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Some of Africa's ambitious projects
Africa is becoming the theatre for economic giants in the East and the West to battle for domination. And because of the demonization campaign going on, we term it the battle of the Beast vs the Dragon. The beast represents the West while the dragon represents China.
Africa is rising and its economic prospects brightening presenting mouthwatering opportunities for investors anywhere in the world. These are Africa’s pluses: a young and growing population. Researchers say that by 2040, Africa will have the youngest and well-educated population anywhere in the world.
A report by Bloomberg back in 2014 said that Africa’s growing population is an asset, not a liability. Being healthy and well- educated, it forms a large pool for labour in the world and also a large market for goods. The report also said that in 2014, Africa’s growing middle class spend $1.3 trillion on consumption. It projects that consumption expenditure will grow to $4.2 trillion by 2030. Of these, says the African Development Bank, Agriculture, and agribusiness will gobble up $1 trillion, leaving a huge balance for other goods and services.
Given these mouthwatering pluses, economic players in the East and the West are rearing to enter Africa. China is the first off the block, having displaced the West as Africa’s top economic partner. A research by McKinsey &Company, says that China has taken the top perch among Africa’s economic partners in the last decade.
This was the time when the beast, was grappling with the effects of the financial Crisis of 2008 which saw a number of large financial institutions collapse.
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The Dragon, on the other hand, warmed its way into the continent’s largest economic partner perch, becoming the leader in infrastructure financing, where its controls 50% of all EPC projects. China, the second largest economy in the world is now Africa’s biggest economic partner. Its trade in goods stood at $188 billion in 2015, followed by India at $59 billion, France at $57 billion, US at $56 billion and Germany at $47 billion, says the McKinsey report.
Although China trails in the stock of FDI in the continent with only $32 billion, fourth after USA whose stock stood at $79 billion in 2015, followed by Britain at $71 billion, and France at $70 billion, the potential of China tipping the scales is also high because its rate of FDI growth at 25
percent is way higher than its closest rival, South Africa at 13 percent. The US and UK trail at 11per cent and 10 percent respectively.
In terms of Infrastructure Finance, China is way ahead of the pack with $21 billion committed in 2015 while the rest are below five billion dollars.
Now you can see why the USA is mad at China which is fast elbowing them out of Africa. China is also eating into the domestic markets in the West.
It is for the reason that commentators in the West are telling it to ignore Africa at its own peril. And the Mantra in the West, which considered Africa a bad economic prospect, is now turning to entering “Africa is the only choice.”
Back in 2006, George Bush Senior was the President of the USA. He was worried about China’s growing influence in the world, and particularly Africa, the then “the hopeless Continent.” The continent was beginning to shed this tag and posting rapid economic growth rates. It was becoming an Emerging Market. China was making inroads into the continent and the West was getting worried.
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Apparently, the West did not know how to tame Chinese influence. So they got into propaganda: “The Chinese are bribing their way into Africa. They are bribing to get contracts.” Chinese workmanship is substandard. The Chinese will destroy your industries.” Ad nauseam.
The bullying tactic didn’t sell in Africa. So Tony Blair, then British Prime Minister, diagnosed what hails the West’s relationship with Africa. “If Africa goes to China and say they need a road, the Chinese are there the next day with their shovels,” he said and added: “The West will load the African officials with sheaths of paper that last months to read and understand.” George Bush did not buy that. But that was the truth.
China is now the largest development partner in Africa. But the propaganda still rages on. It has now turned to “China’s debt into Africa is unsustainable. China will take over your wealth,” so the narrative goes. But the dragon is not deterred, in the FOCAC last month, China committed $60 billion to Africa’s infrastructure development which Africa receives with gratitude.
Granted. Debts can be crippling to individuals and governments alike. Therefore we must keep a keen eye on our indebted because debts can be a nuisance. And according to the Bible, your creditor is your master.
However, we must take a cost-benefit approach and ask: what is the necessity for borrowing? What would happen if we don’t borrow at all? What would happen if we borrowed a little? Would we be better or worse off if we abandoned or delayed implementation of development projects? Delay to when and where will the money come from, at what cost?
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We assume that this is what informs governments’ decision to borrow and invest in infrastructure development.
According to Africa Development Bank’s Africa Economic Outlook 2018, the continent needs to invest $160 billion a year in infrastructure development for the next seven years. This will enable the “dark continent” to build a sufficient stock of infrastructure to spar industrialization and open up intra -Africa trade.
The continent, says the outlook, can only raise $55 billion of these leaving a financing gap of between $65 -105 billion a year. This gap means only one of the two things: borrow or craft bankable business plans to attract the Private sector into infrastructure development.
Either way, we are borrowing because, at the end of the day, someone has to recover the money sunk into the development of; Water, Roads, Railways, Airports, Seaports, Oil pipelines, energy generation plants, and such other infrastructure. China is playing its part, financing infrastructure development. But what about the production of goods.
This takes us back to “Entering Africa is the only choice” narrative. A Bloomberg columnist advises
the West: “Instead of standing on the sidelines and wringing their hands over China’s investments, Westerners and people in other rich countries should be looking to copy or surpass China’s efforts to tap the final frontier of emerging markets.”
That infrastructure development will improve productivity in Africa is not in doubt. The question is; whose productivity? Factories, farmers, traders .name them. Time to Enter into Africa is now else you’d be too late and live on crumbs