Eye on Africa: US and China tussle for economic influence
The US and China are increasingly rivals on the world stage, competing over resources, policy and influence. One region where China has spent years establishing a foothold is Africa. Now the US is also keen to reassert itself after years of economic neglect.
The US fired the latest salvo late last year when it pledged to provide at least US$14 billion in public and private assistance in areas such as clean energy, energy, aviation and banking. President Barack Obama told leaders of 50 African countries attending the US-Africa Leaders Summit that Coca-Cola will provide clean water, General Electric will assist with infrastructure development, and Marriott will build more hotels.
But there was a catch, as always. The governments who receive the investments must do more to bolster the rule of law, reform regulations and root out corruption.
That’s a key difference between the US and China in their approaches to Africa and elsewhere. The US likes to attach strings, the Chinese just want to do business. And that’s why China’s economic footprint in Africa dwarfs that of the US. Indeed, it surpassed the US as the continent’s largest trading partner in 2009.
About $200 billion of goods and services flowed between China and Africa in 2013, double the $85 billion in trade the US had with the continent.
Africa still offers promise to both superpowers, one waxing, one waning, as a region not yet fully developed but boasting many fast-growing economies. In their pursuit of economic gain, the US and China eye Africa as a fertile land of opportunity. As they race to establish economic control on the continent, it is important to carefully examine the strategies they’re employing.
While their economic goals are similar, their terms of engagement are diametrically opposed.
China’s model: investment without meddling
China’s strategy in Africa diverges from the traditional model exemplified by the World Bank and International Monetary Fund. That model, which has regulated the principles underlying international investment and trade for decades, aims to establish accountability and ethics at the center of economic cooperation. Critics contend this model is too Western-centric.
China utilizes a “doing business” model that ostensibly treats African states as equal partners and steers clear of their internal affairs – a strategy that appeals to countries used to Western colonies and dictates.
It’s built on three strategies that China has used successfully to achieve its African trade goals: flexibility, focusing on infrastructure and cementing partnerships with small businesses.
Flexibility. China invests in Africa with a high degree of flexibility and pays little heed to the existence (or nonexistence) of credible financial institutions, contrary to the norm of American and European investment. Instead, its sole focus is on gaining access to natural resources such as copper and gold, with no interest in building up African institutions.
While this approach draws criticism for its lack of accountability, China has managed to seduce many African governments such as Angola and the Democratic Republic of the Congo with the notion of an equal partnership without internal meddling.
Infrastructure. China has long been Africa’s top infrastructure partner. New roads, bridges, hydroelectric dams, schools and hospitals are going up across the country as a result, bolstering economic growth. This hasn’t been without criticism: many question the long-term viability of the structures being built and the fact that Chinese workers are imported to do most of the work. Thus while buildings and bridges may rise, few jobs are directly created.
Small business. Lastly, small business owners in Africa and their Chinese counterparts have established strong ties, particularly in clothing and construction. Trade in these sectors has exploded. Yet again, the rapidity with which these partnerships have developed has created some unease among consumers and analysts. The quality of the Chinese products being imported is often low and comes with no warranty or other guarantee.
Despite the problems and criticisms, these three strategies exemplify why the Chinese model has been successful in Africa.
The US model: building strong institutions
The US has a long history of engagement in Africa, particularly in terms of aid and political and military influence – the case of Rwanda since 1994 exemplifies this. In recent years the USA has been shifting toward building economic ties with the continent.
That’s now accelerating as developing countries such as China and Brazil dominate growth in the global economy, prompting the Obama administration to launch the US-Africa partnership. Previous efforts were bilateral, this new framework has truly continental ambitions.
The US strategy boils down to building strong institutions and focusing on macro projects.
State building. The main thrust of US investment has long been made through development agencies and financial institutions such as the World Bank and IMF, following the traditional model promoted through structural adjustment mechanisms which focuses on poverty reduction, institutional reforms and free market with highly macro-economic focus in its implementation.
With many countries on the continent still in the process of state-building such as the Democratic Republic of Congo and Central Africa Republic, the US focus on institutional reforms and accountability as a precondition of aid should be encouraged. This approach not only facilitates monitoring and management of the funds distributed. It also helps establish a less corrupt economic space for private enterprise. That, in turn, attracts other foreign investors and makes the state more sustainable.
Based on my personal experience, however, this strategy isn’t well received by Africans, who regard it as another symbol of an unequal partnership, with the US imposing its conditions. This inflexible and sometimes overbearing approach sometimes brings more frustration than interest in cooperation.
Big projects. The second US strategy of targeting macro projects in energy, mining and other sectors also often falls flat. The rationale behind making such investments is valid but the idea that the benefits will trickle down has failed to bear fruit. The promotion of economic growth in Africa requires the creation of a stronger middle class, which in turn requires more small- and medium-sized businesses.
On this, China gets it right. The US will need to reconsider this focus and do more to deal with Africans at the micro level if it wants to establish a long and lasting presence there.
Additionally, the US tendency to interfere in the political affairs of many countries in Africa – such as Libya – gets in the way of cooperation.
Economic cooperation needs to be based on mutual trust, and this is only be possible if the US is less forceful in its terms of partnership. Unless the US becomes more flexible, it is unlikely to rival China as Africa’s top partner.
Everyone can win
Both the Chinese and the American terms of engagement in Africa may be strategically and ideologically valid and justifiable. There are strengths and weaknesses to both approaches.
China’s flexibility in contracts and everything else creates a fast win—win situation but does not promote good governance or state building, both of which are sorely needed in Africa.
The US focus on the need for institutional reforms is important, but without a more flexible and adaptive approach this will not work.
As the US shows a growing economic interest in Africa, a key question will be whether the Obama administration can establish a stronger partnership that focuses on business ties and not military force.
Just as China can learn from the US emphasis on state building, the Americans should take a page from the Chinese playbook. The end result would be truly a win-win for everyone.