Recommended Reading
Prologue
February 2009 – The President of China tours countries to the south of the Sahara – Mali, Mauritius, Senegal and Tanzania.
June 2009 – The President of Russia tours countries to the south of the Sahara – Angola, Namibia and Nigeria.
With the exception of the period of the recent financial crisis,1the last two decades have a significant increase in foreign direct investment (FDI). Gradually, more and more investment has been directed to the developing countries in the attempt to diversify portfolios and use finance in the most efficient way. However, not all developing regions of the world succeeded in attracting FDI. Considering its large labour force and territory and abundance in natural resources, Sub-Saharan Africa could perform much better in this aspect. This is now being understood not only by African authorities, but by those who make decisions about investment as well. Two heavy-weights, Russia and China, are paying more attention to the continent nowadays. If for African countries the game for investment is not zero-sum, which, hopefully, means that FDI is not attracted at the expense of another country, there is a good chance to get FDI if there is a will to do so. In this case investors would be able to compete for the tastiest morsels.
What are Russia and China looking for in Africa? What motives may companies from these countries have, countries which have recently shown quite a significant interest in coming (or coming back in Russia’s case) to the continent? In both countries, business is closely connected to the government, so political interests seem to be quite important for business decision-makers. This emphasizes specific trends of investment from these countries.
Russia might be inspired:-
• To use the capital it acquired during the past ten years or so, diversify the risks and at the same time get maximum profit;
• To export high-tech production (military, medical, or dualpurpose). This may not be so difficult to do considering the solid experience of exporting to this region in the past and dealing with those African specialists who were educated in the USSR;
• To get the leadership position in some spheres (for instance, in gas exploitation). There are not so many positions left where Russia can contend for leadership in short- or medium-term perspectives, so Russia would compete for any tiny chance;
• To broaden business (Transnational Corporations);
• To import some natural resources (Manganese, Aluminium, etc.). However, Russia will not be an importer of major natural resources due to the high volume of its own reserves, which it also wishes to export. This should motivate Russia to be interested in assisting African countries to use gas, oil and other natural resources for internal needs (in this context the visit of the Russian president to Angola, Nigeria and Namibia earlier this year is quite telling). If this happens, Russia will have no competitors for export to the European Union, to China and other countries that are increasing their production and therefore require resources. This may mean that Russia is interested in developing infrastructure projects in the region;
• To export knowledge. Even besides the creation of economics of knowledge, African students, who are returning from Russia, may be more willing to use Russian technological resources, as their predecessors did after return from the USSR;
In its turn China is looking for:-
• Export of production (usually cheaply manufactured);
• Acquisition of natural resources and raw materials in order to increase production. This is now one of the key issues for China, since natural resources, and particularly energy resources, are the basis for further development and growth of the republic;• Diversification of the oil and gas supply and securing of agricultural supplies. Following the previous aim, China is committed to finding several sources to ensure a smooth supply of resources;
• Employment for the Chinese labour force (sometimes up to 70% of employees in Chinese-invested projects in Africa are Chinese). Export of labour is one of the essential aims of Chinese authorities in their plans to provide welfare for their citizens;
• Loyalty that would be useful for further global expansion. This forces Chinese leaders to be flexible and prove this to their African partners. They do not require any political actions in exchange for their investment or aid, something that differentiates them from their Western counterparts. This definitely lets them win the sympathy of African politicians.
So, who will win this match: an eagle, having already flown over the continent, and having brought up many of the current influential African politicians in its nest, or a panda, who treads carefully without disturbing others, but who is persistently moving towards its goal?
Epilogue
Jiang Zemin became president of the People’s Republic of China in 1993, followed by Hu Jintao in 2003. During this time the two leaders have paid no less than nine visits to Sub-Saharan Africa in total.Boris Yeltsin became President of the Russian Federation in 1991, followed by Vladimir Putin in 2000 and then by Dmitry Medvedev in 2007. The three of them together have made two visits to Sub-Saharan Africa.
1 According to the latest UNCTAD Press Release (24 June 2009), global FDI inflows and cross-border M&As – the main mode of FDI – significantly declined in the fourth quarter of 2008, and the decrease has continued in 2009 (by 54% and 77% correspondingly during the first quarter of 2009 as compared to the same period of 2008).
Published in Marginalia, 10, October 2009 SSEES London
