Modern scramble for Africa an opportunity or bad spell?

Post was last updated: January 29, 2020

Debate continues in the public domain; both locally and across the African continent as to whether the recent interest in Africa by larger economies is a blessing or a curse for African countries.

Last Sunday, President Peter Mutharika returned home from the United Kingdom (UK) where he participated in the UK – Africa summit with messages of hope that companies from that country will invest in Malawi.

Last October, Malawi was among a few African countries that were invited to the Russia – Africa summit and authorities came back with the same message.

The same can be said about the Forum on China-Africa Cooperation (Focac) summit and the United States (US) Africa Business summit in June 2019, not forgetting the Tokyo International Conference on African Development.

While others want to believe that such meetings are providing an opportunity for African countries to boost trade and grow their economies, others are of the view that the larger economies want to exploit Africa for her resources.

Even economic and trade experts agree that such economies are trying to explore the growing market for products that Africans continue to offer, but also tap resources available on the continent.

Economist Sane Zuka holds that advanced economies are very open about what they are looking for. He said they are looking for market opportunities and natural resources that are abundant in Africa.

“With growing uncertainty within their existing trade relationships, they want to make sure that they do not lose out on the potentially growing market in Africa. For instance, between 2001 and 2011, Africa’s contribution to global trade increased from 2.3 percent to 4.6 percent.

“China and Russia see Africa as an alternative source of oil, gas and other geopolitical minerals. Added to these reasons is the drive to look for political partners that can support their international agenda,” Zuka said.

He added that Africa attracts the smallest share of global Foreign Direct Investment, pegged at around 4.3 percent and 1.8 percent for the sub Saharan Africa.

He said most of the foreign investment is also invested in a few countries such as South Africa, Egypt, Nigeria, Kenya, Angola and the emerging Rwanda and Tanzania.

“Malawi is on the bottom of that share. Despite commanding highest rate of return on investment, Africa fails to attract much investment because of its low human capital, infrastructure, especially roads and energy, and institutional capacity,” Zuka said.

Concurring with Zuka, former president of the Malawi Confederation of Chambers of Commerce and Industry (MCCCI), Karl Chokotho, said Africa is the next big thing however the Continent seems not to have a unified dream albeit the African Continental Free Trade Area (AfCFTA) and related African Union agendas.

“The forums have revealed that some countries are ready for investments and others just simply have a scrambled wishlist, praying that investors will pick and choose from the buffet of unrelated Investments.

“There’s nothing wrong with accepting investment as long as the country itself has a purposeful, time-lined and detailed vision of where it wants to be in all sectors with a professionally, not politically, managed Performance Management System at all levels,” Chokotho said.

He added: “we must all ask ourselves the question; where do we want to be in 20 years? How do we get there? Including but not limited to capacity building of the local population, but including policies and frameworks to enable the vision but also what do we need to do each year in order to get there and detailing annual deliverables in each sector at each level to the lowest Government employees.”

Executive Director of South Africa based Trade Law Center (Tralac), Trudi Hartzenberg, said the interest in Africa is becoming more complex than before.

She added that there is growing interest in African markets, especially in East Africa where economies are growing fast.

“Africa presents growing market opportunities, as per capita incomes are rising so is the demand for consumer goods, electronic goods and much more.

“The AfCFTA has also sparked renewed interest in the African markets, with the prospects of growing markets, with fewer tariff and non-tariff barriers on intra- Africa trade, with progress in trade facilitation, better customs and border management and many other improvements on intra-Africa trade prospects,” Hartzenberg said.

She said foreign dir e c t investment is very important to all African countries as none have high enough savings rates to generate domestic investment to the extent needed to diversify and develop their productive capacity.

“Recent news from Angola indicates that this was not the case when Angola was along the top destinations for Foreign Direct Investment into oil and diamond industries. Very limited development gains resulted from those investments. But in recent times, we have seen countries like Ethiopia attracting investment into manufacturing, clothing and textiles and footwear, for example. These investments are linking Ethiopia production into global value chains and creating many jobs locally,” she added.

On exploitation of resources, Hartzenberg said developments linked to the resources on the continent such as oil, minerals and agricultural commodities such as coffee will continue to be important for many African countries.

She said some are starting to add value locally, for example, to agricultural commodities, and there are sub-regional value chains in diamond developing; for example, between Namibia and Botswana where Namibia is exporting diamonds to Botswana for cutting and polishing and then exporting the value-added diamonds back to Namibia for export to global markets.

When all is said and done there is need for African countries to come together and benefit as a block to avert any chances of exploitation by the larger economies.

Malawi needs to have clear investment agenda and sell it to the world fluently to attract the much needed foreign direct investment.

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