Africa: Change can only come from the inside

A few days before his sack was announced, Rex Tillerson, the outgoing American Secretary of State, warned African countries not to give up their sovereignty by accepting loans from China. This is sound advice, even though it is coming from a man who represents a country that has arguably contributed the most - at least from the outside of Africa - to the perpetration of poor governance and political instability in the continent.

CIA’s implications
It is for instance public knowledge that both during and after the Cold War, the CIA has been implicated in both the overthrow and sustenance in power of some African leaders mainly with the objective of protecting America’s economic and political interests. In 1966, for instance, after the CIA helped to facilitate the overthrow of President Nkrumah of Ghana, a US Government official declared that Nkrumah did “more to undermine our interests than any other black African”. By far the most glaring evidence of the negative consequences of US self-interest determined interventions in Africa is the 2011 ouster of Muammar Gaddafi in Libya. The security consequences of this act on Africa, which continues to reverberate far beyond Libya’s borders, is yet to be fully comprehended.

The interest of the big powers
Many international organizations have also been constructed to protect mainly the interests of the big powers. In the United Nations, for example, few countries have been awarded the privilege to veto decisions of the majority. It is also not surprising that the IMF and the World Bank, which are dominated by Western powers, are the principal apostles of free markets. Poor African countries with very shallow money and capital markets have been forced to liberalize their capital accounts and economies. These have turned these economies into speculative fields for foreign capital. Capital account liberalization serves the interest of Western powers whose currencies are convertible and thus widely used in international trade and as reserve currencies globally.

However, not all free market dynamics are respected by Western countries. International financial institutions turn a blind eye when Europe and the US subsidize their agriculture. More recently, President Trump has announced the imposition of tariffs to protect the US steel industry.

China’s engagement in Africa
The above concerns do not impact on the soundness of Rex Tillerson’s advice. This is because China’s strategy and objective for engaging in Africa is not materially different from that of USA. Like the USA, the main purpose of China’s engagement in Africa is to advance its economic and political interests. Loans and development grants are all tools China is at liberty to use to achieve its objectives. These tools played a key role in helping China to displace the USA as Africa’s largest trade partner in 2009.

Change from the inside
Given the self-interest pursuit of external actors in Africa, I am convinced that positive change in the continent can only come from the inside. Aliko Dangote, Africa’s biggest entrepreneur and richest man, has practicalised this point with the rapid expansion of his cement business across Africa. Within a very short time, Dangote Cement has become Africa’s largest cement producer and the dominant cement producer in almost a dozen countries in Africa. This is an industry where major cement multinationals like Lafarge, Heidelberg and Holcim have long operated in the continent. The tragedy of Africa is laid bare by the fact that until the emergence of Dangote, the continent - which is awash with limestone - remained a major importer of cement, a high bulk and low cost product. Despite the fact that over half of the cost of imported cement relates to freight, making it cheaper to produce cement in Africa than import it, Africa remained a major importer of cement until the emergence of Dangote Cement.

Net exporter of capital
The current state of the financial flows in Africa also supports the assertion that change in Africa can only come from the inside. Although Africa is widely portrayed as being in need of capital, the fact remains that Africa has consistently been a net exporter of capital. In 2015, for instance, African countries received $162bn, mainly in loans, aid and personal remittances, while $203bn was taken from the continent. About a third of this ($68bn) was taken out in capital flight “(…) mainly by multinational companies deliberately misreporting the value of their imports or exports to reduce tax.” This is more than the combined amount Africa received as remittances ($31.2bn) and loans to its various governments ($32,8bn). It was also more than 4 times the net Foreign Direct Investment Equity that entered the continent in the said year ($15.8bn).

Africa a ‘risky place’
It is also public knowledge that most foreign businesses in Africa perceive the continent as a very risky (but also very profitable) place to do business. It is as a consequence of the above that most of such businesses are generally reluctant to undertake capital intensive investments with long gestation periods in the continent. Such companies usually focus on integrating their African operations with their global value chains rather than developing local value chains that are based on the specificities of their host environment. In the eyes of such companies, Africa is seen more as a market than a place for production and value addition.

Another consequence of the above dynamics is that most foreign businesses operating in the continent adopt active dividend policies. This explains why profits legally repatriated by multinational companies in 2015 ($32.4bn) were more than twice the amount of Net Foreign Direct Investment (FDI) into Africa in the said year. It was also more than the official aid received from all OECD countries in the said year ($19.1bn).   

For the above dynamics to change, the governance and business environment in Africa must change. Assistance and/ or interventions from China or USA, even if well intentioned, cannot change this fact. Only Africans can get themselves out of what President Donald Trump has described as its “shithole”.

Top photo: Foreign Minister Mahmoud Ali Youssouf of Djibouti greets (former) US Secretary Rex Tillerson, on his arrival in Djibouti, 9 March 2018 (U.S. Air National Guard photo by Staff Sgt. Allyson L. Manners). Source. 

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