AFRICANGLOBE – As India plans to host the third India-Africa Forum Summit in December, the implications of a similar event that took place in Washington earlier this month should not be lost on us
Our news media’s constant focus on the United States notwithstanding, it seems to have completely missed a historic move earlier this month by President Barack Obama with potentially serious implications. From August 4 to 6, he hosted the first ever ‘U.S.-Africa Leaders Summit’ in which over 45 of Africa’s heads of states participated. In his welcome address, President Obama leveraged his own African lineage by telling them that apart from being a proud American, he also stood before them “as the son of a man from Africa.”
The summit had an unambiguous economic focus. During its three days of deliberations, U.S. ‘commitments to Africa’ worth $33 billion were announced. These included: $14 billion in investment by U.S. companies; $7 billion to finance U.S. exports; and $12 billion for a ‘Power Africa’ initiative to boost electricity availability. Over 90 American companies participated in the summit.
Cynosure Of Many Eyes
Because of its vast natural resources, acute infrastructure deficit, high population growth and growing middle class, Africa has long been a cynosure of many eyes. Countries such as China, India, Japan, Brazil, Turkey and South Korea, as well as organisations such as the European Union (EU), the Commonwealth and La Francophonie, have been regularly hosting Africa-focussed summits. The U.S. is the latest to join this Africa rush.
It would, however, be incorrect to consider Washington a latecomer to the ‘Africa Party.’ Historically, the slave trade provided an umbilical cord between the U.S. and Africa. Bilateral landmarks include American Friendship Treaty with Tunisia in 1799 and establishment of Liberia in 1821. They also include American support for Apartheid regime in South Africa and for right wing dictatorships in countries from Morocco to Congo to Angola during the Cold War. Subsequently, the U.S. did help in the dismantling of Apartheid and getting Namibia its freedom.
In 2007, the U.S. Army created the Africa Command (Africom), which has been steadily expanding its presence in the continent. Lately, however, Pentagon has been alarmed, in the aftermath of the Arab Spring, at the spread of Islamic terrorism across large swathes of Africa: Maghreb, Sahel, Nigeria, the Central African Republic and Somalia.
Economically, the American presence in Africa has been large but is currently declining. Till 2008, the U.S. was Africa’s largest trading partner. This was spurred by import of African oil worth over $100 billion — part of U.S.’ strategy to reduce dependence on the Gulf. However, thanks to a shale revolution, the U.S. has become the world’s largest oil producer and its oil imports from Africa are set to plummet to a mere $15 billion for the year 2014. This has dramatically reduced U.S.-Africa trade to around $60 billion in 2013, nearly a third of China’s trade with Africa. If this trend continues, India may well overtake the U.S. as Africa’s second-largest trading partner this year. However, the U.S. still remains Africa’s largest aid provider and a major investor.
Against this backdrop, many observers see the Washington Summit as a U.S. bid to find new economic paradigms for its Africa profile to catch up with China and other stakeholders on Africa. The sceptics, however, point out that with U.S. economy still in recovery mode, no early surge in American demand for African raw materials is likely.
Further, the U.S. products, services and technology are often either unsuitable or too expensive for Africans. Its Asian competitors have an edge here, in industries ranging from mobiles to medicines. The U.S. niche areas for Africa include: export of commodities (foodstuff, refined products); supply of equipment (for power, aviation, construction etc); and projects for mineral exploitation, hotels and hospitals.
Following The Chinese Strategy
A closer look at the Washington Summit’s outcome also reveals that the U.S. intends to follow the Chinese strategy of long-term soft funding for Africa. Beijing has for long provided concessional loans to African countries to cushion them from the lower quality (and higher costs) of its products and projects; the U.S. and American MNCs would possibly do the same. For most African governments facing a serious capital crunch, such long-term soft loans are often irresistible. Second, with many African states facing serious security challenges, the U.S. may also leverage its Africom umbrella to gain an economic advantage.
As New Delhi plans to host the third India-Africa Forum Summit (IAFS-3) in December 2014, what are the implications of the Washington event for us? First, forceful re-entry of the U.S. and its deep-pocketed MNCs may lead to a more intense and potentially unfair competition in Africa. Second, greater U.S. engagement in infrastructure building may release synergies in Africa that we can leverage. For example, better roads can mean more Indian vehicles being sold. Third, if American MNCs increase production of primary commodities in Africa, it may benefit India as their end-user. Fourth, Indian subsidiaries of the U.S. MNCs stand to gain. Finally, over the past 15 years, India has successfully created some key interfaces in Africa in areas such as power, Information and Communications Technology, and healthcare. A U.S. entry into these may affect market access for us. Africans, who have often played the China card with us, could now play the U.S. card as well.
India would do well to prepare IAFS-3 with a Strengths, Weaknesses, Opportunities and Threats (SWOT) review of the past six years of the IAFS process. The following domains suggest themselves:
(i) Being a developing country with income level comparable to most African nations, India cannot sustain the IAFS process on the basis of freebies alone. Instead, African countries should be invited to become co-stakeholders in the process.
(ii) While the African Union Commission can be a political umbrella for the IAFS process, India should, on its own, choose both the recipients for our developmental cooperation and the manner in which we plan to extend it. We must not abdicate this important task to the African Union (AU) bureaucracy.
(iii) There is a need to revamp the Line of Credit approach to projects as it has rarely delivered the intended results. Instead, greater support should be given to private sector-driven projects through initiatives like lower interest rates, risk mitigation, etc.
(iv) We should harness our assets in Africa, such as the Indian diaspora there; a growing acceptance of the quality of our healthcare and educational facilities; relevance of our developmental model; and the greater willingness of our private sector to engage the continent.
By: Mahesh Sachdev