The 19th century saw the First Scramble for Africa. European colonial powers carved up the continent between them and created huge colonial empires. Their reasons were multiple. Sheer greed was one of them, as Africa was a country with rich resources in the hands of people who lacked the technology to repel the greedy colonialists. Prestige was another reason.
During those days, the cult of the superiority of the white men over other races was still very much a common belief, so the fact that white European colonialists lorded over their African subjects made perfect sense to the colonialists. The losses sustained during WWI and WWII bankrupted and terminally weakened the European colonial empires and left them with no choice but to liquidate their empires.
Nonetheless, the retreating colonialists often maintained their influence over their former colonies. One good example of this would be France which forced its former colonies to use a currency that was based on the French currency, first the Franc and later the Euro. This gave France the power to hold an iron grip over the finances of her former colonies.
The retreat of the Europeans left a power vacuum, which the two rival superpowers, the USA and the Soviet Union, were more than happy to fill. The end of the Cold War and the collapse of the Soviet Union saw their influence wane, and for a time Africa was seen as a lost cause for foreigners. Too unruly and unstable to be a place for sound business.
Yet things changed in the last decades, and today the developed countries of the world are once again investing in Africa. Whether these investments will lead to improved living standards for the Africans is a question for the future. You can find people who believe the investments will improve Africa, however, some people saw this new scramble for Africa as neo-colonialism, and are more cynical about the prospects of Africa.
A few questions that we need an answer to is why are capital-rich countries flocking to Africa now? Who are these countries and what are they doing? Will their investment help the people of Africa?
Why does the developed world invests in Africa?
We are living in an age where political discourse and geopolitical objectives are heavily influenced by the control of resources, and Africa is a place with plenty of resources. Even better than the abundance of the resources is the weakness of the countries that own them. Rich countries are presented with the chance to take the candy from the baby.
The developed world is determined to gradually phase out its addiction to fossil fuels, but the process is slow, and it will take decades. The EU set 2050 as the date by which Europe will become carbon-free. It’s an ambitious project, but it is still 28 years away, and during that period, we will still need fossil fuels.
Natural gas is one energy source the developed world is heavily dependent on. Algeria is the biggest producer of gas in Africa. Thanks to their proximity to Europe and the ever more hostile relationship which Europe has with Russia, its main gas supplier, it is probably a safe bet that demand for Algerian gas might increase in the future.
The still untapped gas resources African countries have is also substantial. Nigeria, Algeria, Senegal and Mozambique all have gas resources worth over 100 trillion cubic feet. One would expect to see Gas industry giants increase their investment in Africa in the future, and probably substantially.
Oil is another resource that Africa has in abundance, according to the UN, Africa holds 12% of the world’s oil reserves. African countries like Libya, Nigeria and to a lesser degree Algeria, Angola, Congo or Gabon, just to give a few examples have vast oil reserves. Large companies like Chevron, Exxon and Shell are present all over African countries, and the need of Africans for expertise and technology gives these companies a strong bargaining position.
Gas and oil are probably the two most spoken of resources of the last two decades, but there are plenty of other resources in Africa. The continent may be rich in oil and gas, but in minerals, Africa has even more. According to the UN Africa hold 30% of the world’s mineral reserves.
As we all know, minerals are a must in the making of all the high tech gadgets we use in our daily life, and the people who produce them need the resources of Africa.
For example, cobalt is a key resource that is needed to make the smartphones we all use. As of 2019, 63% of the world’s cobalt production is done in the Democratic Republic of the Congo. Tantalum is another mineral that is needed in the making of mobile phones or laptops, and at the current moment and time, the two biggest producers of this resource are the Democratic Republic of Congo and Rwanda. These are just two examples, but there are plenty of others.
Unfortunately for Africans, their continent is underdeveloped in terms of infrastructure, economy and political organization.
The underdeveloped infrastructure is a golden opportunity for firms of developed countries to find potential projects and large ones at that. Firms from China and other developed countries built-up roads, railways, dams, airports and other infrastructural projects during the last decades. On the one hand, it is a good development, because let’s be honest, all modern countries need a developed infrastructure in our world. Without good roads, railways, airports or ports, the traffic of goods is much slower in and out of the country, which is a potential loss of revenue for both the private and public sectors.
On the other hand, we should not believe these projects were done out of the goodness of Chinese or Western hearts. The loans that were given will have to be repaid, and probably from the investor countries perspective, the infrastructure’s reason and purpose were to speed up the flow of goods out of the countries.
As Africa is much poorer than the developed world, firms that move their factories there can make a profit by simply paying a lot less to the African workers than they would be forced to pay for workers in their own country. Africa is quickly becoming what China was a couple of decades ago to American and European firms, with the exception that China has joined the gang this time around.
Lower wages are not the only advantage African countries can offer to corporations. The workforce of Europe is quite well protected by laws, both in terms of wages, insurance and organs that represent the workers, the European workers have a relatively strong position. This is something that the workers in most African countries lack. Human rights and freedoms are ideals the West, though not China or Russia, seemingly holds in high regard, however, the backing of dictators and regimes that trample those is seemingly not a problem. Most Western people probably never even heard of those countries or how the gadgets we use are made.
Who are these countries and what are they doing?
China is one of the countries which heavily invested in Africa during the last two decades. The sum is estimated to have passed 2 trillion $ since 2005. Chinese firms and loans financed the thousands of building projects, which led to the development of the infrastructure of many African countries.
Some Western countries even accused China of debt trapping African countries. In simplified terms, this means that China offers African countries loans that they have no hopes of repaying and in exchange for writing off these loans, they ask for resources, privileges for Chinese firms or political favours. One good example of political favour would be voting in the UN Security Council.
Another country that was and still is heavily involved in Africa is France. Many accused the French of maintaining an informal colonial empire since the 1960s, when the French colonial empire was officially liquidated. Despite the loss of their colonial empire, the French, with the backing of the USA, maintained control over the financial sector of their formal colonies( West CFA and Central CFA) by tying their currency to the French franc, which was of course regulated by the French treasury. These countries were also forced to keep half of their reserves in Paris, which gave France further leverage over them. The system was just recently abandoned in the West CFA region.
Russia is another country that tried to forge closer ties with African countries during the last decade, especially since the country was hit with Western sanctions in 2014. Russia is on one hand, probably looking to extend its political influence, which could help the country in the UN for example, but also looking for new markets. Russia seemingly has no quarrels about making deals with dictators, supplying arms and even their controversial mercenary group, Wagner, to politicians in need.
The United States is also present in Africa, and despite the disparaging remarks of Trump, the US-African trade was growing in the last few years. The exports were between 21 and 26 billion dollars the last few years, while the imports between 26 and 37 billion dollars. The presence of China will probably force the US to keep a close eye on the region.
Other countries from the Western world and Asia are also present in Africa. The prospect of cheap resources and market for their products is an opportunity that is simply too good to be missed for the EU, India or Turkey to give just a few examples.
Will the investments help the people of Africa?
The infrastructural investments in roads, railways etc were much needed. Nonetheless, whether foreign investment will help the people of Africa prosper is another matter.
Firms that moved their factories in Africa mostly need low to medium-skilled workers, as their home economy is increasingly moving away from manufacturing to services.
If the money pumped into Africa leads to an emergence of a Western-style middle class that can challenge the more authoritarian leaders would be the best development Africa could hope for. Just how much the countries that are investing in Africa are interested in that is questionable. Weak regimes suit them just fine. Despite the legal freedom of African countries have, if foreigners control their elites, resources and financial system, are these countries free? And is it not better for the ex-colonial powers and the new ones to keep that status quo so?
This content reflects the personal opinions of the author. It is accurate and true to the best of the author’s knowledge and should not be substituted for impartial fact or advice in legal, political, or personal matters.
© 2022 Andrew Szekler