Tuesday, 24 July 2012

East-West Rivalry in Africa: Can the West prevail?

An over-pass crossing Thika Highway in Kenya: Funding
 such projects 
has become the preserve of the East and AfDB 
  
AS THE EAST-WEST RIVALRY  in Africa gets stiff, the question can be asked:Will the west hold its ground?

 The answer is No and YES. NO because the government in the West have lost their clout in Africa. YES because the bold in the west's private sector are in Africa and could uphold its interests, say experts.

This is because an emboldened Africa has defined its development agenda and stands by it.  Consequently, the Dark Continent is dealing with its partners on its terms, according to its needs.

The official west does not get this. The result is waning influence of the West in Africa.  The official West is here defined to include governments; official development agencies and NGOs funded by such agencies. This group wants to make Africa the world’s largest charitable project.

The west has no idea what are Africa’s real needs.  Its official strategy demands political and legal reforms before the purse strings are loosened. This is a lengthy and uncertain strategy hence unpopular in Africa. The West is thus losing its grip on Africa.

An Oil Rig:  Well heeled Private sector is welcome in Africa
Africa’s greatest need for now is infrastructure (Dams, irrigation systems, water supplies, roads, rail roads, airports, sea ports, name them). And will do business with anyone who supports this development agenda. This is why the less fussy emerging Economies of the East are gaining popularity in Africa.

The East is here defined to include; China, South Korea and Japan.  The East hand understands Africa’s real needs and support efforts to satisfy them. It therefore uses a no frills business approach.

Last week, China made this understanding clear by doubling aid to Africa to US$20 billion over the next three- years. That is a whopping US$6.7 billion a year.  Compare that to US$4.5 billion that the World Bank lends to Africa annually. Also compare with US$8.0 billion in US assistance to Africa each year. Add to this figure Chinese Investments in Africa and you can see why the West is worried.

Studies show that Chinese investment in Africa is greater than is reported.  For instance, a February report published by Carnegie Endowment says that “Chinese investment in Africa is likely higher than the official figures suggest as Chinese investment involves state-owned enterprises that use a range of financing instruments, such as export credits, which are not included in FDI figures.”

 This is supported by a report by Reuters that “Industrial and Commercial Bank of China for example, the world's most valuable lender, has invested more than $7 billion in various projects across the continent.” Official figure show that Chinese investment in Africa up to 2012 stands at US$5.5 billion.

 Early this year, China lend  South Sudan- which does not enjoy the support of the West- a hefty US$8.0 billion to finance core projects in infrastructure, agriculture, small scale enterprises. If we add this to the US$20 billion that was committed to Africa by China last week, the one can appreciate why the West is worried.

In the private sector realm, PTTE&P a Thai fuel exploration firm, beat Shell/BP in the bid for Cove energy, a LNG exploration company that has significant interests eastern Africa.

PTTE&P offered US$1.9 billion for Cove while BP-Shell offered US$1.6 billion.  Shell pulled out arguing that it did not want to pay more for Cove energy plc. Whatever, the case Shell was locked out the lucrative eastern Africa fuels exploration sector-at least for time being.
 The message here is loud and clear: only the bold and daring would do business in Africa. Hesitant suitors will lose out.

Surprisingly, despite the waning significance of western official aid, there is a growing presence of western private sector in key Africa sectors. This is a clear indication that Africa chooses its partners according to its needs.

The western private sector has a lot to offer to Africa. First it has the Technology and the financial muscle to help Africa develop its resources. 

Despite the humiliation of BP/Shell by PTTE&P over the Cove energy affair, all fuels exploration Licenses in Eastern Africa for example are held by Western exploration companies such as France’s Total and Italy’s ENI.  There are other players such Anadarko of the US and Tullow oil of UK.

These western companies have announced major oil and LNG finds in Eastern Africa since January this year. Put together they have discovered an estimated 120 trillion cubic feet of LNG in eastern Africa and are still counting.


Tullow oil plc a British independent Exploration firm has made discovery of significant oil reserves in Africa a routine affair. She has made discoveries in Ghana, Uganda and Kenya and is still searching.

The lesson here is Africa is ready to do business with anyone who can support its development agenda.
However, Africa also has experience with building critical infrastructure with start-ups. The African telecoms landscape is dominated by homegrown telcos that were upstarts just a couple of years back.

 Going by the look of things then, in future the West will have to look at the bold in the private sector to protect and advance its interests in Africa. But even the bold and daring will have to take Africa serious because it can look elsewhere. Just ask the giant international telecoms, such as Orange and Dutch Shell and BP. Getting into Africa, late is very expensive.

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