Monday, 16 November 2009

The final frontier

You may be forgiven if
“the final frontier”
was to mirror the title of a Hollywood blockbuster or you could also be mistaken; that “the final frontier” could not be reflective of a continent; usually dubbed the darkest place on earth.

The truth is that Africa is the next New frontier of mineral exploration. With major stakeholders battling, wilding and conniving their charm against a complex network of shady deals to outwit the cool, smart and calculative moves of the Chinese.

Africa strategic importance can not be underplayed nor it value cheapened. It’s geographical positioning and untapped mineral wealth makes it a unique selling proposition to any investor. The trading ability of any multinational company is dependant on contracts signed and memorandum of understandings reached between hosts and investing governments.
African countries dissatisfied by the unequal trading relationship with the rest of the world,
have hardened their political stance. China’s current interest in Africa is only a convenient opportunity for African governments to support another wood-by investor.

China’s interest and relationship building with Africa over the past 10 years has left the continent in a relatively descent shape. African governments have realised that they need Trade far more than AID. They need fair term without carrot and stick approach linked to investment. African’s clearly understand that they can choose between China from the East versus the rest of the world.

China has stolen the lead in Africa with over 60 Billion Dollars worth of investment and untold influence.
Virtually in slow motion, over night
the Chinese had taken a grip of mineral extraction with Europe and the USA a distance fourth. Behind Russia and Brazil, both major players in their own right.

Industrialised nations appetite for oil goes unabated despite calls from pressure groups. Governments need to diversify into large scale production of new greener cleaner technologies of wind, solar and hydro. Wars in the Middle East combined with strained relationship with most Eastern oil producing countries; have forced the West to look for new suppliers of oil.

China is also desperate, its fast growth pace, technological advancement have increased it’s appetite for energy to fuel its enormous economy. This is the central driving force that justifies it presence in Africa. China’s dominance across the continent has come at a price. The Chinese have built bridges, road and general infrastructure all for free. In a bid to guarantee access to Africa’s precious minerals. China have also provided soft loans to African governments namely Angola, Sudan, Zambia, Congo and Rwanda; as a means of raising much needed private capital outside of the frame work of the (IMF) International Monetary Fund and the (WB)World Bank.

The Chinese have not imposed conditionality packages as part of their loan agreements; unlike the stringent and detrimental conditionality packages imposed by IMF, WB and Industrialised nations. Instead China has requested that African government in receipt of Chinese money do business with Chinese companies and buy goods from Chinese firms. Guaranteeing that the circulation of money is kept strictly with the China / Africa Trade Zone. Squeezing Western products and firms out of the picture. There are now little China Town enclave popping up all over Africa with cheep Chinese goods replacing Western brand names.

It is therefore not surprising that President Obama visited Africa, flagged by an extended trip to various mineral hot spots by Foreign Secretary Hillary Clinton. The USA is eager to show support to Africa and to rekindle influence in a bid to up root and dislodge the Chinese iron grip on the continent.
African leaders and their advisers have finally awakened,
realising what the new type of globalise politics is all about. Who are the new major players and what choices have to be made? Africa finds it’s self in a very unique position to be able to choose among multiple investors all bidding for the same job. This increases the value of Africa’s currency ensuring that the best deals are signed. Africa’s choice will be at the expense of western governments and their respective multinational companies. A liberalised continent is voting with its feet and changing suppliers, manufacturers and investors all at the same time. This is ground breaking and truly unprecedented.

He who pays the piper will always call the tune. Who ever controls Africa’s minerals resources, builds infrastructure, provide cheap products for African markets and loans to support government initiatives, will always have an influence over Africa’s affairs.

Most developed nations are not sure how to respond to Africa. Europeans who taken a hard line on the African countries, risk having their contracts cancelled and deals renegotiated. This has resulted in a significant shift in mindset. The USA and Europe have changed long term hardened position against the Sudan and Lybia in exchange for mineral contracts. The French softer line with Guinea’s military junta and desperate efforts by Nicholas Sakosi to mending the rift with the Angolan’s, after a billion dollar military deal that went sour. It’s all change in the name of and fear of loosing Billion Dollar contracts. Especially as the Chinese are always lurking in the shadows; to snap up contracts that are being renegotiated. African governments are using this unique opportunity to negotiate hard with Europe and the USA for rates and terms that benefit their communities.

China's influence in Africa is steadily growing. China will soon have to gently start to coax African governments to adopt more proactive and economic fiscal processes. China will have to ensure that leaders whom it have signed mineral agreements with stay in power. Maintaining China’s dominant position and over all control; whilst freezing the West governments out of Africa.

China sees its current business relationship with Africa as strictly an exchange of ideas and expertise in structural development as a pretext to access and to precious minerals. China has to realise that most countries in Africa are fragile states by definition and the condition that lead to their fragility are still apparent. Poverty inequality and lack of good governance are the solitary reason for conflict and instability. China’s current formula of quiet diplomacy and neutral position on most sensitive matter relating to the African continent can only be acceptable in the short term. This strategy will become problematic in the medium to long term. When African government change and new leaders adopt a negative stance to what had previously been approved.
China’s legacy in Africa may be kinder in its favour.
Less so for other industrialised nations; whose influences have not always been in Africa’s best interest. Western Aid models have increased government dependency levels to exceed 70 % of national budgets. Where as poverty levels of 80% are far higher than it was 50 years ago.

China must be mindful that with great power comes great responsibility. China’s human rights record has always been open to question. It remains to be seen how if at all it can shrug off its appalling record and start to use it’s influence and question African governments that fall short of international acceptable standards. Chinese companies operating on the African continent have got to ensure that they adhere to local and international working standards. There has been unrest in both Ethiopia and Sudan where workers have demonstrated seeking better standard of pay, personal conditions and above all safety levels of working.

Sierra Leone, Ghana and Uganda are a growing list of countries that have now joined the exclusive club of nations striking it rich with off shore oil. Quantities found exceeding what Gadafi Libya currently has in reserve. Provided these countries are managed properly, with a constant supply of cash injection worth Billions. They do have the potential to develop, evolve and transform beyond all recognition.

Civil Society responsibility is now paramount in calling for better transparency. They must question the terms of China’s contractual arrangements with respective governments. Whilst seeking better terms for workers and greater accountability of government ministries.

1 comment:

pharmacy said...

I don't know what to think because mineral exploration sometimes brings to the countries hard consequences, they should think better in that