in 1979; in 2005, this increased to more than 9,8-million. The second-largest global energy importer behind the US, China imports 6-million barrels a day. This figure is expected to double in the next 15 years.

With only half of its energy needs now supplied by domestic sources, China is aggressively pursuing fresh oil interests in Africa, notably in Sudan, which supplies a 10th of all Chinese oil imports. Today the China National Petroleum Corporation is the largest investor in Sudan. China also agreed to a $2bn credit line for the Angolan government in 2004, later increased to a reported $11bn. And last year, China made a $2,3bn investment in Nigeria’s oil industry.

In southern Africa, Angola is at the centre of the oil boom, with its output increasing from 722000 barrels a day in 2001 to 930000 barrels a day in 2003. By 2020 it is expected to reach 3,3-million barrels a day. Nigeria’s output is predicted to double to 4,4-million barrels a day by 2020. And today’s minor oil producers — such as Equatorial Guinea, Chad and Sudan — could more than treble their output, given this demand.

Today’s dozen African producers could in the next few years include five more — Tanzania, Kenya, Uganda, Mozambique and Madagascar.

The benefit Africa generates from such investment depends on what Africans do themselves more than what China and the US can do for Africa. Good governance is a prerequisite for the higher-order investments in Africa that Africans consider to be essential, such as beneficiation of natural resources. It is of course crucial that Chinese and American economic activities do not implicitly or unconsciously undermine good governance. One of the best guarantees that a venture will promote African interests is the length of its engagement. A company that builds factories and mine shafts has a greater stake in stability and responsible government than does the short-term speculator.

In addition, low human capacity, poor infrastructure and Africa’s small market size — Africa’s is an economy the same size as the US state of Ohio — reduces its attractiveness for foreign investors. But, more important, such investors will follow the lead of their local African counterparts. The fact that Africans themselves are significant divestors in their own countries (about 40% of African capital has fled the continent) gives foreign investors scant confidence.

Contrary to the general assertion that there is an opposition between China’s African activities and improving standards of African governance and democracy, good governance in Africa is in China’s best interest, since it is the easiest means to ensure that investor interests are safeguarded — a realization western countries have long since arrived at. Similarly, democracies have consistently performed better economically than autocracies (outside of east Asia, about 50% faster growth between 1960 and 2003), hence their promotion is also in the investor’s enlightened self-interest. Moreover, support for autocratic governments by external powers is likely to pit these powers against African citizens, who have consistently fought for their rights.

Given the combination of a high domestic-investment (45%) and savings (50%) rates , China is likely to be able to sustain its current high-growth phase and appetite for raw materials for the next two decades. This highlights the need for an Africa-China-US “win-win-win” strategy.

To achieve this it may be necessary as well as a good idea to create a new set of rules — based on the old Sullivan code for US businesses operating in apartheid SA — on how to do business with Africa. Even if China and the US do not agree on a precise definition of what sort of democracy Africa needs, the principles could include a broad agreement on the need to give African people some democratic choice.

These principles could be the catalyst for wider co-operation on issues of mutual interest, including conflict prevention, integration into the world economy, health care, energy, good governance, and capacity building. And rather than exist as a set of vague guidelines, they could be given real prominence by strategic co-operation between the US, China and African countries on pressing issues — most notably to end the crises in Darfur and Zimbabwe.

‖ Dr Mills and R-Adm Stead are with the Brenthurst Foundation in Johannesburg, which, along with the New York-based Council on Foreign Relations and the Chinese Academy for Social Science, hosted the first of three meetings in August on the Africa-China-US Trilateral Dialogue.

Source: Business Day, 11 August 2006


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