Africa has long been a battleground for world powers. Two giantsplaying there these days are China, which is spending freely throughout the continent to scoop up resources and tap some of the world’sfastest-growing economies, and the U.S., which is looking to do more business. Both Chinese and U.S. companies expect to profit from their African stakes. The question is whether Africans can win, too.
While Chinese companies have been criticized forimporting Chinese labor rather than training and employing Africans, they are now building garment manufacturing plants to take advantage of Africa’s cheap labor amidhigh unemployment. U.S. development in Africa has been private-sector driven and concentrated in just a few countries including Liberia, Mauritius and South Africa.
President Barack Obama wants American companies to do more. In August 2014, U.S. companies pledged $14 billion in investments at the U.S.-Africa Leaders Summit in Washington. In 2013, the U.S. began the Power Africa initiative to build electricity grids and generators across six countries by working with African companies and U.S. partners that have top-of-the-line technology, including General Electric, and offering $7 billion in financial support and loan guarantees. But by the time of Obama’s 2015 trip to Africa, Power Africa projects had not delivered any electricity. And power shortages are cutting into growth.
The Background
European imperialism left deep scars in Africa. During the Cold War, the U.S. and Soviet Union intervened to put dictators in power who lined their own pockets and left legacies of poverty, famine and conflict. Foreign aid was often misused and diverted for weapons.
Food aid imported to combat famines depressed prices for local farmers. Unrest led to little investment in infrastructure; even now about 600 millionsub-Saharan Africans — about 70 percent of the population — lack electricity. Though Africa is rich in minerals and energy sources, few Africans have benefited from exports of those materials. Someeconomists and policymakers have even argued that dependence on natural resources does more harm than good — a phenomenon they call “the resource curse.”
China’s rapid-fire, state-funded building provides quick fixes to pressing infrastructure needs in Africa, though some critics say construction can beshoddy. China also isn’t fussy about working with controversial political regimes, bestowing legitimacy on leaders in countries that U.S. companieswon’t touch. Though it sometimes pays little heed to the political andenvironmental impact of its investments, China’s government has stepped in when its investments were threatened — as it did in South Sudan — and thus could help promote calm. Yet Chinese growth is cooling, GDP data and IMF forecasts show, and this could be a dragon its projects in Africa.
While the U.S. is trying to use development as a way to shore up regional stability, its investments can take longer to get the jobs done, since companies have to satisfy shareholders and projects often undergo environmental vetting before they can get off the ground. U.S. companies are also subject to anti-corruption lawsthat make it almost impossible to do deals in places where bribery iscommon.
U.S. and Chinese investments in transportation and electricity should make it easier for African businesses to get goods and services to and from the continent. African planners hope this will help lift the average per-capita income past $10,000 in many countries in the next three decades.
