The Globalization of Foreign Investment in Africa : The Role of Europe, China, and India [1 ed.] 9781787433588, 9781787433571, 9781787434554

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THE GLOBALIZATION OF FOREIGN INVESTMENT IN AFRICA The Role of Europe, China, and India

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THE GLOBALIZATION OF FOREIGN INVESTMENT IN AFRICA The Role of Europe, China, and India BY

Adams Bodomo University of Vienna, Vienna, Austria

United Kingdom North America Japan India Malaysia China

Emerald Publishing Limited Howard House, Wagon Lane, Bingley BD16 1WA, UK First edition 2017 Copyright r 2017 Emerald Publishing Limited Reprints and permissions service Contact: [email protected] No part of this book may be reproduced, stored in a retrieval system, transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without either the prior written permission of the publisher or a licence permitting restricted copying issued in the UK by The Copyright Licensing Agency and in the USA by The Copyright Clearance Center. Any opinions expressed in the chapters are those of the authors. Whilst Emerald makes every effort to ensure the quality and accuracy of its content, Emerald makes no representation implied or otherwise, as to the chapters’ suitability and application and disclaims any warranties, express or implied, to their use. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library ISBN: 978-1-78743-358-8 (Print) ISBN: 978-1-78743-357-1 (Online) ISBN: 978-1-78743-455-4 (Epub)

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CONTENTS Acknowledgements

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Foreword

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1. Introduction: Globalizing Foreign Investment in Africa 1.1. 1.2. 1.3.

Socio-Economic Theories Socio-Political Theories Socio-Cultural Theories

2. Conceptual Groundings: The Role of FDI in National Development 2.1. 2.2. 2.3. 2.4. 2.5.

Introduction FDI: Definitions and Conceptualizations Arguments for FDI Arguments against FDI Conclusion: We Need FDI

3. Looking Back into History: European Investment in Africa 3.1. 3.2. 3.3.

Introduction Historical Overview Essential Features and Constraints of European Investment in Africa 3.3.1. European Socio-Economic Conditionalities 3.3.2. The Export of Global SocioPolitical Values v

1 3 3 3

7 7 8 11 13 16

19 19 20 23 24 25

Contents

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3.3.3.

3.4.

3.5.

European Views of Africa as a Humanitarian Burden How Europe Can Re-Invent Itself in Africa 3.4.1. Let Politics Be Politics and Investment Be Investment 3.4.2. Trade and Investment, Not Aid 3.4.3. The Role of the African Diaspora Conclusion

4. In Comes the Dragon: Chinese Investment in Africa 4.1. 4.2.

4.3. 4.4. 4.5.

Introduction Features of Chinese Investment in Africa: A Paradigm Shift 4.2.1. Conditions of Engagement But No Conditionalities 4.2.2. Equality of Partnerships 4.2.3. Aid Versus Investment Global Growth Companies China’s Success in Africa: Lessons for Other Investors Conclusion

5. The Elephant Stands Up to the Dragon: India’s 21st Century Investment Initiatives as a Reaction to China in Africa 5.1. 5.2. 5.3. 5.4. 5.5.

Introduction History of Indian Investment Presence in Africa Indian Awakening in Africa: Evaluating Investment Initiatives How Unique Does India Want to Be? Conclusion

6. Newer Alternative Foreign Investment Sources in the 21st Century 6.1.

Introduction

26 27 27 29 29 30 31 31 34 36 37 37 39 43 44

49 49 50 52 61 63

65 65

Contents

6.2.

6.3.

6.4. 6.5.

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The GEEP or the ‘BRICS’ 6.2.1. Brazil 6.2.2. Russia Rising Asian Stars: Turkey and Indonesia 6.3.1. Turkey 6.3.2. Indonesia 6.3.3. Other Asian Players Central and South America: Cuba and Beyond Conclusion

7. The Lion Must Roar: Towards an Africa-Driven Investment Policy in an Era of Globalization 7.1. 7.2.

7.3.

7.4. 7.5.

Introduction: Critiquing Africa China Relations The Fallacy of the ‘Win-Win-Win’ Hypothesis for Africa, China and the West 7.2.1. WWW-Hypothesis 7.2.2. Four Formal Arguments against an Africa China West Trilateralism Hypothesis The WWW-Hypothesis versus an Alternative AWA-Hypothesis 7.3.1. Africa-Driven Win-for-All (AWA)-Hypothesis The Role of the African Union (AU) Conclusion 7.5.1. Africa-Driven Win-for-All (AWA)-Hypothesis

References

66 68 69 71 71 72 73 74 74

77 78 79 80 82 85 86 87 89 90 93

About the Author

103

Index

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An earlier version of this research was published in Spanish by Casa Africa/Los Libros de la Catarata, Madrid, Spain, as La Globalizacion de las Inversiones en Africa in 2011: the current version is longer and more updated.

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ACKNOWLEDGEMENTS In writing this book, I have benefited from assistance accorded me by many people and institutions. First and foremost, I would like to express my appreciation to various editors and anonymous reviewers. This book targets both a general and a specific readership. Generally, it targets readers globally in Africa, Brazil, China, India, Russia and other parts of the world, including the Asia-Pacific and North and South America regions as this is a book framed in the literature on globalization that I have researched and taught on from various perspectives during the past 15 years. But it also specifically targets a European readership where I believe I have been frank in suggesting how Europe can reposition itself to effectively compete with emerging players on the African investment scene. I am grateful to the following scholars for reading all or some parts of this book and offering useful comments and suggestions: Frances Bodomo, Gao Xiaohui, Marcus Schuetz, Che Dewei and Moses Kiggundu. Professor Kiggundu has written a comprehensive forward for this book and is already one of the first readers to have demonstrated a thorough appreciation of the message of the book. I am extremely grateful for his generous comments. I thank students and other sit-in participants in three of my courses on Globalization: African Experiences, Foundations in African Studies and Africa China Relations, all offered at the University of Hong Kong and at the University of Vienna, for xi

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countless hours of discussions, many of which relate to the subject matter of this book. I have presented draft chapters of the book at many audiences and I wish to acknowledge the useful feedback that has led to several revisions and reformulations of the book manuscript. Finally, I am grateful to my research assistants Lucille Hu, Phoebe Li and, particularly, Yuky Liu and Caroline Pajancic who have worked with me over the years to help me to prepare a camera-ready version of the book manuscript.

FOREWORD Professor Adams Bodomo, a native of Ghana, formerly resident of Hong Kong, and now resident of Austria, personifies a gratifying and growing number of globally minded African intellectuals boldly presenting alternative approaches to African development and its dynamic relationships with other parts of the world. In seeking to clarify, redefine and reshape Africa’s changing position in the increasingly globalizing world, he, like many of his generation, takes a humanistic, nationalistic and at the same time Pan-Africanist approach, aimed at improving the lives of ordinary Africans, their communities and countries. He rejects traditional Eurocentric approaches and seeks alternatives to maximizing Africa’s benefits and minimizing costs from globalization of foreign investment. As a globalized African scholar, Professor Bodomo is uniquely qualified to reframe the discourse about the globalization of Africa, its changing relationships with Europe, China and other emerging economies, seeking a more balanced approach with Africa in the lead. Like many African Africanists, Professor Bodomo firmly believes that Africa will get maximum benefits for its resources and markets only if it succeeds in evolving an Africa driven foreign investment policy to regulate all foreign investors on a bilateral basis as opposed to entering into multilateral investment relations. This is a powerful message that he wants all his readers Europeans, Asians, xiii

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South Americans…or fellow Africans to internalize. By raising the important question as to whether or not Africa and the Africans can manage globalization to advance their own development, he affirms the strong conviction many of his generation share that indeed globalization can and must be managed for the benefit of all. Once again, we are reminded of the fact that management matters, and that those who have the capacity and tenacity to manage globalization in all its dimensions will survive and even thrive. Those without are likely to suffer and be permanently marginalized. In this concise book, Professor Bodomo has a message for us all. For Europeans, the message is clear: European investments have not always been beneficial to Africa and the Africans, especially those at the bottom of the pyramid. The European Union needs to change its economic relations with Africa and separate politics from commerce … in his words ‘let politics be politics, and investment be investment’. This is not a new message, but it takes on new urgency because, for the first time, Africa has a growing number of alternative economic partners. Evidently, both Europe and the US governments are deeply concerned about China’s deepening economic engagements with Africa. In 2011 alone, then Secretary Clinton accused the Chinese of neocolonialism in eastern and southern Africa, the Germans accused them of being a contributing factor to the famine in eastern Africa and David Cameroon accused them of ‘stealing’ trade, investment and business opportunities in Nigeria from the UK-based companies. Critics have linked these European anxieties with NATO type military operations in Africa. On the whole, Europeans find it difficult to change because attitudes towards Africa and the European institutions that deal with Africa have not changed that much since

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colonial times. Europe’s ongoing public finance difficulties relating to national budgets, deficits and an uncertain Euro have weakened its capacity and influence to compete for international investment, especially in high-risk environments. European business in Africa is dominated by old conservative oligopolistic companies, and bilateral relations are driven by foreign aid and military, NATO type operations. Most European countries have strong domestic NGO constituencies addicted to foreign aid with little or no interest in promoting trade or investment with Africa. European global growth companies that Professor Bodomo refers to as the future drivers of global business and commerce are hardly present in Africa. Until European business and government leaders can change the way they deal with Africa by replacing conditionalities with conditions, improving the quality of partnerships with Africans, and substantially providing more opportunities for trade and investment rather than focusing almost exclusively on relief and aid, Africans of Professor Bodomo’s generation will remain unimpressed, and probably hostile. The challenge is for both Europe and Africa to effectively manage this needed transformational aspect of globalization. Professor Bodomo has an equally important message for China and the Chinese. Western reactions to China’s growing economic engagements with Africa have been lukewarm, controversial and at times hostile, but Professor Bodomo takes a different view. He sees China as a game changer, paradigm shifter, providing alternative and potentially better models for African development, international relations and helping Africa to overcome its global marginalization. China’s ‘don’t ask, don’t tell’ approach to Africa’s internal affairs, its willingness to combine aid with trade and investment, its experience in managing projects in high-risk environments and its strategic and long-term approach to

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relationship building combine to present a positive picture for Africa. Indeed, as an emerging superpower with a strong growing economy, China is well positioned not only to play a leading role in the global economy and global society but also to significantly change the rules of the game governing global institutions. This has profound implications; key among them is the urgent need for Africa and China both to improve their individual and collective capacities to manage Africa China globalization to mutual advantage. Under present global conditions, it would appear that there is no country with the potential to do more for African economic development and transformation than China. But for this to happen, both China and Africa must get it and get it right. While China has a strategy for Africa (e.g. FOCAC), Africa is yet to articulate its strategy for China. The challenge, however, is that neither China nor Africa is monolithic. Accordingly, both sides need differentiated and carefully targeted strategies to reflect changing realities in China, Africa and globally. We need to go beyond continental organizations like the African Union, regional organizations like ECOWAS, and seek more operational strategies among complementary countries (e.g. Kenya and South Sudan), sectors (e.g. transport, energy) or development issues (e.g. urbanization). Likewise, Africa needs to do more to attract investments from Chinese investors outside Beijing, and focus on the emerging private sector, provincial governments and town and village enterprises (TVEs). As China continues its domestic economic reforms, these will become the prime drivers of the country’s going global policy, foreign investment and globalization. There are many things China can do to achieve codevelopment with Africa, within the context of a revised FOCAC framework, and on regional and bilateral relations.

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It is important to diversify trade and investment to include sectors other than resource extraction and infrastructure building, and to include African countries not endowed with minerals or petroleum. China needs to open its vast domestic markets to African exports, not only by reducing tariffs, but more importantly, by forming joint ventures with African producers, especially those in the private sector. A key area where China, rather than Europe, can be particularly helpful is the development of an African enterprise private sector, globally competitive and capable of growing African trade and investments. Only by helping Africa to build a strong and globally competitive economy and effective state will China be a true partner and paradigm shifter, different from earlier Europeans. This is the essence of Professor Bodomo’s message to the Chinese. Growing up in East Africa, I remember seeing many people of Indian origin engaged in business, trade and commerce. Indeed, for a number of African countries, the Indian community served as the link with the global economy. However, unlike many of the Chinese people we see in Africa today, the Indians were settlers rather than expatriates. Accordingly, the message Professor Bodomo offers for India the Indian government and Indian investors in India is rather different. Indeed, the Indian government and investors have been slow to respond to Africa’s growing economic opportunities, in spite of well-established Indian roots in Africa. While India, like China, is an emerging global economic power, India is not China. It is wrong for India to emulate China in Africa, and it is wrong for Africa to deal with India as if it were China. Professor Bodomo’s message here is clear: Africa and India need to identify areas of socio-economic complementariness in terms of sectors (e.g. services), institutions (e.g. public administration) and businesses (e.g. business processes) and develop investments of mutual advantage. India also needs to

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work with Africa to help access its growing domestic market for African goods and services and technology both for public administration and productive enterprises. India can also be a game changer and paradigm shifter for African international investment and development, if the global relationships between the two are strategically calibrated and managed. We now turn to the message that Professor Bodomo offers to African leaders and policy makers. The first message is that with globalization, economic management and public administration become much more difficult and challenging. Not only do leaders and policy makers have to deal with Europeans, but they must also deal with competing and often conflicting expectations from the Chinese, Indians and others from the South. At the same time, the global economy changes so fast that the reasons for foreign investors to come and invest often differ from those for staying and investing more. For example, if the Chinese originally came for oil and minerals, now they are also interested in African land to grow food for their own people, banking to finance trade and investment and deep sea ports to service global supply chains. Governance, leadership and management become equally complex, and require competent, proactive, strategic thinking and operational efficiency both in the public and private sectors. While friendship, trust and a sense of brotherhood are important, especially for South-South international investments, nothing replaces strategic thinking and business acumen. I see Professor Bodomo’s message as a challenge for African leaders and policy makers to make sure that they have the individual, institutional and national capacities and competencies to effectively manage the complexities of globalization to mutual advantage. Failure to do so would mean that it does not matter whether it is the Europeans, the

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Chinese or the Indians; Africa would not benefit from foreign investment, not matter where it comes from. Finally, as an academic, Professor Bodomo has a message for the academic community. His first message is that all his propositions and hypotheses are subject to empirical verification. We must not take his word for gospel truth. Rather, we must apply rigorous research to test whether or not his work can be supported by independent evidence. For example, there is a need for longitudinal and comparative studies of European, Chinese and Indian investments in Africa to determine if indeed there are significant differences, over a period of time, among them in terms of net benefits to Africa and the Africans. As well, Professor Bodomo’s bold assertions that China’s economic engagements with Africa constitute a paradigm shift which has also reduced the continent’s global marginalization need further discussion and research. The alternative view is that China’s contributions to Africa’ economies are additive and transactional, rather than transformational, and that Africa still remains marginalized in terms of global economic, political and international relations. African NGOs seem to have taken a lead from their European cousins and condemned Chinese engagements with Africa. Professor Bodomo is challenging them to think again, or at the very least to suspend judgement until more objective evidence is available. Taking a page from recent Chinese economic development, Professor Bodomo seems to draw comparisons between the role played by ethnic Chinese and the African Diaspora in the development of their respective economies. Here again, we need both experience based (case studies) and empirical research to establish the role of the African Diaspora in advancing African globalization and international foreign investment. If management is important for globalization, then we need management research and development to

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ensure a level playing field for Africa. Since most African states are dominated by an overreaching state and a relatively small or weak business sector, we also need research that informs of the optimal institutions and institutional arrangements needed to support the effective management of African globalization and foreign trade and investment. There is also the question of comparing and testing for the salience and applicability of Sino-capitalism (market economy with Chinese characters) with Western type of capitalism for the varied emerging African economic systems. There is much Africa can learn from China in terms of proper pacing and sequencing of economic reforms. Admittedly, not everyone will agree with everything Professor Bodomo has said. For example, he may have underestimated the positives of European investments in Africa, too upbeat about China and unduly optimistic about Africa’s capacity and tenacity to manage globalization to advantage for all. His failure to clearly differentiate, in this book, between official China (bilateral or multilateral) and the growing highly differentiated Chinese participants from the private sector (individuals, SMEs), and even provinces (e.g. TVEs) in Africa or the many Africans who live and work in China does not take into account the more recent changes in Africa China relations. Yet, we all agree that the questions he has raised and the intellectual rigour with which he has treated the salient issues remain important and laudable. The messages embedded in this work are not only relevant for Africa’s former colonial masters but also for China, India and present and future members of the evolving GEEP (group of emerging economic powers). As Professor Bodomo has promised, this short exposé should be seen as the first of a series of publications that will critically examine globalization of foreign investment in Africa with different global

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players. We look forward to reading this and other works by Professor Bodomo. Moses Kiggundu Professor, Management and International Business, Sprott School of Business, Carleton University, www://sprott.carleton.ca Note: Professor Kiggundu is also currently editor of the African Journal of Management (AJOM). He is also a member of the African Capacity Building Foundation (ACFB).

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CHAPTER 1 INTRODUCTION: GLOBALIZING FOREIGN INVESTMENT IN AFRICA

The 21st century era of globalization has suddenly opened up many investment alternatives for Africa. There is now a rush by many government and private companies to invest in Africa to the extent that we can begin to talk of a process of worldwide investment. At the turn of the Millennium, foreign investment in Africa was only worth about USD10 billion. By 2014, the number had climbed to USD54 billion according to the United Nations Commission on Trade and Development (UNCTAD) 2015 report. Indeed, in order to emphasize this intensified process, we may talk of the globalization of investment in Africa. The use of the term globalization of investment in this book aims thus to describe this vast proliferation of investment from all corners of the globe into Africa. To understand this globalization of investment, we need to put the term globalization itself in context. There are many definitions and theoretical view points on globalization from works such as Meyer (1980), Meyer et al. (1997), 1

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Robertson (1992), Steger (2009), Wellerstein (1998) and James (2014). In this book, we advance the following definition of the term globalization: Globalization is a process which involves an increasing interaction of people of different cultures, languages, and identities as more and more efficient transportation and communications technologies facilitate the movement of peoples, goods, and services across vast expanses of the world. This definition is closely in line with Thomas Friedman’s idea of globalization as follows: ‘The simple definition of globalization is the interweaving of markets, technology, information systems and telecommunications systems in a way that is shrinking the world from a size medium to a size small, and enabling each of us to reach around the world farther, faster, deeper, and cheaper than ever before, and enabling the world to reach into each of us farther, faster, deeper, cheaper than ever before. That’s what globalization is.’ (http://www.bricklin.com/albums/fpawlf2000/ friedman.htm: accessed December 5, 2016). In several works (Friedman, 2005, 2008, 2016), Thomas Friedman has described many aspects of globalization that are closely in sync with many of the theoretical approaches we examine in this book. There are many theoretical dimensions to this definition and conceptualization of globalization, including the sociopolitical, socio-economic and socio-cultural and we shall be looking closely in this book at how this global flow of capital investments into Africa affects African lives politically, economically and culturally. Some of the major theories of globalization include the following.

Introduction: Globalizing Foreign Investment in Africa

3

1.1. SOCIO-ECONOMIC THEORIES Works like Wellerstein (1998) theorize globalization in terms of the spread of the capitalist world system across the entire globe. The globalization of investment in Africa and elsewhere would then be one of the processes licensed by this theoretical view of globalization since foreign investment is an essential part of the capitalist world system.

1.2. SOCIO-POLITICAL THEORIES Works like Meyer et al. (1997) often theorize globalization in terms of polities (systems that create value through the collective conferral of authority) and tend to show how nation states are governed or controlled by some universal cultural values. ‘Instead of a central actor, the culture of world society allocates responsible and authoritative actorhood to nationstates’ (Meyer, 1980, p. 112).

1.3. SOCIO-CULTURAL THEORIES Works like Robertson (1992) theorize globalization (known as world culture theory) which focuses on the way in which participants in the process become conscious of and give meaning to living in the world as a single place. For instance, Robertson defines globalization as the compression of the world and the intensification of consciousness of the world as a whole. These and other major theories of globalization are well summarized on a useful website for the study of globalization, called ‘The Globalization Website’: http://www.sociology. emory.edu/globalization/ (last accessed December 5, 2016).

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The Globalization of Foreign Investment in Africa

Foreign investment is an integral component of some of these goods and services mentioned in the various definitions of globalization, including the one we have advanced in this book. We may indeed define the Globalization of Investment in Africa as a process which involves the transformation of the socio-economic, socio-political and socio-cultural lives of Africans as more and more foreign investors and the foreign investments they bring from across all parts of the world move into the African continent. The term as defined here is different from the term investment globalization, which is defined by some economists (e.g. Chase Dunn, 1989) as the proportion of all invested capital in the world that is owned by non-nationals. Some of the questions we may ask include the following: can Africa manage this scenario of the globalization of investment well enough to boost its socio-economic development? How would this affect African lives politically, economically and culturally? This book examines the role of foreign direct investment (FDI) in Africa’s socio-economic, socio-political and socio-cultural development with particular reference to Europe and Asia’s two biggest emerging economic powers, China and India. This book begins with a focus on conceptualizations of FDI in Chapter 2 and then develops a debate about its benefits or otherwise to the economic development and political sovereignty of the recipient country. It then turns to a historical overview of FDI in Africa since the second half of the 20th century, with particular reference to Europe’s investment in Africa in Chapter 3. It documents a scenario of Western dominance from mainly European colonial powers and the United States. Following from this historical overview, it is argued in Chapter 4 that a paradigm shift occurred with China’s 21st century intensified foray into Africa in search of oil and other raw materials to fuel its rapidly rising economy. In Chapter 5, the argument

Introduction: Globalizing Foreign Investment in Africa

5

about a paradigm shift is further developed with the idea that even though India was in Africa long before China, it was basically a sleeping giant that has had to wake up to challenge the sudden rise in Chinese investment in Africa, beginning with its ‘Focus Africa’ investment programme. Apart from highlighting the prominent roles played by Europe, China and India, a brief overview of new emerging players in the African investment stratosphere is provided in Chapter 6, with particular reference to other ‘BRICS’ countries such as Brazil and Russia. Finally, in Chapter 7, we look into the future and defend the hypothesis that Africa will only get maximum benefits for its natural resources if it succeeds in evolving an Africa-driven foreign investment policy to regulate all foreign investors on a bilateral basis as opposed to entering into multilateral investment relations. This book concludes with the idea that maintaining clear investment alternatives in Africa’s investment stratosphere (a metaphor we use throughout this book to signal these highlevel investment activities by different actors in Africa) presents the best scenario for an African economic renaissance in the 21st century.

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CHAPTER 2 CONCEPTUAL GROUNDINGS: THE ROLE OF FDI IN NATIONAL DEVELOPMENT

2.1. INTRODUCTION In their book on the role of foreign investment on national economic and political development, the authors, Theodore Moran, Edward Graham and Magnus Blomstrom, ask the poignant question: does foreign direct investment (FDI) promote development? (Moran, Grahamand, & Blomstrom, 2005). This first chapter of my own book on Foreign Investment in Africa focuses, first, on conceptualizations of the specific notion of FDI (which underlies the general notion of foreign investment) and, then, on the debate about its benefits or otherwise to the economic development and political sovereignty of any recipient country, with regard to, not just only African countries, but all countries, in general. This discussion is expected to provide the conceptual groundings of the topic of FDI. This is necessary for discussing the roles of various foreign investors in Africa from Europe through China to India in later chapters. 7

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2.2. FDI: DEFINITIONS AND CONCEPTUALIZATIONS The term, FDI, constitutes a rather technical economic notion that is conceptualized in slightly different ways by various economic institutions, prominent among which is the Organization for Economic Co-operation and Development (OECD). The term has, however, become more popularized with its increasing use in the media in an era characterized by massive global investment flows to mean basically the commitment by one country or firm or individual, X, to put substantial resources in another country, Y, for the purpose of running a business in one sector or other of the recipient country. In this book we will follow closely the conceptual definition of FDI adopted by the OECD as follows: ‘Foreign direct investment reflects the objective of obtaining a lasting interest by a resident entity in one economy (“direct investor”) in an entity resident in an economy other than that of the investor (“direct investment enterprise”)’ (OECD, 1996, p. 7). The OECD goes further to specify that the lasting interest implies some kind of long-term relationship between the two parties and a significant degree of influence on the management of the enterprise. The direct investment would involve initial business transactions and subsequent capital transactions between the parties. This definition is quite broad; it emphasizes long-term investment but does not attempt to tease apart different types of capital flows including short-term capital inflows like bonds and stocks. This broad definition that emphasizes long-term investment flows like equipment and infrastructure building is sufficient for the scope of this book.1 Who or what then is a foreign direct investor? The OECD clearly identifies this as ‘… an individual, an incorporated or unincorporated public or private enterprise, a government, a

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group of related individuals, or a group of related incorporated and/or unincorporated enterprises which has a direct investment enterprise that is, a subsidiary, associate or branch operating in a country other than the country or countries of residence of the foreign direct investor or investors’ (OECD, 1996, p. 8). And what then is a direct investment enterprise? Again the OECD has a recommendation that a ‘…direct investment enterprise be defined as an incorporated or unincorporated enterprise in which a foreign investor owns 10 per cent or more of the ordinary shares or voting power of an incorporated enterprise or the equivalent of an unincorporated enterprise’ (OECD, 1996, p. 8). From the above conceptual definitions and specifications we can see that the issue of ‘foreign’ in the term foreign investment with regard to individuals is not strictly about citizenship but about residency. An individual is involved in foreign investment if the individual is permanently resident in one polity, A, and puts money into a business in another polity, B, where he is not a permanent resident. The citizenship here is not an issue. For our purposes then, in this book we define FDI as follows: Foreign Direct Investment is a transaction in which an individual or an organization located in one polity commits financial resources to the long-term development of a business in any economic sector of another polity to the tune of at least 10% of the value of the beneficiary business. As a further clarification of the working definition we have come up with in this book, ‘foreign’ here does not involve citizenship but residency, as already mentioned above. Second,

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‘direct’ here implies that entity A must not be dealing with entity B through a third party, entity C, such that entity A is invisible; entity A must be directly involved in the financial transfer and other financial dealings from polity A to polity B. Third, ‘Investment’ here does not involve spending money in buying and selling goods and services (in which case we talk of trade) but must actually be spending resources in growing a business in polity B. In this book we will use the term foreign investment as a short form of FDI so there is no real difference between the two terms, and they will be used interchangeably throughout the book. Given these conceptual groundings we will now proceed to evaluate the role of foreign investment. The role foreign investment plays in the socio-economic, socio-political and socio-cultural life of a recipient country is the topic of one of the most intense intellectual debates of our time, especially with particular reference to Africa, where more and more foreign enterprises and individuals are beginning to invest to the extent that we can now say that Africa is attracting investors from most parts of the globe. As many countries develop their economies they will need two important elements which Africa has in abundance: natural resources and a large population. Countries growing their economies would need to fuel their industries with natural resources such as oil and other hydrocarbons. They will need minerals such as gold, diamond, bauxite and manganese as raw materials. Africa has them in abundance, mostly untapped. They will also need a market to sell their products, and Africa is now a continent of more than one billion people with a rising middle class whose purchasing power is getting stronger and stronger (Mahajan, 2009). What are the arguments for and against this massive FDI inflow into Africa in terms of the sustainable development of the continent?

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2.3. ARGUMENTS FOR FDI The first issue to note in terms of justifying the need for FDI in a country is that there is virtually no country in the world in this age of globalization that does not encourage foreign investment in the country, in one way or the other. There must therefore be a globally implicit understanding that foreign investment is necessary to spur development. There are many socio-economic arguments for FDI. First, it is impossible to grow an economy without capital investment, and local investments alone cannot accomplish economic growth. Capital investments by foreign investors is one of the most effective ways to construct much needed infrastructure, such as roads, railways, ports and dams, in a country. Second, foreign investors and the foreign business investments they set up in a country need labour to operate. So FDI inflows in most cases provide employment opportunities for the citizens of the country, opportunities that would not otherwise be available. Third, foreign investments can lead to knowledge transfer and skills development within a country. As investors set up businesses they will have to share some high level skills in terms of high technology management of heavy equipment and precision technologies with local engineers and other professionals in order to successfully operate in the country. This can have a trickle-down effect in terms of knowledge transfer from the foreign experts to local experts and even down to some unskilled workers within the country. Socio-politically, there are also justifications for foreign investments. First, FDI in most cases leads to the payment of taxes by these foreign companies. This means that the political economy in question will have substantial tax revenue on

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hand to plan a national budget that can further spur growth and bring about national development and prosperity. Second, foreign investors, like all other business people, are usually attracted to political systems that are stable and have fairly robust rule of law that can protect the investments foreign investors pour into the country. This means that the need to attract foreign investors would be enough impetus for political reform towards democracy, freedom of speech and rule of law. Third, in terms of international political relations, the more foreign investments a country has the more it is connected to other countries, thus enabling the country in question to become a global player in the league of nations, rather than one that is isolated and inward-looking. From the socio-cultural perspectives, one can point to a number of advantages to be derived from a massive inflow of FDI. First, the vast majority of foreign investment firms have very robust corporate social responsibility programmes in place wherever they invest in. This means that socio-cultural organizations such as clubs, town and village development committees, and even non-governmental organizations in charge of vulnerable groups can apply to these foreign companies for revenue to put in place programmes that can go to promote the social and cultural welfares of the societies that host these foreign invested businesses. Second, foreign invested businesses can serve as catalysts for the growth of local cottage industries in their localities. The presence of foreign workers at an industry located in a rural area, for instance, can spur local tourism and the need for citizens of the district to provide goods and services to the workers and company bosses of these companies. Third, the foreign investments and their workers who come from a different cultural set-up can create crosscultural spaces that can only go a long way to benefit the

Conceptual Groundings

13

local cultures of the districts in which they are located. The interaction of people from different cultures, if wellmanaged, can only nourish cultural understandings, which can go a long way to creating lasting friendships and crosscultural understandings. The last point is stressed with a caveat, if well-managed. Most often than not, foreign investment situations are not well-managed and this can lead to a lot of problems and prevent the realization of the many arguments we have advanced in favour of foreign investments. In the next section we will explore arguments against FDI inflows into a country.

2.4. ARGUMENTS AGAINST FDI Despite the vast inflow of foreign investment in a country, the country may still not experience any socio-economic, sociopolitical and socio-cultural gains. For instance, the United Nations Council for Trade and Development (UNCTAD) Secretary-General (from 1 September 2005 to 31 August 2013), Supachai Panitchpakdi said that, despite a massive inflow of FDI in Africa from USD14 billion in 2003 to USD18 billion in 2004, ‘The expectation for foreign direct investment to create growth, to create diversification, technology spill-over and jobs has not really been fully realised…’, according to a 2010 BBC report (http://news.bbc.co.uk/2/hi/ business/4242554.stm: retrieved July 2017). This is because much of that investment was targeted at Africa’s resourcerich oil and mining industries, which often generate low tax revenues and carry high environmental and social costs. Socio-economically then, the first argument against foreign investment is that massive capital investments involving the building of roads, railways, surface mining and large-scale hydroelectric dams can often lead to massive environmental

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The Globalization of Foreign Investment in Africa

degradation with little return for the country. The present scourge of illegal surface mining by Chinese and many foreign companies in Ghana and other African countries is a case in point. Second, whereas it is expected that FDI inflows may improve the employment rates of an economy, the employment opportunities that are expected may not actually be realized. The FDI firms may prefer to bring their own employees from their home countries, and Chinese companies have been accused on many occasions by Africans for bringing in labour from China rather than hiring local labour. Even if locals are employed the employees are subject to the vagaries of the profit cycles of the foreign companies who can lay off employees without the least hesitation when facing a negative profit cycle. Moreover, employees, especially lowskilled ones, are often poorly compensated in terms of their salaries and allied conditions of service. Third, even though foreign investment creates the opportunities for knowledge transfer and skilled manpower development this does depend on both the companies’ readiness to transfer skills and the level of education of a country’s work force. Because of company and trade secrets foreign companies may not be willing to transfer knowledge to local experts, preferring instead to bring experts from their home countries. Moreover, if the type and level of education a country has is not appropriate, transfer of skills especially with regard to lowly educated workers may not be possible even if they have worked in a company for a very long time. Socio-politically, there are, at least, three arguments against FDI. First, the expected tax revenue accruing from foreign company tax payments may not be realized in a number of scenarios. In an attempt by a country to woo foreign investors away from other countries competing for foreign investments, foreign investors often enjoy large tax concessions

Conceptual Groundings

15

to the extent that only very little revenue is collected from them. Moreover, corruption on the part of both the foreign investors and local tax revenue collectors can lead to massive losses in tax revenue. Second, whereas foreign investments may serve as catalysts for positive socio-political developments like democratization and the rule of law, foreign investors and multinational cooperations could easily interfere with and hijack the political system of recipient countries. This would ultimately lead to loss of political sovereignty by the citizens within their own country, with the influx of foreign investment. Third, a massive injection of foreign investments can often lead to influences on the country’s external relations. Foreign companies with large investments in a country would be most interested in influencing a country’s foreign policy to their advantage, with the threat of less investment should the leaders of the country in question attempt to chart their own path. A country’s relations to other countries, especially in international fora such as the UN, can be largely influenced by foreign investors. There are socio-cultural arguments against foreign investment in a particular region and locality of a country. First, corporate social responsibility, while a laudable idea, can be used as a tool by a foreign company in a particular district of a country to influence the indigenous people’s culture and traditional ways of living. This is because the clubs and traditional cultural and social organizations receiving this kind of assistance from these companies can easily become dependent on their benefactors. A situation of dependency can only be to the benefit of these foreign companies to further entrench themselves. Second, while the foreign invested companies in a particular locality may spur the growth of local industries, they may as well kill them. Foreign companies can attract visitors from

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The Globalization of Foreign Investment in Africa

other parts of the country and from abroad. These visitors and tourists can easily destroy the local ecology if their presence and activities are not well-managed. Third, while the presence of foreign investors and foreign workers may create opportunities for cross-cultural exchange, it could as well present threats for culture clashes, leading to the destruction of local cultures and values, if not wellmanaged.

2.5. CONCLUSION: WE NEED FDI The last section (on arguments against FDI) ended with a caveat, if not well-managed. It is not that foreign investment has inherent disadvantages; it is just that the many advantages contained in the arguments for FDI would not be realized if foreign investment and foreign investors are badly managed. As we have seen, in an era in which there is a globalization of foreign investment, not just only in Africa but in other emerging markets, there is the need to put in place strategies that would ensure that the benefits of foreign investments are realized and sustained. To benefit from FDI inflows, recipient countries must ensure that they have appropriate educational systems that can train their citizens to take advantage of potential employment opportunities. No polity can develop without investment in its human resources. A polity with a poorly educated populace can only look on while foreign investors exploit or even plunder the natural resources of the polity. Investment diversification and the need to protect certain local industries constitute another strategy that must be put in place if any country is to enjoy the benefits of FDI inflows. Foreign investors are often attracted to the traditional extractive industries of a country, such as oil and gold mining.

Conceptual Groundings

17

These can have disastrous consequences on the environment. There is the need to move away from extractive industries to the development of essential manufacturing industries. Moreover, a country cannot afford to leave its most vulnerable and sensitive industries such as water purification and defence, respectively, in the hands of foreign investors. Certain industries must enjoy local protection in order to strive. Chomsky (1998) points out that all industrialized countries have at one stage or the other instituted protectionist investment policies in the course of their development into industrialized countries. Finally, industrialization and FDI inflows in small pockets of nations may not have the desired effect of creating a consumer base for the industrial goods thus produced. The best way for small, developing nations to take advantage of FDI inflows is to create large markets by forming large regional markets with other smaller developing nations. For instance, Africa is a continent of one billion people but this potentially huge consumer base and market is fragmented into 50-odd nations. The best way Africa (or for that matter any developing countries) can benefit from the advantages of FDI inflows is to pool together all their consumers into a huge PanAfrican market. To conclude this chapter then, we may revisit the question we started out with: does FDI promote development? The answer from the arguments we have advanced for and against the concept is: Yes, but only if we manage it well. In addition to answering this crucial question for the subject matter of this book, we have also defined and delineated the conceptual notions necessary for subsequent discussions of the roles of Europe, China and India in Africa’s investment stratosphere. We begin in Chapter 3 with the role of Europe.

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The Globalization of Foreign Investment in Africa

NOTE

1. But we do also take a more philosophical look at the term investment. Investment does not have to necessarily deal with only economic investment but could involve a certain kind of commitment to improving the lives and overall welfare of those people with whom one does business.

CHAPTER 3 LOOKING BACK INTO HISTORY: EUROPEAN INVESTMENT IN AFRICA

3.1. INTRODUCTION Some of the most fundamental questions that must be raised in this chapter are why after so many decades of foreign direct investment (FDI) in Africa by the West (mainly Europe and the United States), Africa still remains one of the poorest and least industrialized parts of the globe? Did the West and Europe, in particular, contribute in the development of Africa or did it indeed under-develop Africa (Rodney, 1972)? How can Europe (and the West as a whole) reposition itself in the wake of new and renewed investment players in the African investment stratosphere? Given these questions, this chapter necessarily constitutes a historical overview of FDI in Africa since the second half of the 20th century, with particular reference to Europe’s investment in Africa. It documents a scenario of Western dominance from mainly European colonial powers, and this aspect of the book, taken up in Section 3.2 of the chapter, comprises 19

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The Globalization of Foreign Investment in Africa

the mandatory historical situational contextualization that is needed for a book on FDI in Africa. In Section 3.3, an outline is provided of the main features and constraints of European investment in Africa; it is then claimed that these constraints are rather inhibiting factors for a beneficial Africa (AU) Europe (EU) investment partnership, and argued that if the EU stands any chance of serving as a relevant and competitive investment alternative in Africa, it must re-evaluate these constraints to reposition itself in Africa’s investment stratosphere.

3.2. HISTORICAL OVERVIEW Following the Berlin conference of 1884 1885 marking the beginning of what is often known as the Scramble for Africa (i.e. the beginning of European colonialism in Africa), much of Africa was formally carved out and colonized by three main European powers, including the United Kingdom, France and Portugal, with others including Germany and Belgium. So any historical overview would dwell mainly on these major former colonial powers, though other Western European countries like Belgium, Germany, Spain, Denmark, Sweden, Finland, Norway, the Netherlands, Switzerland, Austria and Italy also have made important contributions to investment in Africa. During this colonial period one could hardly talk of FDI as these African entities were considered integral parts of the European economies. A country like France even considered its colonies to be ‘Overseas Departments’ (Departments d’Outre Mer) within the French civil service administrative hierarchy, so it would be highly problematic or even inconceivable to spell out the notion of foreign direct investment in such a situation.

Looking Back into History: European Investment in Africa

21

Since the second half of the 20th century when most African countries began to get their independence from Europe and started charting their own political economies, FDI has steadily flowed in from Europe into Africa (and other developing countries). It is estimated that FDI in the 1970s flowed from the developed world (mostly the West, including Europe) to the developing countries (including Africa) at an average yearly rate of USD10 billion in the 1970s, USD20 billion in the 1980s, USD27 billion in the 1990s and up to USD210 billion at the turn of the Millennium (Graham & Spaulding, 2011). In 2010, France had the largest FDI contributions compared to its European peers, given that France has a very large number of former colonies in Africa. The 2010 UNCTAD Trade Investment report says: ‘Most of the FDI flows to Africa come from only a small number of (…) countries…, led by the United States, France and the United Kingdom. During the period 1996 2000, the US alone accounted for more than 37% of total flows from developed countries, France for 18% and the UK for 13%; Germany and Portugal followed at some distance’ (UNCTAD World Investment Report, 2010). By 2015, the United Kingdom had over-taken France as the largest European investor with 58 billion dollars to France’s 54 billion dollars (UNTAD World Investment Report, 2017). However substantial this French FDI is, the most important fact is that it has been falling rapidly. For instance, while French FDI accounted for 18% as Smith says, ‘France’s foreign direct investment in Africa has also plummeted since the Berlin Wall crumbled. While the African share stood at just over 30% in 1989, it has been consistently below 5% since the turn of the century’ (2010). How France Maintains Its Grip on Africa, BBC Focus on Africa Magazine: http://news. bbc.co.uk/2/hi/africa/8639874.stm (retrieved: June 23, 2011).

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The Globalization of Foreign Investment in Africa

The United Kingdom, the next country with the largest number of former colonies on the African continent, also has substantial FDI outflows to Africa, indeed currently the highest, though its African FDI outflow is only a tiny fraction of its total FDI outflows. Figures show that of nearly BPD320 billion of FDI invested by UK companies between 2000 and 2004 only about 15 billion (or approximately 4.5%) of that went to Africa, mostly to South Africa (UK Government National Statistics, Dec 13, 2005). It not clear how this scenario of dwindling rate of UK investment in Africa, now that Britain has begun negotiations to leave the European Union following a referendum on 23 June 2016, dubbed the Brexit referendum. To illustrate a 20-year historical overview of FDI from Europe, Table 3.1 provides a table of statistics and it shows FDI figures from major European countries (most of which are European Union member countries) to Africa between 1981 and 2000. From this table, we may say that historically the top 10 European investors in Africa over a long period of time have been France, the United Kingdom, Germany, Portugal, the Netherlands, Italy, Spain, Denmark, Belgium and Austria, each of which has 200 million dollars or more of investments by either governments or private companies from these countries. This order may have changed over the years; for instance, the United Kingdom has slightly overtaken France in the 2017 UNCTAD figures mentioned earlier. So why has Africa not developed much despite this substantial FDI inflows from Europe? We may look at the essential features of European investment, in part, for answers to why after so much FDI outflow to Africa, the continent still remains what it is today, largely underdeveloped.

Looking Back into History: European Investment in Africa

23

Table 3.1. Africa: Accumulated FDI Outflows from Western European Countries 1981 1985, 1986 1990, 1991 1995 and 1996 2000 (Millions of Dollars). Country

1981 1985 1986 1990 1991 1995 1996 2000

Austria

72

33

7

221

Belgium

99

40

47

242

Denmark

19

24

1

340

38

3

8

1239

1001

2066

4362

Germany

504

332

402

2475

Italy

Finland France

455

217

213

678

The Netherlands

94

153

297

816

Norway

99

12

145

148

96

1560

Portugal Spain

50

576

177

48

4

197

Switzerland

6

73

452

69

The United

882

2193

2376

3269

Sweden

Kingdom Source: UNCTAD, World Investment Report 2002.

3.3. ESSENTIAL FEATURES AND CONSTRAINTS OF EUROPEAN INVESTMENT IN AFRICA One would have expected that given all the arguments advanced in Chapter 2 for the role of FDI in national development, Africa would have made some substantial headway in economic development, given this injection of FDI since the 1960s until now from Europe. Yet, one can claim, arguably, that many countries in Africa are even worse off than

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The Globalization of Foreign Investment in Africa

they were at independence in terms of the economic wellbeing of their people. I want to argue in this chapter that, putting internal political factors aside, FDI did not do any substantial good in Africa because of three essential features of European investment.

3.3.1. European Socio-Economic Conditionalities European FDI and economic development assistance as a whole have always come to Africa on the back of many strings of socio-economic conditionalities. This is particularly the case with former colonial governments and financial institutions controlled by these governments. Many of these former European colonial powers, particularly France, the United Kingdom and Portugal, have always had the tendency to see FDI and the granting of loans to Africa as an economic tool to continue to have massive influence in running the economies they left behind. The most prominent of all socio-economic conditionalities are the demands by these European donors that African economies must privatize their government-controlled corporations and follow such other structural adjustment programmes (SAPs) like trade liberalization and currency devaluation. Any people growing up in Africa, like the author, in the 1970s and 1980s would remember the socio-economic turmoil that SAPs imposed by Western-controlled economic institutions like the International Monetary Fund (IMF) and the World Bank visited on African countries like Ghana, Nigeria, Senegal, Kenya and Zambia. SAPs on the whole demand countries to remove price controls on goods, remove government subsidies, lay off workers in over-bloated civil service structures and in corporations, devalue local currencies against the US dollar to make exports from such

Looking Back into History: European Investment in Africa

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countries cheap for European importers, and so on. All these have the effects of cutting expenditure on education and social services to the extent that students and workers agitate through strikes and other aspects of civil disobedience. While some scholars may argue that SAPs are related more to aid than to FDI, the point here is to show that SAPs are imperfect attempts to mitigate the negative effects of investments. SAPs and other socio-economic conditionalities ultimately lead to generally unstable political systems and dismal economic welfare for the people, and thus to a large exodus of citizens away from these countries in search of better conditions of life in Europe and other Western countries. I believe that a large number of the professionals of African descent living in Europe (and the West as a whole) are economic refugees who had to flee the economic hardships meted out on African countries by European(and American-) controlled SAPs. Immigration often involves push and pull factors (the push factors explain the reasons why people migrate away while the pull factors explain why they choose a particular destination to migrate to, if the migration is voluntary). Unstable economies that result from such socio-economic and socio-political conditionalities in the form of SAPs are an important push factor for migration away from Africa.

3.3.2. The Export of Global Socio-Political Values In addition to the socio-economic conditionalities imposed by European investors in Africa, there are also socio-political conditionalities. In the context of this chapter, socio-political conditionalities are constraints and rules imposed on African countries by European countries before any investment and other economic transactions occur between donor and recipient

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The Globalization of Foreign Investment in Africa

entities. These are different from the purely socio-economic conditionalities characterized by SAPs. These are attempts to directly influence the internal political structure of the country involved. They include the demand that countries must redesign their political system to be one of multi-party democracy, and that there must be a rule of law, free press, freedom of speech, etc. All these are seen as global socio-political views that the West, especially Europe and the United States, tries to impose on Africa and other developing polities. While not denying the inherent good in them for promoting human rights and societal well-being, mainstream anti-imperialist activists often consider them as modern-day post-colonial attempts to re-engineer colonial era ‘civilizing’ missions the need to bring civilization to ‘primitive’ and less advanced societies.

3.3.3. European Views of Africa as a Humanitarian Burden A third group of features and constraints of European investment are socio-cultural in nature. They often take on a more humanitarian dimension and the perceived need to do good to humanity, which on the surface is a very good cultural value on the part of Europeans, but deeper down could be conceived as paternalistic in nature. One of the most distinctive aspects of European investment and general engagement with Africa from any other entity is the conceptualization of Africa as an economic burden, given its dismal colonial past in Africa that has left most countries with hardly any functional political economies. The consequences of seeing Africa in this way is that Europe has focused more on giving Africa ‘development aid’ and less on purely engaging in trade and investment, something that makes it very different from other new investors to be discussed in subsequent chapters.

Looking Back into History: European Investment in Africa

27

Given these three types of investment features and constraints that have left Africa still worse off than it was before European intervention, some scholarly works (Rodney, 1972) have tended to claim that Europe, indeed, through development ‘aid’ and investment has actually exploited the resources of Africa to develop itself, rather than Africa. Europe, therefore, seems to have benefited more than Africa in Africa Europe investment relations over the centuries. If this is the case, can Europe turn a new leaf in its investment relations with Africa in the 21st century?

3.4. HOW EUROPE CAN RE-INVENT ITSELF IN AFRICA The turn of the Millennium presents a good opportunity for Europe, now represented by the canopy European Union (EU), and Africa, most often represented by the canopy African Union (AU), to re-evaluate their investment relationship (Brown, 2002). I argue and demonstrate here that if the EU or Europe as a whole (since not all European countries are EU members and since some EU members like Britain are threatening to exit or already on their way out with referenda such as what the United Kingdom did in June 2016 to trigger a Brexit) doesn’t want to put itself in danger of being overtaken by others, especially the emerging economies from Asia, it needs to re-invent itself along three parameters.

3.4.1. Let Politics Be Politics and Investment Be Investment As outlined above, Europe has tended to impose socioeconomic and socio-political conditionalities on African

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The Globalization of Foreign Investment in Africa

recipients of its foreign investment. These conditionalities have often led to unstable political systems, inefficient economies and social vices such as corruption. Indeed, it can be argued that the turmoil we see in many African countries is not because Africans are incapable of ruling themselves but that it is precisely because of these externally imposed SAPs that have made it impossible to govern certain countries on the African continent whether or not one were an African. In fact, it has sometimes led to defiance against Europe in the form of military coups and uprisings against imperialism, leading to dictatorship regimes, which then have to find ways of staying in power by either looking to alternative sources of investment and economic development or simply just suppressing their citizens over many decades. This situation then creates the need for further European intervention, this time, in the form of ‘development aid’ and humanitarian assistance by both European government and non-governmental organizations (NGOs). This vicious cycle cannot continue forever. The way forward is for Europe to mitigate or even completely abandon its unrealistic conditionalities of engagement and rather engage purely in investment with Africa. Politics should be kept separate from business as much as possible. Let politics be politics and investment be investment! Notice that, linguistically, the term ‘conditionalities’ is different from the term ‘conditions’ (of engagement). Conditionalities are one-sided, asymmetrical constraints imposed by one party in a dialogue between two or more parties while conditions are negotiated, more or less, symmetrical rules of engagement between two or more parties. So the EU can still have negotiated rules of engagement rather than imposing widespread neo-colonial and super-power socio-economic and socio-political conditionalities on their African investment partners.

Looking Back into History: European Investment in Africa

29

3.4.2. Trade and Investment, Not Aid We have seen that Europe tends to focus more on development aid than on investment when it comes to its economic engagement with Africa. This, as mentioned earlier, is a major European distinction. But this distinctive engagement is unsustainable. It creates many economic disconnects, leading to the dependence by many African economies on European governmental and NGO aid. In the 21st century to remain a serious economic partner in Africa and take advantage of Africa’s rich natural resources, the EU must reverse this equation, focusing more on purely trade and investment, which would hopefully lessen the need for development aid by the EU and individual European governments and their NGOs.

3.4.3. The Role of the African Diaspora A third way in which the EU can re-invent itself and remain as a dominant investment partner in Africa is to retool its economic actors in its relations with Africa. There now exists a large number of Europeans of African descent. Indeed, putting aside the history of trans-Atlantic slavery, there are more professionals and other peoples of African descent in Europe than anywhere in the world. The African Diaspora appears to be more vibrant and more salient in many European countries than anywhere in the world as most professionals have had to move to Europe as economic refugees, as mentioned above. This can serve as a comparative advantage that the EU has over many parts of the world, if well managed. These Europeans of African descent can take the lead and serve as efficient actors to re-engineer FDI in Africa to enable the

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The Globalization of Foreign Investment in Africa

EU reinvent itself in Africa in the face of massive competition from more and more efficient emerging economies.

3.5. CONCLUSION To conclude this chapter, let us revisit and address the main questions and issues we started out with. We have asked why after so many years of FDI outflows from Europe to Africa between the 1960s and now the continent remains one of the poorest places in the world. Our answer to the question is that Africa is not just poor per se, but has been impoverished because of the way investment has been managed in Africa. Europe has imposed too stringent socio-economic and sociopolitical conditionalities on the continent to the extent that Europe has gained more than Africa from its FDI outflows into Africa. To redress this situation, the EU and individual European countries must re-engage Africa in search of more mutually beneficial investment relations, especially at discussions within the auspices of the periodic Africa EU Summits. Europe can do this by relaxing its unrealistic conditionalities, by focusing more on trade and investment rather than on development aid, and by taking advantage of its large African Diaspora. Both Africa and Europe need each other, and, indeed, Europe cannot afford to lose out to other competitors. In the era of the globalization of investment, more and more efficient investors are beginning to take hold in the African investment stratosphere, so Europe needs to develop a novel approach to investment in Africa. In the next chapter we will focus on China, one of such new investment players on the African continent in the 21st century characterized by the globalization of investment.

CHAPTER 4 IN COMES THE DRAGON: CHINESE INVESTMENT IN AFRICA

4.1. INTRODUCTION Two of the most fundamental questions to pose and address in this chapter are why is China investing so much in Africa, and how has China’s investment in Africa shaped up the investment stratosphere of the second largest continent in the world? It is not that China was not present in Africa before the turn of the Millennium. Indeed, the history of Africa China relations goes back to the 15th century or earlier when a Chinese sailor, Admiral Zheng He, sailed to the East African Coast on a trading mission. The second significant event involving Africa and China (this time in the context of larger Africa Asia relations) is the Bandung Conference a conference that brought together for the first time mostly independent African and Asian countries in the Indonesian city of Bandung in 1955. The aim was to form an alliance against colonialism, neo-colonialism and imperialism; and to work together for economic development. Since then 31

32

The Globalization of Foreign Investment in Africa

many African countries and China have established diplomatic relations. China, as a player in the Cold War era, characterized by superpower skirmishes between East and West for ideological and economic influence in different parts of developing world, was always present in Africa throughout the 1960s, 1970s and 1980s. Indeed, it did carry out one of the largest development projects in the World the Tazara railway (linking the port of Dar es Salam in Tanzania to inland Zambia) was completed within five years in 1974 (Monson, 2009). The Tazara Railway project constitutes an epitome of Africa China relations, especially in the area of development aid. Because of this and many other projects, China has achieved a lot of political capital and a large amount of trust from many African leaders, which has resulted in crucial support to China on many occasions from African countries especially in matters of voting and endorsements within the aegis of the United Nations (UN). But China’s Cold War era presence in Africa is nothing compared to the intensified way it refocused its attention on the African continent in the 1990s, especially at the turn of the Millennium until now. The year 2000 saw the creation of the Forum for Africa China Cooperation (FOCAC), which I consider as the third most significant event in the development of Africa China relations. FOCAC is a triennial gathering of African and Chinese leaders alternating between African capitals and Beijing at which various development cooperation agendas are outlined and assessed. So far we have had FOCAC2000 in Beijing, FOCAC2003 in Addis Ababa, Ethiopia, FOCAC2006 again in Beijing, FOCAC2009 in Sharm El Sheik, Egypt, FOCAC2012 back in Beijing, and FOCAC2015 in Johannesburg, South Africa, where China pledged to increase investment in Africa to the tune of 100 Billion US dollars by 2020 (http://www.focac.org/eng/ltda/ dwjbzjjhys_1/t1327961.htm accessed July 25, 2017).

In Comes the Dragon: Chinese Investment in Africa

33

The next edition of this trennial meeting is scheduled for Beijing in 2018.1 This model of cooperation has indeed been emulated by other investment competitors as we shall see in the next chapter. The FOCAC policy framework has been the dominant framework for Africa China relations. However in recent years another policy framework has come in view, especially with the advent of President Xi Jinping as the paramount leader in China. Since 2013, President Xi has championed a new policy framework called the Silk Road Economic Belt and the 21st century Maritime Silk road (One Belt One Road policy framework (Page, 2014)). This framework mainly concerns China’s relations with West Asia and into Europe. However, with the expansion of the ancient silk road to include a maritime component, as indicated in the name of the policy framework which can even be seen as a strategic development programme we are dealing with the South China Sea and also parts of the Indian Ocean which eventually involves countries in East Africa and upwards to the Horn of Africa and even the Maghreb. In the coming years, we are likely to see substantial development finance and foreign investment projects involving Africa within the aegis of this framework, just as we are seeing with FOCAC. In this chapter, we argue that a paradigm shift occurred with China’s 21st century intensified foray into Africa in search of oil and other raw materials to fuel its rapidly growing economy. This paradigm shift can be calibrated in, at least, three ways: in terms of the volume of engagement with regard to trade and investment figures and the sheer number of infrastructure projects; in terms of the speed and efficiency with which investment projects are completed; and in terms of the very discourse of trade, investment and even aid. We develop this argument in Section 4.2, where we also outline some of the main features of Chinese investment in

34

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Africa that distinguish it from Europe as discussed in Chapter 3. In Section 4.3, to give a concise description of the quiet investment revolution that China appears to be engineering in Africa and across the globe, we focus on the new phenomenon of global growth companies (Kiggundu & Ji, 2008), a group of high-growth, small and medium enterprises (SMEs), many of them from China, that are emerging as the movers and shakers of globalization of investment that we have described throughout the book thus far. Section 4.4 is a brief expose of how China is in tandem with other investment competitors in Africa and what lessons these competitors can learn from China’s success. Section 4.5 summarizes and concludes the chapter.

4.2. FEATURES OF CHINESE INVESTMENT IN AFRICA: A PARADIGM SHIFT So why is China in Africa? Or in other words, what accounts for China’s increasing economic activities in the 21st century? There are claims that China is in Africa mainly because it is badly in need of African resources to fuel its rapidly growing economy (Bodomo, 2016a, 2016b; Chin, 2014; Deepak, 2014; Mhandara, 2013; Okolo & Akwu, 2016; Rich & Recker, 2013). Actually China has long been in Africa even when its economy was not that robust (the building of the Tazara railway in the 1960s being a typical example). China not only engages Africa for economic reasons but also to gain political capital and enhance its soft power status; so it would not be fair to say that it is just there for resources. However, it would be fair to say that China has dramatically increased its investment presence in Africa because of one important item: oil! Here is why. Figures from many sources in 2010 showed that the Chinese economy consumed 10 million barrels of oil a

In Comes the Dragon: Chinese Investment in Africa

35

day in that year making it thus approximately 3.65 billion barrels that year (which is seen in the oil industry as a substantially large figure). The number could be much higher now, about 4 billion barrels and increasingly so according to CNBC Reuters website, 26 January 2016. For instance, the Stateowned China National Petroleum Corporation (CNPC) sees the country’s oil demand rising to 566 million tonnes, or 11.32 million barrels per day in 2016, some 460,000 bpd higher than in 2015 (retrieved July 8, 2017 from http:// www.cnbc.com/2016/01/26/china-oil-demand-to-grow-43-percent-in-2016-cnpc-research.html). This would make China the largest consumer of oil in the world. So where does China secure its oil from, and where will it source oil from in the future? West Asia (or the so-called Middle East) is still China’s main source of oil (for instance, it received 45 million tonnes of oil from Saudi Arabia, its largest supplier of oil in 2010 and in 2014 it received 16% of crude oil imports from Saudi Arabia (retrieved July 8, 2017 from http://oilprice.com/Energy/ Crude-Oil/The-Battle-For-Chinas-Oil-Market.html)) but West Asia is not that stable politically and security-wise (especially with the expanding presence of Islamist groups in Iraq, Syria and adjoining areas in the region); moreover there is much more competition with the United States for oil in West Asia. Africa has the largest known reserves of oil and its oil is among the best in the world in terms of quality, so China has very few alternatives left but to engage Africa more intensively in terms of investment in its extractive and other resource exploitation industries. Moreover, as mentioned above the most realistic alternative to Africa, West Asia is less stable than Africa, security-wise. To begin to answer the questions stated at the beginning of this chapter we claim here that China’s re-engagement with Africa in the 21st century constitutes a paradigm shift that has completely altered the investment stratosphere

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The Globalization of Foreign Investment in Africa

(stratosphere here being defined as the entire gamut of the economic sector that need capital injection). This paradigm shift is characterized by three distinctive aspects of Chinese investments: (i) conditions, yes, but conditionalities, no leading to speedy and efficient completion of massive infrastructure investment projects, (ii) equality of partnerships and (iii) more investment than aid. These three types are basically direct contrasts of what we see with European investment in Africa (Bodomo, 2011a, 2011b), so there inherently has to be a comparison. Let us address each in turn (Downes, 2007a, 2007b; Meidan, 2006; Taylor, 2006).

4.2.1. Conditions of Engagement But No Conditionalities One myth about Chinese forays into Africa seems to be that China’s engagement with African governments is unconditional and without asking questions. The reality, however, is that China negotiates conditions of engagement, the most important of which is the ‘One China’ policy. The ‘One China’ Policy is a policy that opposes Taiwan declaring independence and calling itself the Republic of China, as seen from Taipei, as opposed to the Peoples’ Republic of China, which is the official name of China, as seen from Beijing. Indeed almost all African countries adhere to this principle and for the few countries which from time to time deviate from it and recognize Taiwan, China does all it can to woo them back by negotiating to start investments if they agree to switch. This is a typical example showing that China does actually negotiate conditions of engagement, rather than impose conditionalities, as the West does. Because of this Beijing has succeeded in setting up investment programmes more speedily and efficiently than many of its European competitors.

In Comes the Dragon: Chinese Investment in Africa

37

4.2.2. Equality of Partnerships This last point about negotiating conditions brings us to the issue of equal partnerships. A particularly attractive and rather refreshing approach that China brings to Africa with regard to investment is what I will call here a new language of engagement. China comes to Africa with words and phrases in its lexicon bag like ‘brother’, ‘comrades in arms against neo-colonialism’, ‘people of the developing world comparing notes’, ‘win-win’ partnerships, and so many other issues all of which centre around the theme of ‘South South’ Cooperation. Given decades of neo-colonial discourse involving former European colonial masters handing down conditionalities on its former African subjects, this approach from China is rather refreshing to anti-imperialist movements in Africa and is indeed music in the ears of many African leaders tired of being dictated to by the West. China refrains from being judgemental about the internal political machinations of African countries, as opposed to the West’s socio-political conditionalities like the need for so-called dictatorships to democratize before investment can begin. This ability to separate politics from investment is a major ingredient helping China’s engagement in Africa.

4.2.3. Aid Versus Investment Another feature about Chinese engagement in Africa in the 21st century is that it now focuses more on investment (and trade) than on aid. While both the West and China have undertaken vast development aid and humanitarian aid programmes in Africa, China has at the turn of the Millennium focused more on trade and investment than on aid, while the West is still stuck to that old paradigm of seeing Africa as a

38

The Globalization of Foreign Investment in Africa

humanitarian burden that must be addressed with ‘aid’ packages, even after many African analyses (Bodomo, 2013; Moyo, 2009, 2010) are beginning to show that Africa needs more trade and investment than foreign aid. This investment is financed and channelled through banking institutions like the Exim Import and Export Bank and the Asian Infrastructure Investment Bank (AIIB). Given these three features of Chinese investment and many more, China has shaped up Africa’s investment stratosphere in a rather profound way, to the extent that we can talk of a paradigm shift away from the Western approach to investment in Africa. China is certainly not just following in the footsteps of the West and simply adding to how the former colonial masters did in terms of investment in Africa; China’s engagement is not an additive engagement, the country of the Dragon, as China is commonly known, is creating a paradigm shift by charting a different path to investment in Africa. This has resulted in a massive injection of investment capital into Africa from China. According to Berger (2007), figures from the African Development Bank (AfDB) show that ‘...in 2006 Chinese investment in Africa amounted to US$11.7 billion. In the same year bilateral trade reached $55.5 billion, an increase of 40% from 2005. In October 2007, trade volume soared 30%. One third of China’s crude oil exports are now coming from Africa, with Angola as the largest single exporting country since early 2006’. The numbers have been dramatically increasing in subsequent years. For instance, in 2014, bilateral trade between China and Africa trade surpassed $220 billion, a 22-fold growth since 2000 and China’s investment stock in Africa exceeded $30 billion, a 60-fold growth (retrieved July 8, 2017 from http://www.bjreview.com/Current_Issue/ Editor_Choice/201512/t20151214_800044690.html). The 2017 UNCTAD investment figures show that China’s FDI

In Comes the Dragon: Chinese Investment in Africa

39

investment in Africa increased from 13 billion dollars in 2010 to 35 billion dollars in 2015. These figures, which could indeed be far higher but for the fact that it is hard to calculate and calibrate Chinese FDI because of transparency issues, represent a strong paradigm shift from what was happening on the African investment scene before the era of globalization of investment. In the next section we shall look at another phenomenon that is likely to shape the future of Chinese investment in Africa the concept of Global Growth Companies as emerging leaders on the African investment scene.

4.3. GLOBAL GROWTH COMPANIES According to Kiggundu and Ji (2008), a typical global growth company may be generally conceptualized as ‘… a new, high-growth and SME (gross revenue range from 100 million to 5 billion USD) which has demonstrated a clear potential to become a leader in the global economy based on factors such as its business model, growth record, internationalization, leadership, innovation, and the market or markets it serves’. Apart from established Chinese companies, including China National Offshore Company (CNOOC), Aluminium Corp. of China Ltd. and China National Petroleum Corp which are already doing investment and trade business in Africa or currently looking for acquisitions in Africa, including buying iron ore, oil and copper assets to feed China’s growing economy, there are many other emerging companies from China (and other emerging economies), as seen in Table 4.1. China alone has 22 companies on this table, most of them from Tianjin and Dalian, out of about 70 companies. Many of these

40

Table 4.1. A Partial List of Global Growth Companies in the E7 Countries. China; Dalian List 1. CBC Capital

India, Russia, Mexico BCG India:

Brazil; HBR List 1. B2W (retailer)

1. Bajaj Auto

2. Casas Bahia (consumer electronics)

3. Dalian Dayang Trands Co. Ltd

2. Bharat Forge

3. Cosan (ethanol, sugar)

4. Dalian Hi-Think Computer Technology

3. Cipla

4. Gol Linhas Aereas Inteligentes

Company 5. Dalian Wanda Group Co. Ltd. 6. Dashang Group Co. Ltd. 7. Far East Holding Group 8. Fujia Group Company Co. Ltd 9. Inner Mongolia Mengniu Dairy Industry (Group) Co. Ltd. 10. Inner Mongolia Yili Industrial Group 11. Neusoft Group Ltd. 12. Suntone Business (Group) Co. Ltd

4. Crompton Greaves 5. Dr. Reddy’s Laboratories 6. Hindalco Industries 7. Infosys Technologies 8. Larsen & Toubro 9. Mahindra & Mahindra 10. Ranbaxy Pharmaceuticals 11. Reliance Group 12. Satyam Computer Services

(airline) 5. Grupo Positivo (PCs, Notebooks) 6. O Bosticario (cosmetics) 7. Totvs (ERP solution provider to SMEs 8. TV Globo (TV network) 9. Votorantim Financas (auto finance company)

The Globalization of Foreign Investment in Africa

2. China Baha’i Bank

13. Suzlon Energy

14. Tianjin Jinbin Development Co. Ltd.

14. Tata Consultancy Services

15. Tianjin Pipe (Group) Corporation

15. Tata Motors

16. Tianjin Port (Group) Company Ltd.

16. Tata Steel

17. Tianjin Tasly Pharmaceutical Co. Ltd

17. Tata Tea

18. Tianjin Teda Group Co. Ltd

18. Videocon Industries

19. Tianjin Zhonghuan Electronics and

19. Videsh Sanchar Nigam

Information Group Co. ltd 20. Tianjin Zhonghuan Pharmaceutical Group Corporation Ltd. 21. Xi’an Dagang Highway Machinery & Electrical Co. ltd 22. Yida Group Co. Ltd.

20. Wipro Russia:

Turkey: BCG List

1. Gazprom (fossil fuels)

1. Koc Holdings (home appliances)

2. Inter RAO EUS (energy)

2. Sabanci Holdings (chemicals)

3. Lukoil (fossil fuels)

3. Vestel Group (consumer electronics)

In Comes the Dragon: Chinese Investment in Africa

13. Tianjin Bohai Chemical Industry Group

4. MMC Norilsk Nickel Group (nonferrous metals) 5. Rusal (nonferrous metal) 6. Severstal (steel)

41

42

Table 4.1. (Continued ) China; Dalian List

India, Russia, Mexico BCG Mexico

Brazil; HBR List Indonesia (BCG & HBR)

2. Cemex (building materials) 3. Femsa (food and beverages)

2. Astra International (car maker with foreign partners)

4. Gruma (food & beverages) 5. Grupo Bimbo (food & beverages) 6. Grupo Modelo (food & beverages) 7. Nemak (auto equipment) Sources: Kiggundu and Ji (2008), China List from the WEF, Founding Members of the Community of Global Growth Companies, http://www. weforum.org/pdf/SummitReports/dalian2007/print_gccmembers.htm, accessed March 04, 2008; India, Russia, Mexico and Turkey lists from The 2008 BCG 100 New Global Challengers, Exhibit 2, p. 8, December 2008, www.bcg.com; Brazil list from Bhattacharya and Michael (2008) (www.hbr.org), and Indonesia from both BCG and HBR. We refer to these seven emerging economies as the E7, representing the top seven Emerging Economies.

The Globalization of Foreign Investment in Africa

1. America Movil (telecom networks) 1. Indofood Sukses Makmur (BCG)

In Comes the Dragon: Chinese Investment in Africa

43

companies are either already in Africa or beginning to prospect for business investment on the continent. The future of investment will be greatly shaped by these companies in the sense that they, more than established companies, reach out to up and coming local companies to either acquire them or do joint business with them. They thus stand a chance of affecting middle class incomes in profound ways, mostly in a more positive way in terms of raising income levels for middle class business investors. The intention of this brief section is to draw attention to these global growth companies as the companies to watch for in the future in terms of fundamental changes in Chinese private company investments in Africa. In the next section we will briefly outline what lessons the West and other competitors on the African investment scene can learn from China.

4.4. CHINA’S SUCCESS IN AFRICA: LESSONS FOR OTHER INVESTORS The most important lesson any contemporary investor can learn from China is risk taking with regard to investment in Africa. In fact, prior to the era of globalization of investment the proliferation of investment by many foreign investors from all corners of the globe Africa was faced with what many referred to as the marginalization of Africa (Bouët, Devesh, & Mishra, 2007; Hagen, 2002). As explained in many places, the end of the Cold War in the 1990s was read, mistakenly, by some people to mean that Africa would no longer be an important geopolitical region, and much less economically so. However, China read otherwise and while others were relaxing China entered Africa in full force at the turn of the Millennium. Not only did China just enter Africa as a whole, but it also ventured into war-torn and rather

44

The Globalization of Foreign Investment in Africa

unstable political economies. The result was that it paid off handsomely. A case in point is Angola. Angola was embroiled in civil war for 25 years and just as the end of the war was in sight in 2002, China entered and invested heavily in Angola’s oil sector (which no country was doing at the time) and its infrastructure building programmes like the construction of the Benguela railway. As of 2014, Angola was China’s second largest supplier of oil, following Saudi Arabia, accounting for 13% of China’s crude oil imports. While Angola may be selling crude to Western countries like the United States, it is certainly trading more with China. China has also taken risks in many other countries like Sudan, South Sudan and Zimbabwe which are either politically unstable or are seen to be countries where many of their leaders are dictatorial and are involved with human rights violations (Sautman & Yan, 2009). Again these issues should not prevent investors from investing in such countries. Investment must supersede politics; moreover, it is actually morally wrong to deny the populations of such countries much needed investment and its attendant benefits like employment leading, hopefully, to better standards of living just because one perceives that the leaders there are not democratic.

4.5. CONCLUSION In this chapter we have addressed two important questions in the book: why is China so much in Africa and how has it shaped up the investment scene in Africa? As seen in this chapter, China’s fast growing economy means that it needs more than 10 million barrels of oil a day. It thus had to look beyond West Asia and other places to Africa for oil. It now gets almost one-third of its oil needs from Africa. In so doing it has completely shaped up the investment sphere and has

In Comes the Dragon: Chinese Investment in Africa

45

completely rewritten the rules about how to invest profitably in Africa thus creating a paradigm shift that is making its competitors from around the globe sit up. Three main features have brought about this paradigm shift of success in Africa: the negotiation of symmetrical conditions rather than imposing asymmetrical conditionalities; a new language revolving around ‘brotherhood’ and equality of partnerships; and more investment than aid. How would the future of this investment be shaped up? In future we should expect more global growth companies, many of them private, and also small-scale Chinese entrepreneurs acting solely on their own, to be the drivers of Chinese investment in Africa. Does the fact that China has rewritten the rules about successful investment in Africa mean that there is no room for improvement on the Chinese side? No, a lot stills needs to be done. Faced with competitors and criticism mainly from Europe and the West, China doesn’t seem to have done a good enough job of explaining itself and justifying what it does in Africa and how it does it (Bodomo, 2015, 2016). It needs to really address the myths and realities of the effects of its investment in Africa. For instance, it needs to rein in its own private companies and private individual Chinese investors and traders in Africa. This is because each Chinese in Africa is seen by many Africans and other observers to be the face of the Chinese government and state, and any wrong and reprehensible behaviour on the part of an individual Chinese or Chinese company would be interpreted by the average man on the African street as a Chinese government atrocity in Africa. A typical example is how the Chinese government responds to illegal mining and other illegal investment activities in Africa that lead to environmental degradation. For instance, in 2017, there was a massive public outcry against illegal surface mining in Ghana, called galamsey in local parlance, which is vast polluting the river waters

46

The Globalization of Foreign Investment in Africa

of Ghana, in most cases the only sources of drinking water for rural dwellers. The Chinese ambassador in Accra, Sun Baohong, came out to complain and criticize the media for projecting a bad image about China (http://citifmonline.com/ 2017/04/08/chinese-mission-angry-over-galamsey-reportagecalls-for-fairness/ accessed July 7, 2017). One would have expected the ambassador to advise her compatriots in Ghana to respect the laws of their host country, as African ambassadors in China often do when they address Africans in Chinese cities such as Beijing, Guangzhou and Hong Kong. Instead, she chose to go on the defensive in the way described in the report, leading to anger against China on the part of the Ghanaian civil society. Such public relations disasters can only militate against the good image of China as a win-win investment partner in Africa. Finally, and rather surprisingly, the impression about the discourse surrounding Chinese investment in Africa is as if the country of the Dragon has completely forgotten about other parts of the world and turned its attention massively to Africa. Nothing can be further from the truth if we look at the statistics: even though China gets almost one-third of all its oil imports from Africa, only about 4% of its total FDI outflows goes to Africa! This means that there is a lot of room for improvement as far as commitment to investing in Africa is concerned. For instance, rather than just concentrating heavily on oil (which only less than half of African countries have at present) it must go beyond ‘palaces and petroleum’ (Kiggundu, 2011), that is it must do more than just speedily building infrastructure to facilitate its oil and natural resource extraction; it must diversify into other areas such as agro-business. And this is especially more poignant if we understand that Europe, India and many other competing investment players are repositioning themselves to compete with China in Africa. In the next chapter we will focus on one such player, India.

In Comes the Dragon: Chinese Investment in Africa

47

NOTE

1. In some of my conversations with my colleagues, Chinese academics, many of whom are in think tank and advisory relationship with the Chinese government, I have suggested that in 2018 or at some point in the future it would be reasonable for China to mount a FOCAC forum in Guangzhou, which is the city that hosts the largest African trading population.

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CHAPTER 5 THE ELEPHANT STANDS UP TO THE DRAGON: INDIA’S 21ST CENTURY INVESTMENT INITIATIVES AS A REACTION TO CHINA IN AFRICA

5.1. INTRODUCTION In 2006, immediately after giving a talk on Africa China relations, I had a lunch invitation from an Indian Consul in Hong Kong and discussions at lunch naturally centred on Africa India relations. I mentioned that I was surprised that India, which is so geographically close to Africa, was just sitting back while China flew over India into Africa to the extent that Africa China relations are now more prominent worldwide than Africa India relations. In further discussions with Indians at various fora including an invitation to attend India’s 59th Independence anniversary celebrations by the Indian Consulate General in Hong Kong, I came to the

49

50

The Globalization of Foreign Investment in Africa

understanding that India was quite concerned that it is losing the momentum to China with regard to investment in Africa. In this chapter, I argue that even though India was in Africa long before China, it was basically a sleeping giant, but has had to wake up to challenge the sudden rise in Chinese investment in Africa with its ‘Focus Africa’ investment programme which began in 2002, and was later supplanted by a triennial Africa India Forum that took off in 2008. In Section 5.2, we sketch a history of Indian investment in Africa up to 2002 when the ‘Focus Africa’ programme was initiated. Section 5.3 examines and evaluates the current engagement, especially in comparison to China’s own initiated programme, the Forum for Africa China Cooperation (FOCAC). In Section 5.4, we speculate on how India would like to distinguish itself from other competitors. Section 5.5 concludes the chapter.

5.2. HISTORY OF INDIAN INVESTMENT PRESENCE IN AFRICA Like China, India’s trade and investment history begins in Africa with ship voyages, but while China’s journeys were limited to East Africa, India’s voyages were limited to the Horn of Africa when Indian ships entered Ethiopian ports in the 6th century AD in search of trade in silk and spices. This early date of 6th century would mean that India did indeed engage Africa before China did (China’s Admiral Zheng He’s journeys were in early 1400 AD). The next most prominent event in India’s relations with Africa (not necessarily in the field of trade and investment but more generally) involves the exploits of Indian Statesman Mahatma Gandhi in South Africa. Gandhi and Indian Diaspora community members, who were mostly merchants

The Elephant Stands Up to the Dragon

51

in South Africa, were among the first to resist the Apartheid policy (a racist policy practiced by a White Minority government in South Africa against its majority Black populations over many decades until it was formally abolished in 1994) through non-violent ways in the early 1900s. Gandhi thus began his political activism in Africa which he took back home to lead India into nationhood. Indians often look back with pride to this event in their relations with Africa.1 A third event through which Indians often frame their historical links with Africa is the fact that India and many parts of Africa all experienced the advent of European colonialism, and indeed, currently India and many African countries (former British colonies) are all members of the British Commonwealth. This group of 54 nations in all parts of the globe often has close financial investment links as well as cultural links (e.g. India organized the 2010 Commonwealth Games in New Delhi). Because of these colonial links (being under the same empire at some points in time), there have been sizeable proportions of Indian communities in many African countries, such as in Southern Africa (South Africa, Zambia, Malawi etc.), East Africa (Kenya, Tanzania, Uganda etc.) and West Africa (Ghana, Nigeria etc.) long before other Asian communities, such as the Chinese, appeared in Africa. Despite all these historical links and the framing of close contemporary relationships between Africa and India, it is a fact that Africa India relations are nowhere as prominent as Africa China relations, even if India has been in Africa longer than China. Metaphorically speaking, it is the case of a large animal (let us call it the Elephant) going slow and sometimes sleeping quietly over long periods of time in an open grassland area for which it has no challengers until a competitor appears in the horizon. India thus has had considerable economic and cultural influence in Africa, especially given its long established

52

The Globalization of Foreign Investment in Africa

African Indian Diaspora, in a rather low key way up to the turn of the Millennium.

5.3. INDIAN AWAKENING IN AFRICA: EVALUATING INVESTMENT INITIATIVES At the turn of the Millennium, India began to up the ante in its African foray with two investment-related initiatives: Focus Africa and the Africa India Forum. India has often denied that it is awakening or re-engaging with Africa more intensively because of Chinese competition in Africa as seen by many analyses (e.g. Broadman, 2008; Chand, 2011; Mathews, 2011; Mawdsley & Gerard McCann, 2011). The South Asia Monitor reports the following from the second Africa India Forum Summit (which took place in Addis Ababa): ‘Rejecting any race with China, India Tuesday announced a massive $5 billion credit line for Africa for the next three years and unveiled a host of new institutions for training and capacity building, setting the stage for forging a “contemporary and modern” partnership with the resource-rich continent’ (South Asia Monitor. Retrieved July 3, 2011 from: http://www.southasiamonitor.org). The Third Africa India Forum Summit which took place in New Delhi from 26 to 30 October 2015 promised even more investment from Prime Minister Narendra Modi’s government than was done in the second summit. This third summit saw India promising USD10 billion in investment fund, along with 50,000 scholarships for African students to study in India. However, a broad overview and evaluation of the two main frameworks under which India is operating in Africa indicates that there exists indeed this race to catch up with China, to a large extent, even if rather inexplicit. We will look at some features of these frameworks.

The Elephant Stands Up to the Dragon

53

But, first, let us put the India foray into Africa in terms of a pan-Asian FDI outflows before focusing on a comparative analysis of China and India in Africa. UNTAD (2007), a book about FDI contributions from Asian countries, shows that India has the highest FDI contributions as can be seen in Table 5.1 after Singapore. However, the case of Singapore is exceptional. Singapore shows the highest figures on this table but it is not the case that there is more investment from Singapore companies than most other Asian nations. This is almost certainly due to the fact that Singapore, being a wellknown international offshore investment centre, has many companies from Western countries registered there and doing FDI transactions with Africa from Singapore. Malaysia also comes in rather strongly, given the 2004 and 2005 figures, as shown in the table. Currently, however, China’s investment in Africa is higher than India’s, standing at USD11.7 billion in 2006 and 35 billion in 2015, as stated in Chapter 4. With these figures in an Asian perspective presented, let us now look at the two frameworks, India’s Focus Africa programme and the triennial Africa India Forum. India began its 21st century foray into Africa with a policy framework called ‘Focus Africa’ in 2002 under the auspices of the Indian Ministry of Commerce and Industry. The programme began with seven African countries South Africa, Nigeria, Mauritius, Tanzania, Kenya, Ghana and Ethiopia in 2002 but has since then been extended to all other countries in 2003. The main aim was to widen and deepen trade with Africa. On the programme website the following details are put in place: ‘Focus Africa’ Programme was initially launched on 31.3.2002 with focus on seven countries of Sub-Saharan African (SSA) Region, viz., South Africa, Nigeria, Mauritius,

Indiab

Malaysia

Pakistan

Republic of

Singapore

Taiwan Province of

2005

2004

2004

2004

Korea 2002

2003

Chinaa 2002

1595.3

1968.6

1880.1

93.0

480.5

3508.9

224.0

North Africa

618.4

974.5

416.9

58.5

349.0

..

..

Africa

Algeria

171.2

Egypt

39.8

Libyan Arab Jamahiriya

33.1

30.0

Morocco

20.6

32.5

2.3

351.5

912.0

320.8

Sudan Tunisia Other Africa Angola

93.8

994.1

..

..

..

..

..

..

39.3

..

..

104.5

..

..

0.1

..

..

3508.9

224.0

58.5

2.2 976.9

102.8 102.3

1463.2

34.5

131.5

8.8

..

..

..

..

..

..

Botswana

18.1

..

..

..

..

..

..

Cameroon

7.9

..

..

0.7

..

..

0.3

The Globalization of Foreign Investment in Africa

Chinaa

Region/country

54

Table 5.1. FDI Stocks in Africa from Selected Developing Asian Economies (Millions of US dollars).

0.6

..

..

..

..

..

..

Central African

2.0

..

..

..

0.6

..

..

Chad

2.7

..

187.6

..

..

..

..

Congo

13.3

..

..

..

..

..

..

Congo, Democratic

25.1

..

..

..

..

..

..

Côte d´Ivoire

29.1

..

..

..

36.3

..

..

Equatorial Guinea

16.6

..

..

..

..

..

..

Ethiopia

29.8

..

..

..

0.6

..

..

Gabon

35.4

..

19.7

..

..

..

..

Gambia

1.2

..

..

..

..

..

..

Ghana

7.3

..

55.3

..

1.9

..

..

Guinea

44.2

..

13.2

..

..

..

..

Republic

Republic of

58.3

..

0.3

..

2.0

..

..

Liberia

15.9

..

4.5

..

..

..

131.8

Madagascar

49.9

..

0.3

..

..

..

..

55

Kenya

The Elephant Stands Up to the Dragon

Cape Verde

56

Table 5.1. (Continued ) Region/country

Malawi

Chinaa

Indiab

Malaysia

Pakistan

Republic of

Singapore

Taiwan Province of

2005

2004

2004

2004

Korea 2002

2003

Chinaa 2002

..

..

..

..

..

13.3

..

..

..

..

..

..

2.4

..

..

..

..

..

..

Mauritius

26.8

948.9

618.7

..

..

3,508.9

..

Mozambique

14.7

..

9.1

..

..

..

..

2.4

..

90.5

..

..

..

..

Niger

20.4

..

..

..

..

..

..

Nigeria

94.1

..

..

1.5

12.0

..

..

Rwanda

4.7

..

..

..

..

..

..

Senegal

2.4

22.2

..

..

0.5

..

..

Mali Mauritania

Namibia

Seychelles

4.2

..

Sierra Leone

18.4

..

South Africa

112.3

23.0

3.3

..

..

..

..

..

0.3

..

..

..

..

456.2

..

73.5

..

29.6

The Globalization of Foreign Investment in Africa

0.7

4.8

..

..

..

..

..

..

Uganda

5.0

..

..

..

..

..

..

62.0

..

..

2.1

..

..

160.3

..

..

..

..

..

41.6

..

..

..

..

United Republic of

3.9

Tanzania Zambia Zimbabwe

.. 0.3

Unspecified Other

33.0

.. 62.6

Africa Unspecified Africa Total world

57,200

11,039

41,508

794

31,102

90,242

34,718

The Elephant Stands Up to the Dragon

Togo

Source: UNCTAD, Asian Foreign Direct Investment in Africa: Towards a New Era of Cooperation among Developing Countries, Table I.5, p. 19. a

Based on approval data.

b

Based on data for approval flows, accumulated since 1996.

57

58

The Globalization of Foreign Investment in Africa

Tanzania, Kenya, Ghana and Ethiopia. With a view to further widen and deepen India’s trade with Africa, the scope of this Programme was further extended with effect from 1.4.2003 to include Angola, Botswana, Ivory-Coast, Madagascar, Mozambique, Senegal, Seychelles, Uganda, Zambia, Namibia and Zimbabwe, along-with the six countries of North Africa, viz., Egypt, Libya, Tunisia, Sudan, Morocco and Algeria. Thus, the following 24 countries are covered under the programme:

Algeria

Libya

Seychelles

Angola

Madagascar

South Africa

Botswana

Mauritius

Sudan

Egypt

Morocco

Tanzania

Ethiopia

Mozambique

Tunisia

Ghana

Namibia

Uganda

Ivory Coast

Nigeria

Zambia

Kenya

Senegal

Zimbabwe

Under this Programme, Government extends assistance to exporters and Export Promotion Councils etc. to undertake visits to countries in Africa to organize/participate in trade fairs and exhibitions, hold B-2-B meetings etc. African trade delegations are also sponsored to visit India. These export promotion activities are conducted by various Export Promotion Councils and Apex Chambers with grant under Market Development Assistance (MDA) and Market Access Initiative (MAI) Scheme. Ongoing activities under this programme include: • Focussing on commercial issues as a priority by the Indian Missions in the African countries.

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• Review of the Trade and related issues with the 24 African countries through institutional mechanisms like the ‘Joint Trade Committee’ etc. • Increased interaction among businessmen through Joint Business Councils/Joint Business Groups/CEOs Forum. • Additional ‘Lines of Credit’ to the African Countries. • Finalizing MOUs between appropriate authorities, on technical assistance and cooperation in several sectors (http:// focusafrica.gov.in/Focus_Africa_Programme.html retrieved: July 10, 2017). Under this programme, India had trade relations with Africa to the tune of USD40 billion in 2010, representing about 10 per cent of India’s total trade figures. These kinds of trade investment relations are parallel to the kind of activities that were taking place between China and African countries prior to the massive enactment of FOCAC in 2000. India has now also enacted its Africa India Forum in 2008, in many ways replacing this single trade-focused programme with a more comprehensive continental relationship. Incidentally, the Africa India Forum resembles FOCAC in a number of respects. First, like FOCAC, it is a triennial event, beginning in 2008. The second Africa India Forum summit took place in 2011 and the third in 2015.2 Second, like FOCAC which alternates between Beijing and African capitals, the Africa India Forum also alternates between New Delhi and African capitals, with the first in New Delhi, the second in Addis Ababa, the third scheduled for New Delhi. Third, just like FOCAC and its trademark declarations with promissory notes by China to undertake various things in the next 3 years after each summit, the Africa India Forum also has its declaration document titled: The Africa India

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Framework for Enhanced Cooperation. In this document a number of areas of cooperation are outlined: ‘…human resource development, research and development, institutional capacity building, education, science and technology, agricultural productivity, industrial growth, mineral extraction, development of the health sector, development of infrastructure, Information Communication Technology as well as establishment of judicial systems with police and defense establishments under civilian control’ (Mathews, 2011). Indeed, the Indian Prime Minister, Manmohan Singh, who was in attendance at the second summit, summarized the initiatives by outlining four broad areas of Indian support including ‘… infrastructure development, regional integration, capacity building and human resource development’ (Mathews, 2011). One important infrastructure project proposed is the Ethiopia Djibouti railway at an estimated cost of USD300 million. All this seems to be very parallel to what China has done and is doing in terms of railway infrastructure building (The Tazara railway in Tanzania and Zambia, the Benguela Railway in Angola etc.). Given all these similarities, we cannot simply say it is by coincidence that both China and India have similar and rather parallel frameworks. Clearly, India seems to be looking closely at how it can go in tandem with China, and is thus carefully examining what is happening between Africa and China and taking some cues from it. This constitutes some amount of evidence for our argument that India’s 21st century re-engagement with Africa is a reaction to China’s presence on the continent. This Indian awakening is not necessarily a negative thing for any of Africa, China and Europe. Indeed, as I argue in the last chapter of the book, competition for investment in Africa is the best way forward for Africa, on the one hand, and even for the competing investors, on the other hand.

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It is not the case, however, that India is just doing exactly what China is doing in Africa. In the next section, we outline some features that go to show how India will like to distinguish itself from other investors on the African continent.

5.4. HOW UNIQUE DOES INDIA WANT TO BE? There are four ways in which India would like to distinguish itself from the Europeans on the one hand and from the Chinese on the other as the three go in tandem in the African investment scene. First, India, somewhat like China, often wants to portray itself as a ‘fellow victim’ of colonialism and exploitation (e.g. Africans who were sent to America as slaves, Indians were also shipped to East and South Africa as slaves or more euphemistically put, as ‘indentured labourers’ to build railways), thus suggesting that there is no way in which India would come to the discussion table with the same set of conditionalities that the former European colonial masters often lay on the table. The Indian Prime Minister made sure to allude to this point at the second Africa India Forum in Addis Ababa: ‘The India Africa partnership is unique and owes its origins to history and our common struggle against colonialism, apartheid, poverty, disease, illiteracy, and hunger’ (Kimani, 2011). From this perspective then, India would like its relations with Africa to be seen as one of equal partnership to distinguish itself from it European competitors. Second, India distinguishes itself from its Chinese competitors by focusing more on private sector investment than relying heavily on government-owned or government-controlled company investment as the Chinese do. Currently, some of the largest Indian investments in Africa are championed by major Indian companies such as Tata Group and Bharti

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Airtel Group while Chinese investments are led mainly by government-owned or government-controlled companies such as CNOOC. Third, India would also like to distinguish itself, faced with Chinese competition, by pointing to the fact that it is indeed the largest democracy in the world, and would thus not export undemocratic practices to Africa or be complicit to certain human rights violations in Africa by dealing with entrenched African dictators. Fourth and finally, the most unique way in which India would like to distinguish itself from either the Europeans or the Chinese is to highlight its signature approach to capacity building, which rather than being seen as just aid, should be seen as ultimately facilitating Indian trade and investment. Four flagship institutes underlie this Indian signature approach: ‘The India Africa Institute of Foreign Trade (IAIFT) in Uganda, the India Africa Institute of Information Technology (IAIIT) in Ghana, the India Africa Diamond Institute in Botswana, and the India -Africa Institute of Education, Planning and Administration (IAIEPA) in Burundi’. It even plans to give more than 50,000 scholarships to students, many of whom will study in these institutes, a better way to capacity building within the continent, it seems, than sending them mostly abroad to study. Other educational and student assistance programmes include training positions as outlined by the Indian Prime Minister: ‘We will thus offer 2500 ITEC training positions every year for the next three years. Our total commitment for the next three years by way of scholarships to African students will stand at more than 22,000’, Manmohan Singh said to applause from African leaders at the African Union headquarters (South Asia Monitor: May 24, 2011 www.southasiamonitor.org, retrieved: July 3, 2011).

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5.5. CONCLUSION From the preceding analysis in this book, it is now clear that the three front runners among all the investors setting up shop in Africa are Europe, China and India. India, the Elephant, appears to have awoken from its slumber to reclaim a strong position in the intense competition for Africa’s resources (and for Africa’s voting power in world politics India itself is vying for a permanent UN seat and would like to place itself in such a way that it can garner African votes). Can India maintain this premium position on the African investment stratosphere? This is possible if India emphasizes its comparative advantages over Europe and China in three aspects. The first aspect concerns its ability to provide appropriate technology for African countries (TATA buses are, for instance very adaptable to African road conditions). The second is with regard to its ability to maintain an edge over others in terms of its signature capacity building training programmes (many Africans complain a lot about Chinese bringing in their own workers rather than employing and training local workers, so if Indians are seen at prioritizing capacity building in training Africans in Africa this would come very good for them). To further strengthen this capacity building, it must add its well-known expertise in setting up business services (call centres) to the picture, and it must strive to invest in agro-business. Finally, India must strive to meet up the challenge of continental coverage. Currently, the Europeans and the Chinese are investing more comprehensively continent-wide than the Indians who only concentrate on a small but increasing number of countries. India can only remain one of the three top investors in Africa if it can widen and deepen its FDI inflows to many more African countries than it is doing now.

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NOTES

1. A 2016 Gandhi statue ‘must fall’ campaign on the campus of the University of Ghana, Legon, Accra (which were based on claims that Gandhi made some anti-Africa racist remarks in his life time) has had some damaging effects on Ghana/Africa India relations, though I believe that the two entities can quickly mend these relations by more indepth discussions of the role of Gandhi in contributing to African self-actualization struggles as briefly mentioned here. 2. Syed Akbaruddin, the official spokesperson of Indian Foreign Ministry, told the media that the scheduled summit was postponed to 2015, although the summit was earlier scheduled to be held in December 2014, with a 3-year gap after the 2011 Addis Ababa summit. Media reports claimed that Ebola outbreak in Western African nations played key role behind the postponement of the summit.

CHAPTER 6 NEWER ALTERNATIVE FOREIGN INVESTMENT SOURCES IN THE 21ST CENTURY

6.1. INTRODUCTION In this chapter, a brief overview of new emerging players in the African Investment stratosphere is provided, with particular reference to ‘BRICS’ countries such as Brazil and Russia, but also to newer and renewed players such as Turkey, South Korea and Indonesia. The aim is to show that the picture of globalization of investment we have painted in this book cannot be complete by just concentrating on the three pillars of globalization of investment in Africa: Europe, China and India. These new, renewed, or up-and-coming investors are likely to shape the future of investment in Africa in so many profound ways that we can only be speculative about this at the moment, though we will bring up some important statistics to foreground this future. We begin in Section 6.2 with the so-called BRICS or what I prefer to call here the GEEP or the E-Group. I give a background to this nomenclature before showing how the major players, mainly Brazil and Russia, 65

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are positioning themselves for this phenomenon of global African investment. Section 6.3 focuses on the interesting rise of other Asian stars such as South Korea, Turkey and Indonesia, while in Section 6.4 we move down to South America to see if other players like Cuba, Mexico and Venezuela could be looming in the African investment horizons. Section 6.5 concludes the chapter.

6.2. THE GEEP OR THE ‘BRICS’ A feature of the globalization of investment, not just in Africa, but in all corners of the globe is that new economic and investment groups are being formed by the day. One such group is the ‘BRICS’, comprising Brazil, Russia, India, China and South Africa. Goldman Sachs, a global investment company, coined the term ‘BRIC’ in 2003 as the designation for this group, making use of the first or significant letters of the component country names: Brazil, Russia, India and China. With South Africa (SA) joining later in 2011, one would have thought that the name would change to incorporate SA; instead ‘BRICS’ was designated as the name. However, this choice of BRICS is not correct, as it stands, and the right name should be BRICSA — Brazil, Russia, India, China and South Africa, if we stay with this paradigm of choosing first or significant letters of country names to designate economic groups. ‘SA’ would be more representative of ‘South Africa’ in this acronym, as the country is not simply ‘Southafrica’ but South AFRICA! Beyond making better linguistic sense, BRICSA would emphasize the emergence of an AFRICAN economy into international prominence and this ought to be recognized with the presence of ‘Africa’ in all aspects of the name.

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I believe, however, that we need a different paradigm of designating these blocs beyond the original Goldman Sachs choice of first letters of country names. Unfortunately, the Goldman Sachs strategy is characterized by lack of foresight to take account of future expansions to include new members. As it stands now, we are already getting things wrong, with just the inclusion of only one new member, SA. What happens if other members join? At one time or the other, Mexico, Indonesia and Turkey have also expressed interest in joining BRICSA. What would happen if they joined? Shall we call it BRICSMIT or even BRICSAMIT? Even if we succeeded in choosing one of these names what happens if more countries like Nigeria, Africa’s largest economy, and South Korea succeed in joining the group in the future? Indeed, worse attempts to propose other acronyms for various economic groupings, such as CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa) are on the way.1 Because of this problem, I propose in this book to call this group, the Group of Emerging Economic Powers, or the GEEP. Since they are now five members, I propose to call the current BRICS, the GEEP5 instead, with possibilities of calling it GEEP6, GEEP7, GEEP8 etc., depending on how many countries are in the group. The proposed acronym, GEEP, is presumably superior to the existing acronym, BRICS, because it is not only more amenable to future expansions, but because it indeed describes more aptly what these countries really are in comparison to other existing groups such as the Group of industrialized nations with acronyms such as G7, G8 and G20. Another alternative, which is already in use in some quarters is to simply reduce my coinage of GEEP to E (Group of Emerging Powers) such that where I talk of GEEP5, GEEP6, GEEP7 etc., they talk of E5, E6, E7 etc. While there may be arguments that some of these countries are not just emerging but already emerged powers, both of these alternatives

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(GEEP and E) are better than the BRICS alternative, at least in the way that it is amenable to amendments, and I hope that either of them gets adopted over and above BRICS as the wave of globalization of investment continues unabated. Let us look at Brazil and Russia as potential players in the African investment scene.

6.2.1. Brazil Brazil, a more or less economically successful country in South America and a member of GEEP5, is beginning to turn its attention to Africa. Africa’s stake in Brazil’s foreign trade overall increased steadily from 3.9 to 5.7 per cent between 2000 and 2012. The 2008 figures show that Brazil’s FDI outflows to Africa stood at just USD1.2 billion, according to the Brazilian Central Bank, but the number could be far higher now.2 Still this number is far lower than that of Europe, China and India. For example, it is less than 10 per cent of Chinese FDI in Africa. So how can Brazil succeed in Africa, what are its relative comparative advantages in terms of investment? To succeed, Brazil has to carefully calibrate a fine line between it and Europe, China and India, the three main pillars of foreign investment in Africa. One of its comparative advantages that none of its competitors shares with it is: its blood links with Africa. Many people were shipped to Brazil from Africa as slaves during the infamous Trans-Atlantic Slave Trade, so Brazil can more than China and even India (which also suffered trade in ‘indentured labour’) appeal to the fact that it and Africa are both victims of Western exploitation and ought thus to stick together in matters of trade and investment. Lewis (2011) states: ‘Former president Luiz Inacio Lula da Silva, who stepped down in January [of 2011], spent a good part of his eight years in power selling Brazil as Africa’s

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partner and highlighting the ways in which Brazil is built on the “work, sweat and blood of Africans” shipped across the Atlantic during the slave trade. Lula visited 25 African nations, doubled the number of Brazilian embassies in Africa and boosted trade to $26 billion in 2008 from $3.1 billion in 2000’. Indeed, about a 100 million Brazilians are said to have African blood and share many cultural traits with Africans in terms of food based on ‘…palm oil, beans, okra, and cashew nuts…’ (Lewis, 2011). Many African religions or their remnants still live on today in Brazil. However, blood links are not enough. Brazil, once it supplants its current financial problems and political turmoil because of the impeachment and subsequent overthrow of President Dilma Roussef in 2016 has to emphasize its real comparative economic advantages. It is not clear if the current President, Michel Terner, since August 2016 will continue engaging Africa with the same enthusiasm as Lula and Roussef. The country is well-known for its expertise in biofuel production, such as the creation of ethanol. Brazil can try to invest in Africa based on this technology and strive to share this expertise in the form of technology transfer. If it can do this successfully, it would be able to create a niche market that it can build on to mount a good challenge to investment competitors like Europe, China and India.

6.2.2. Russia The way we can foreground Russia’s role in African investment is to show what it lost out as one of the countries that seemed to have lost interest in Africa and in the process allowed China to make inroads and take a pole position. As has been mentioned in earlier parts of the book, one of the biggest, though little noticed, contributions of China’s 21st

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century intensified forays into Africa for trade and investment purposes is the elimination (or at least the minimization) of a major problem Africa faced at the end of the Cold War in the early 1990s: the marginalization of Africa. There was the fear that with the end of the Cold War, Africa would cease to be an ideological battleground between major world powers and thus be of little geopolitical and economic importance. However, China’s entry into Africa was a game-changer and this led to the sudden disuse of this term 20 years on (even though one can still argue that Africa is still marginalized in many world fora since it doesn’t have a forceful voice yet), and has now resulted in a global rush by major economic powers to compete with China in Africa, leading to what I call the ‘globalization of investment’ in Africa. We now see major trade and investment players on the African continent including the traditional Western players like Europe and the United States but also new and renewed ones like India, Brazil and Russia. In many ways then countries like Russia, which was very much present in Africa under the Soviet banner, seem to be playing ‘catch-up’ with China and it is in this context that any closer contacts between Russia and African countries would bring both short- and long-term benefits to both entities. In the short-term it would show that Russia is, so to speak, keeping its hands warm in the fire, as it would be seen to be one of the contemporary players in the African investment stratosphere. In the long term it would translate into lucrative trade deals. Even though Russia is a net exporter of petroleum products, it would still benefit from up-and-coming exporters of petroleum products in Africa in that it would be able to find market for its oil extraction technologies and for its consultancy expertise. Russia doesn’t seem to have a clear Africa strategy, and it ought to set about developing one. To stay in the game and to match-up with the

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spectacular success of its fellow GEEP5 members, China and India in Africa, Russia must intensify such close contacts, between not just oil producing countries like Nigeria, Angola and Ghana, but most of the other 50-odd countries on the African continent as well.

6.3. RISING ASIAN STARS: TURKEY AND INDONESIA It is not just only China and India that are Asian players on the African continent. As we saw from the table of FDI statistics in Table 4.1, other Asian countries are also strong, including Turkey, Indonesia, South Korea, Malaysia, Thailand and the Philippines.

6.3.1. Turkey Turkey seems to be a surprise player on the African continent. It is said to be suddenly opening many embassies in Africa and expanding its relations in many ways including that of trade and investment (Amra, 2011, Vicky, 2011), despite the 2016 political turmoil involving an attempted coup d’etat that led to far more excessive powers for President Erdogan. Turkish companies in Africa have increased from 52 to 90 between 2005 and 2009 (Amra, 2011), with most of its investment concentrated in North Africa though. Turkish FDI in this region of Africa was USD317 million in 2009 (Amra, 2011). In 2010 foreign investment by more than 400 Turkish SMEs amounted to USD500 million in all of Africa (Vicky, 2011). Turkey’s bilateral trade volume with Africa has reached USD17.5 billion in 2015, a threefold increase in volume compared to the records of 2003 (Republic of Turkey, Ministry of Foreign Affairs,

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retrieved December 4, 2016 from http://www.mfa.gov.tr/turkey-africa-relations.en.mfa). In many ways Turkey’s investment journey is rather parallel to that of China and India. China re-entered Africa more energetically at the turn of the Millennium with the formation of FOCAC. India responded by re-focusing on Africa with its ‘Focus — Africa’ programme in 2002. And Turkey took a cue and responded in 2005 with its designation of that year as the ‘Year of Africa’, leading to the first Africa Turkey Cooperation Summit in Istanbul in 2008. Turkey trades and invests in Africa with Turkish made products such as building materials. Turkey now has 39 embassies in Africa, and this refocus on Africa immediately paid off in diplomatic terms with Turkey winning a non-permanent seat on the UN Security Council, with a strong backing of 51 votes from Africa alone (Vicky, 2011). It seems then that it is an absolute miscalculation for anyone to have had the conceptualization that the end of the Cold War would mean that Africa would be geopolitically less important. Besides its rich natural resource reserves, Africa is also geopolitically a vital part of the world in terms of it mounting a collective stance at many UN fora, compared to how other parts of the world fare. So neither traditional power blocs in the West nor emerging powers can afford to ignore Africa economically and geopolitically. Turkey seems to have realized this and has risen to the occasion with a late entry compared to other emerging powers like China, India and Brazil. As the saying goes, better late than never!

6.3.2. Indonesia Indonesia, South East Asia’s largest economy, is beginning to show signs of investment in Africa, especially in

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predominantly Moslem countries like Nigeria where it is exploring investment in housing construction, hydroelectric power generation and in the petrochemical industry. Indonesia was the host of the first ever major Africa Asia conference (held in Bandung in 1955), so the political goodwill is already there as far as Africa Indonesia relations are concerned. A little bit more push at the socio-economic and socio-cultural levels can come good for both sides of the relationship.

6.3.3. Other Asian Players South Korean companies are present in Africa as traders and investors. The most famous are car companies and fishing companies. Korean cars like Hyundai and KIA are popular among African middle class buyers. Malaysia, like South Korea, is often seen as a success story by many African countries, since at independence many African countries were richer than these two Asian countries but have now been overtaken by them. Malaysia, which has a large population of ethnic Chinese (about 25 per cent of its total population of about 30 million), often makes use of the ethnic Chinese Diaspora in Africa as a stepping stone to investments in many countries such as Mauritius and South Africa, and in many industries such as tourism, resource extraction, garment manufacture and all kinds of trade. It would not be too surprising to see the rise of other Association of South East Asian Nation (ASEAN) players like Thailand, the Philippines, Singapore, Myanmar, Cambodia, Laos and Vietnam as investment partners with Africa in the very near future. There is already a nascent Africa ASEAN Business Forum whose first edition is to be held in

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Johannesburg in November 2017 (http://www.aabexpo.com/: accessed on July 25, 2017).

6.4. CENTRAL AND SOUTH AMERICA: CUBA AND BEYOND The Central and South American regions on the whole have countries which are rising stars with countries such as Cuba, Venezuela, Mexico, Argentina and Colombia poised to look to Africa for trade and resource extraction. Currently, there are no obvious attempts by these countries to engage Africa investment-wise. However, Cuba is very prominent in Africa in terms of development aid, especially in the medical field (Cuba was very instrumental in combatting the Ebola outbreak in 2014/2015) and could build on this in terms of trade and investment. Venezuela has just begun to talk to Nigeria about investment in Nigeria’s oil refineries. These initial contacts by these Central and South American countries are bound to translate into some concrete investment deals in the not too distant future.

6.5. CONCLUSION As this chapter has shown, while Europe, China and India are the three pillars of the globalization of investment in Africa, other players beginning to emerge are Brazil, Russia, Turkey, Indonesia, South Korea, Malaysia and possibly some other Central and South American countries like Cuba, Venezuela, Mexico, Argentina and Colombia. We have not explicitly examined the role of obvious players like the United States, Canada, Japan and Australia for, at least, two reasons. First, we believe that these are part

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of the Western players that we have discussed in Chapter 2, and the socio-economic patterns these countries, especially the United States, use is somewhat rather similar to what the Europeans do in that these Western-based economies all make use of Western-controlled worldwide financial institutions like the IMF and the World Bank as instruments to impose socio-economic conditionalities on African countries. Second, for reasons of space, we need further sequels to this book where we can do book-length discussions with titles like: The Globalization of Investment in Africa: The United States, Brazil and South Korea in Tandem; the Globalization of Investment in Africa: Japan, Cuba and Indonesia in Tandem; the Globalization of Investment in Africa: Russia, Turkey and Malaysia in Tandem etc. The discussion, thus, far seems to be that it is only the foreign investors who are taking investment initiatives in the African investment stratosphere, while Africa is just a passive recipient of these foreign investors and the investments they bring. In the next chapter, we will look to arguing for giving Africa a certain amount of agency in managing its own investment stratosphere.

NOTES

1. ‘…But…, economist Jim O’Neill of Goldman Sachs, the man who originally coined the initial term BRICs, has designated what he thinks are the next great emerging market opportunities Columbia, Indonesia, Vietnam, Egypt Turkey and South Africa. The CIVETS for short’. (http://www.skyscrapercity.com/showthread.php?t= 1209661 retrieved: December 28, 2010). Indeed Jim O’Neill has further cooked up another term: The N-11,

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standing for the New or the Next 11 emerging countries, and comprising South Korea, Mexico, Turkey, Egypt, Iran, Pakistan, Indonesia, Nigeria, Philippines, Bangladesh and Vietnam. 2. It increased from USD69 billion in 2001 to USD214 billion in 2009 (http://siteresources.worldbank.org/ AFRICAEXT/Resources/chapter5.pdf: Accessed on December 10, 2016).

CHAPTER 7 THE LION MUST ROAR: TOWARDS AN AFRICA-DRIVEN INVESTMENT POLICY IN AN ERA OF GLOBALIZATION

This final chapter of the book looks into the future and defends the hypothesis that Africa will only get maximum benefits for its natural resources if it succeeds in evolving an Africa-driven foreign investment policy to regulate all foreign investors on a bilateral basis as opposed to entering into trilateral investment relations. The book concludes with the idea that maintaining clear investment alternatives in Africa’s investment stratosphere presents the best scenario for an African economic renaissance in the 21st century. Power and agency are translated into having options and choices. Lions always keep their options open as they roam the African savannah!

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7.1. INTRODUCTION: CRITIQUING AFRICA CHINA RELATIONS As mentioned in Chapter 4, one of the biggest, though little noticed, contributions of China’s 21st century intensified forays into Africa for trade and investment purposes is the elimination of a major problem Africa faced at the end of the Cold War in the early 1990s: The Marginalization of Africa. There was the fear that with the end of the Cold War, Africa would cease to be an ideological battleground between major world powers and thus be of little geopolitical and economic importance. However, China’s entry into Africa was a gamechanger and this led to the sudden disuse of this term 30 years on, and has now resulted in a global rush by major economic powers to compete with China in Africa, leading to what I call the ‘globalization of investment’ in Africa (Bodomo, 2011). We now see major trade and investment players on the African continent including the traditional Western players like Europe and the United States of America but also new and renewed ones like India, Brazil and Russia. However China’s engagement in Africa has not been without critical comments. Indeed, Africa China relations, especially in the era of globalization of investment, are marked and defined to the international world, not so much by the two parties but by more than one decade of sustained Western critiquing and even downright criticism of China’s activities in Africa (Berger & Wissenbach, 2007; Bodomo, 2009, 2010b, 2015; Hartig, 2015; Mohan & Lampert, 2012; van Staden, 2015; Waseermann, 2015; Wissenbach, 2008, 2009). In this respect then Africa China relations may be said to be defined and determined not just by them but also by Western reactions to the contacts between Africa and China. China is often seen as a new economic imperialist in Africa (e.g. Games, 2005), as a pure capitalist investor in Africa (e.g. Hilsum, 2006) or even

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as a neo-colonialist power on the continent (e.g. Jack Straw, former British foreign Secretary’s address in Nigeria, February 2006). In Section 7.2, I question the European Union’s stance on moving suddenly from this criticism of China to one of engagement with China in Africa, and raise four arguments against the EU proposal for ‘trilateralism’ in Section 7.3. I then propose an alternative approach in Section 7.4 that I believe is more inclusive in giving conceptual spaces to other investment players, not just only Western and Chinese players. Section 7.5 concludes the chapter and the book by stressing the need for Africa to chart an investment policy that is based on the philosophy that only Africa knows what is best for Africa.

7.2. THE FALLACY OF THE ‘WIN-WIN-WIN’ HYPOTHESIS FOR AFRICA, CHINA AND THE WEST As mentioned earlier, the EU and other Western bodies have heavily criticized Chinese engagement with Africa on many fronts since the turn of the century. Suddenly, after one decade of criticism, as if to mimic the phrase, ‘if you cannot beat them, join them’, the West has turned volt face, and proposed to ‘collaborate’ with China in its African foray (Berger & Wissenbach, 2007; Commission of European Communities, 2008; Wissenbach, 2008, etc.). Even the European commission now has a blue print for a so-called EU-China-Africa trilateral dialogue and cooperation (Commission of the European Communities, 2008). Further still, the American government is encouraging American companies to have trilateral meetings on ‘corporate social responsibility’ (Bodomo, 2010a). So it is quite clear that, to a large extent, there is a common Western position on trilateralism. This trilateralism is the basis for the

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Win-Win-Win hypothesis. This hypothesis has never been clearly articulated by its proponents; it is often simply assumed and stated in different ways so many times that it has become a hackneyed expression. However, surmising from the various ways it is often mentioned, we construct the following formulation for the hypothesis:

7.2.1. WWW-Hypothesis Africa, China and the West will achieve mutual benefit if China and the West cooperate in their investments, trade and humanitarian activities in Africa. The spirit of this statement is at the core of the Commission of the European Communities 2008 blueprint. But one wonders whether this is true; is it genuine to claim that all three parties stand to win within the scenario China West collaboration in Africa? In any case, why now has this position been arrived at after two decades of intensive criticism about China’s presence in Africa? Is it only the West that has arrived at this stance? Even some Chinese academics and Chinese institutions have talked about this so-called beneficial trilateralism (Guan, 2007; Luo, 2006), for instance at a February 2010 Monrovia meeting between Africa, China and the United States (Bodomo, 2010a). Indeed, after resisting EU requests to table Africa as an agenda in EU-China fora, China has on at least one occasion allowed this to happen. (China — EU Summit in Beijing 2008). While it is clear that there is a Western position on this and there is some semblance of some Chinese academics and institutions going along with it, probably bending to the weight of Western criticism, it is not clear what the foundations of this position are.

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On the surface, it would be a good, sound hypothesis in the minds of its proponents. The most developed part of the world, the West, and the fastest developing country globally, and indeed the second largest economy — China — could team up to give life-support to a helpless Africa. But this would appear to be a highly flawed thinking that is not commensurate with contemporary ways of viewing Africa in the 21st century. First, this position would be treating Africa, not in reality as a trade and investment opportunity, but as a paternalistic, basket case of aid to give, in reality as a humanitarian burden to grapple with. This, as mentioned in Chapters 3 and 4, is a patently Western paradigm to African development and it is precisely this paradigm that China has successfully challenged at the end of the 20th century. Even if we were to stay with this old paradigm of engaging Africa as a ‘burden’, as a basket case of aid and not of trade and investment, the hypothesis of a trilateralism would still be ill-stated and thus flawed. For instance, the rationale for the Monrovia meeting was for the parties to ‘discuss how companies can contribute to economic and social development in Africa’. This is hardly convincing, in the least. For this rationale to have a real tangible, honest truth-value we need a multinational, UN-style meeting, not a tripartite meeting. After all, social development (especially for a whole continent) is a comprehensive concept that is best discussed in the environment of more international and necessarily multilateral expertise, rather than within the confined circles of top-notch economic and investment technocrats whose primordial aim is to make as much profit as possible, rather than any truly altruistic preoccupations. Far from being well founded, this hypothesis of China West cooperation thus seems indeed to have been initiated by the West for China and the West to gain a foothold in Africa (as part of the West’s reaction to the Chinese

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success in Africa, which seems to have taken Western analysts by surprise). This could end up creating a Win-Win-Lose scenario against Africa rather than a so-called cooperation with Africa.

7.2.2. Four Formal Arguments against an Africa China West Trilateralism Hypothesis We have shown in the above that the proposal for trilateralism as a Win-Win-Win scenario does not appear to be well stated, nor well demonstrated, and is indeed, rather hollow and flawed. In fact, this ill-stated hypothesis of Win-Win-Win is so hackneyed in international studies but is a largely unsubstantiated ‘Win-Win-Win’ hypothesis. If one were to allow it to be repeated over and over again unchallenged it might risk developing into an (un)intended collusion between China and West that can scupper a rare chance for African development in the 21st century. I here advance and discuss four arguments against the Win-Win-Win hypothesis. 7.2.2.1. Why Africa as a Locus for China West Cooperation? One may wonder why at all any analyst would single out Africa as a locus of cooperation between any two Power Blocs. It seems that this is often assumed without any attempt to justify the assumption. This kind of fallacy creates a baseless or, at least, a shaky foundation for any logical argumentations to follow from such presumptions. Proponents of the trilateralism hypothesis are often silent on this needed explanation about why Africa would be a beneficiary to such cooperation. Indeed such analyses do not point to clear precedents in the world where such power Bloc cooperation has solved anything. The Marshall Plan at the end of the Second World War may be mentioned as such a precedent, but it

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was just one Power Bloc, the United States, helping out an old ally, Europe, in need after the War. This is a major flaw for proponents of the hypothesis about Power Bloc-based ‘multilateral cooperation’ in one part of the world or the other. Of course, this inability to justify Africa as a necessary locus of China West cooperation is inherent from the old paradigm of Africa as a basket case for aid, and not as a typical, lucrative spot for business investment. 7.2.2.2. Benefits for Who? There is a glaring counter-argument against the hypothesis of China West cooperation in Africa: Africa is better off championing its own agenda and dealing bilaterally with one outside Power Bloc at a time, rather than risking with two Blocs concurrently which are likely to collude to promote their joint interests at Africa’s peril. In sum, Africa stands a better chance of developing higher bargaining powers if it dealt with China and the West separately. This formal counter-argument alone would render untenable the so-called Win-Win-Win hypothesis that is often touted by its proponents. A rebuttal to this counter-argument may be that the average African state appears too weak, tiny and insignificant and thus lacks the power and leverage to negotiate with each of these superpower investors like many European countries, China and India to its advantage. However, the counter-argument can be quickly reenforced if one draws attention to the fact that the strength of this counter-argument lies in the weakness of the original argument it is countering: Africa should deal with two or more investors concurrently as against dealing with one investor at a time. For if an African country is weak even in dealing with one big powerful investor at a time, it would even be worst off dealing with two or more investors concurrently. Even if African countries do not get maximum benefits from investment negotiation either way, they would benefit more from

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investment negotiations with one investor at a time than with two or more investors at a time. 7.2.2.3. The Albatross of Differences in Diplomatic Philosophies Further still, a major flaw about the WWW-hypothesis is that it is often abstract and is thus devoid of concrete illustrations. The hypothesis ought to be able to show what contemporary African problems such a cooperation has or will be able to solve. We may take the Darfur problem, for instance. How would China West cooperation solve this problem? On the contrary the counter-argument would be that the differences in policies, diplomatic ideas and philosophies between China and the West would rather worsen the situation, and this is what has happened in the two Sudans so far, where differences between China and the West about how to handle the Al-Bashir divisive rule still leave the Darfur problem unresolved till now. Even though some semblance of peace seems to be in the horizons with a 2011 successful referendum that has led to independence for South Sudan in July 2011, any Sudan analyst would still be aware that peace cannot really come to the two Sudans until the Darfur case too is addressed. Further still, the irony of the situation is that the West, especially the United States, is often at loggerheads with China on many issues in the world. China US relations often degenerate into their lowest ebbs on major international issues, as the reality of contemporary geopolitics is that the two often act as competing superpowers. It is thus suspiciously harmonious for two competing superpowers, with their relations usually at their lowest ebbs, to try to find common ground around how best to do business in Africa. Indeed it will finally take a concerted effort within the aegis of the United Nations to address the Darfur problem. Such illustrations are lacking among proponent analysis for a China West cooperation hypothesis.

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7.2.2.4. Lessons from Contemporary Scenarios Furthermore, the WWW-hypothesis is flawed by evidence that most of Africa’s problems are best addressed and eventually resolved within the aegis of the United Nations and not by some Power Bloc ‘multilateral cooperation’ in Africa, even if we must acknowledge that the UN is not without its weaknesses. Even the ending of the apartheid system in South Africa in 1994 took more than trilateralism. All major countries around the Globe contributed to a resolution of the problem. Many Civil wars in Africa, including the Angolan Civil war, the Rwandan genocide and the diamond wars in Liberia and Sierra Leone, to name just a few, took concerted United Nations-style efforts to resolve. The counter-argument here shows that probably the WWW-hypothesis so many authors allude to may indeed be a win for all major Power Blocs coming into Africa and not a win for Africa, a sort of Win-Win-Lose hypothesis (WWL-hypothesis).

7.3. THE WWW-HYPOTHESIS VERSUS AN ALTERNATIVE AWA-HYPOTHESIS The Win-Win-Win hypothesis of an Africa China West cooperation is not only ill-stated, ill-founded, and thus flawed, it is also unfairly exclusionary as it leaves no room for other major players on the African continent. What if Africa suddenly finds that it has more alternatives among its stack of clientele who may even be better to deal with? A China West cooperation, for not to say collusion, would already have taken a foothold, and may even serve as a stranglehold for new players. To avoid this unfavourable scenario for Africa, what is needed is an Africa-driven Win-For-All hypothesis. This

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hypothesis may be stated in a number of ways, but in this book we propose to state it as follows:

7.3.1. Africa-Driven Win-for-All (AWA)-Hypothesis 1. In a 21st century era marked by free trade and globalization of investment, Africa will gain maximum benefit for its resources by refereeing a healthy competition for all friendly foreign investors. Consequently: 2. Africa must thus put in place equitable trade and investment policies and rules for all friendly countries within the aegis of the United Nations (particularly UN agencies such as UNCTAD) and other international bodies such as the World Trade Organization (WTO) and the African Development Bank that would like to trade and invest in Africa. The first part of the hypothesis may be regarded as the cause, and the second part may be seen as the effect or the consequence. The AWA-hypothesis has, at least, the following three features. First, it seeks to create a level-playing ground for all investors, and is thus fair and equitable. Second, it focuses on the role of Africa, and thus puts Africa at the centre and in control of how it opens up its investment stratosphere to foreign investors. Third, it is particularly a welcome development for other emerging investors, such as the GEEP nations, including Brazil, Russia, India and, of course, China. Rather than aligning China to the West, which is what the WWW-hypothesis does, the AWA-hypothesis would actually align China to its natural GEEP group. Under the AWAhypothesis, any potential investors, whether they be from the

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West, the East, the North or the South, would stand a fairer chance of competing for investment opportunities in Africa. A possible counter-argument against the AWA-hypothesis is that Africa is too weak and disorganized to effectively determine and conduct a gate-keeper role in regulating investment in its own territory. However, this would, at best, be an afro-pessimistic way of looking at the issues. Africa is fast democratizing and the individual countries on the continent, which are getting more and more democratic, can be expected to manage their own investment resources and make decisions in the most rational ways possible.

7.4. THE ROLE OF THE AFRICAN UNION (AU) More often than not, European Union (EU) relations with the African continent are treated as EU-Africa relations. But this again is a flaw in nomenclature and overall presentation of the analytical framework. Why does it always have to be framed in terms of Africa-EU, why not talk of AU-EU and more? This clearly shows that the role of AU is often not seriously considered or, at worse, completely sidelined altogether. In the same way that the European Union acts as a canopy institution for Europe, so does the African Union act as a canopy institution for Africa. The counter-argument might be raised that the AU is weaker than the EU, but this is not true in many scenarios. For instance, in many UN-style political decision-making, the AU is sometimes even more united than other canopy organizations such as the EU, and indeed China has on many occasions benefited from Africa’s united stance (Bodomo, 2009). Moreover, events like the 2016 referendum by Britain to exit the EU (Brexit) indicate that the EU itself is not that more united than the AU.

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In reality, it seems the AU is already beginning to think seriously of evolving an investment policy and of coordinating continent-wide investment as suggested by a recent position advertisement1 for a Policy Officer on Investment and Resource Mobilization. This is a step in the right direction. The AU must chart an Africa-driven investment policy based on the philosophy that only Africa can decide what is best for Africa, not any other national or international body. Therefore ‘partnership’ programmes such as the NEPADOECD as described in this excerpt: The NEPAD-OECD Africa Investment Initiative is the major regional forum on mobilising investment for Africa’s development. Launched in 2006 as a partnership between the OECD Investment Committee and NEPAD, as well as other regional and global organisations, the Initiative aims to: strengthen the capacity of African countries to design and implement reforms that improve their business climate; raise the profile of Africa as an investment destination while facilitating regional cooperation and highlighting the African perspective in international dialogue on investment policies. (Retrieved from http://www.oecd.org/document/41/ 0,3746,en_2649_34893_45337193_1_1_1_1,00. html. Accessed on April 28, 2011) would seem rather naïve, as we cannot expect the very same people who stand to gain by Africa remaining a fragmented body in terms of investment to help Africa achieve the kind of goals that are spelt out in this ‘cooperative’ programme. There is a promising policy framework by the AU in the name of Agenda 2063 that promises to be a large-scale

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investment and development policy that all foreign investors, including China, Europe and India, must familiarize themselves with.2

7.5. CONCLUSION In conclusion, we have shown in this chapter and other parts of the book that after a decade of sustained criticism of China by the West about China’s engagement in Africa, the West suddenly appears to have changed strategy and many Western bodies such as the EU have now proposed frameworks for a China West ‘cooperation’ in Africa (Bodomo, 2016a). The hypothesis of a so-called China West cooperation, which may be termed the Win-Win-Win (WWW)-hypothesis, seems to say: Africa, China and the West will achieve mutual benefit if China and the West cooperate in their investments, trade and humanitarian activities in Africa. I have presented four arguments to critically assess this WWW-hypothesis. First, it is not convincingly justified why Africa is the locus of a supposed China West cooperation. Second, it is not clearly and convincingly indicated who the real beneficiaries of such a stated cooperation would be; it is believed instead that this scenario of a China West cooperation actually points perilously to a Win-Win-Lose scenario against Africa. Third, the differences in diplomatic philosophies between the West and China alone would render this WWW-hypothesis untenable. Lastly, lessons from contemporary scenarios dealing with the search for solutions to Africa’s problems do not suggest any good things China West cooperation in Africa can do or has actually done for Africa.

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I have instead proposed an alternative hypothesis, stated as follows:

7.5.1. Africa-Driven Win-for-All (AWA)-Hypothesis In a 21st century era marked by free trade and investment, Africa will gain maximum benefit for its resources by refereeing a healthy competition for all friendly foreign investors. This AWA-hypothesis not only sees Africa at the centre of the action, it actually sees Africa presenting a level-playing ground and an equal opportunity to all other investors, such as those of the GEEP countries. Africa is a vast continent and it is possible for all investors to find investment room in Africa’s investment stratosphere. The most fundamental argument against the WWWhypothesis, and for managing meaningful and sustainable investment in Africa, is that Africa (or for that matter any developing part of the world) is better off dealing with each of these major economic Blocs, China, India or the West, separately at a time and dealing with all of them concurrently only within the aegis of the United Nations and other international financial, investment and trade institutions such as World Bank, the International Monetary Fund and the World Trade Organization. We began this book with two fundamental questions: can Africa manage this scenario of the globalization of investment well enough to boost its socio-economic development? How would this affect African lives politically, economically and culturally? The answer to the first question as we have seen throughout the book especially this chapter is: yes, only if Africa maintains clear choices and puts in place fair and equitable rules of engagement on its own terms to all foreign investors. The answer to the second question, again, as has

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been seen throughout the book, is that the presence of so many groups of investors is already giving Africa some political leverage and leeway in the way it relates to traditional donors from the West. In the face of alternatives, Africans will more and more be in a position to effectively engage its political partners from around the world. Economically, we are seeing the establishment of huge infrastructure projects and large FDI inflows that will in the next 10 20 years completely transform African society. Culturally, the influx of so much investment and so many investors from different cultural set-ups is creating a more and more cross-cultural setting; Africa will be thrust in the whirlwind of global culture forever. In this first half of the 21st century, as Africa enjoys an era characterized by the globalization of investment it must take steps to maintain clear investment alternatives if it is to benefit in a sustainable way from this phenomenon of globalization.

NOTES

1. In an advert for a Policy Officer — Investment and Resource Mobilization, the AU spells out the purpose and duties for the job some of which include the following: JOB PURPOSE To formulate appropriate policies and plans of action and develop programmes and project proposals related to investment promotion, private sector development, mobilization of both domestic and foreign resource for development; and to monitor progress on implementation in conjunction with relevant stakeholders.

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MAJOR DUTIES AND RESPONSIBILITIES: • Recommend appropriate policies for empowering the private sector in particular small, medium and micro-enterprises so that it can contribute to the attainment of the Millennium Development Goals; • Develop and recommend investment policies that would lead to Africa becoming a single investment destination and improving the investment climate on the continent; • Network all investment promotion agencies in Africa with the aim of harmonizing investment policies; • Suggest new measures for raising resources for financing the Africa Union’s programmes; • Coordinate the African Union Commission relations with cooperating partners such as the European Union; • Perform any other duties as may be directed by the Head of Division; • To organize and service workshops, seminars and meetings; • To coordinate and conduct studies and research in related fields of the work of the Division; http://www.au.int/en/sites/default/files/Policy%20Officer% 20(Investment%20and%20Resource%20Mobilization)% 20-%20English.doc (accessed on April 28, 2011). 2. Agenda 2063 documents can be downloaded from here: https://www.au.int/en/agenda2063 (Last accessed on December 10, 2016).

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ABOUT THE AUTHOR

Adams Bodomo is a Professor of African Studies holding the chair of Languages and Literatures at the University of Vienna. For 15 years, he was a Professor of Linguistics and African Studies at the University of Hong Kong where he served as Director of the university’s African Studies Programme. Professor Bodomo has done pioneering work on 21st century Africa China studies, with a particular focus on the African Diaspora in China. His research in the area of Africa China Studies, Diaspora and Global Studies has been featured in major academic journals such as China Quarterly, China Review, West Asia and Africa, African Diaspora and African Studies. His first book on the topic of Africa China relations is titled: Africans in China: A Sociocultural Study and Its Implications on Africa China Relations. This was shortlisted for the Africa Asia book prize in 2015. His latest (edited) book on the topic is titled Africans in China: Guangdong and Beyond (Diasporic Africa Press), which won the ICAS Colleague’s Choice Award book prize in 2017.

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INDEX Africa as humanitarian burden, European views of, 26 27 Africa as locus for China West cooperation, 82 83 Africa China relations, critiquing, 78 79 Africa China West Trilateralism hypothesis Africa as locus for China West cooperation, 82 83 albatross of differences in diplomatic philosophies, 84 benefits from investment, 83 84 lessons from contemporary scenarios, 85 Africa-driven Win-For-All (AWA) hypothesis, 86 87, 90 91 Africa India Forum, 52 Africa India Framework for Enhanced Cooperation, 59 60

African Development Bank (AfDB), 38, 86 African Diaspora, role of, 29 30 African Union (AU), 27 role of, 87 89 Aid versus investment, 37 39 Akbaruddin, Syed, 64n2 Alliance against colonialism, 31 Aluminium Corp. of China Ltd., 39 Apartheid policy, 51 Apex Chambers, 58 Argentina, 74 Asian Infrastructure Investment Bank (AIIB), 38 Association of South East Asian Nation (ASEAN), 73 Bandung Conference, 31 Baohong, Sun, 46 Berlin conference of, 1884 1885, 20 Bharti Airtel Group, 61 62 105

106

Brazil’s investment in Africa, 68 69 BRICS, 65 BRICSA, 66, 67 BRICSAMIT, 67 BRICSMIT, 67 Central America, 74 China National Offshore Company (CNOOC), 39 China National Petroleum Corp., 39 China National Petroleum Corporation (CNPC), 35 China US relations, 84 Chinese investment, in Africa, 31 47 aid versus investment, 37 39 conditions of engagement, 36 equality of partnerships, 37 features of, 34 39 Global Growth Companies, 39 43 success of, 43 44 CIVETS, 67 CNOOC, 62 Colombia, 74 Commonwealth Games 2010, 51 Conditions of engagement, 36 Cuba, 74 Currency devaluation, 23

Index

Darfur problem, 84 Development aid, 26 28 Direct investment enterprise, 8, 9 Direct investor, 8 Equality of partnerships, 37 Erdogan, Recep Tayyip, 71 Ethiopia Djibouti railway project, 60 European investment, in Africa, 19 30 essential features and constraints of, 23 27 historical overview of, 20 23 reevaluation of investment relationship, 27 30 European socio-economic conditionalities, 23 24 European Union (EU), 27, 29, 30, 79, 87 EU Summits, 30 Exim Import and Export Bank, 38 Export Promotion Councils, 58 Focus Africa programme, 53, 58, 72 Foreign direct investment (FDI), 4 alternative sources 21st century, 65 76

Index

arguments against, 13 16 arguments for, 11 13 defined, 8 10 need for, 16 17 role in national development, 7 18 stocks in Africa, 54 57 Forum for Africa China Cooperation (FOCAC), 32, 47n1, 50, 59, 72 policy framework, 33 Gandhi, Mahatma, 50 51, 64n1 political activism in Africa, 51 Global Growth Companies, 39 43 Globalization defined, 2 theoretical dimensions of, 3 Globalization of investment, defined, 4 Globalization Website, The, 3 Global socio-political values, export of, 24 25 Group of Emerging Economic Powers (GEEP), 65, 67 68, 86 He, Zheng, 31, 50 Humanitarian assistance, 28 Hyundai, 73

107

Imperialism, 31 India Africa Institute of Education, Planning and Administration (IAIEPA), 62 India Africa Institute of Foreign Trade (IAIFT), 62 India Africa Institute of Information Technology (IAIIT), 62 India’s investment, in Africa, 49 64 history of, 50 52 initiatives evaluation, 52 61 uniqueness of, 61 62 Indonesia’s investment in Africa, 72 73 International Monetary Fund (IMF), 23, 75 Investment, defined, 18n1 Investment globalization, 4 KIA, 73 Lula da Silva, Luiz Inacio, 68 69 Malaysia’s investment in Africa, 73 Manmohan Singh, 62 Marginalization of Africa, The, 78 Maritime Silk road (One Belt One Road) policy framework, 33

108

Market Access Initiative (MAI) Scheme, 58 Market Development Assistance (MDA), 58 Mexico, 74 Neo-colonialism, 31 NEPAD-OECD Africa Investment Initiative, 88 Nigeria, 74 Non-governmental organizations (NGOs), 28, 29 ‘One China’ Policy, 36 O’Neill, Jim, 75n1 Organization for Economic Co-operation and Development (OECD), 8 Politics, and investment, 27 28 Roussef, Dilma, 69 Russia’s investment in Africa, 69 71 Silk Road Economic Belt, 33 Small and medium enterprises (SMEs), 34, 39 Socio-cultural theories, 3 arguments against, 15 16 arguments for FDI, 12 13

Index

Socio-economic theories, 3 arguments against, 13 14 arguments for FDI, 11 Socio-political theories, 3 arguments against, 14 15 arguments for FDI, 11 12 South America, 74 South Korea’s investment in Africa, 73 South South Cooperation, 37 Structural adjustment programmes (SAPs), 23 24, 26, 28 Tata Group, 61 Tazara Railway project, 32, 34 Terner, Michel, 69 Trade, and investment, 29 Trade liberalization, 23 Trans-Atlantic Slave Trade, 68 Turkey’s investment in Africa, 71 72 United Nations (UN), 32 United Nations Commission on Trade and Development (UNCTAD), 1, 13, 22, 38, 53, 86

Index

World Investment Report 2010, 21 Venezuela, 74 Win-Win-Win hypothesis, 80 82, 83, 85 87

109

World Bank, 23, 75 World culture theory, 3 World Trade Organization (WTO), 86 Xi Jinping, 33