by Guy Arnold
In future years South Africa should beware of the stronger BRICs powers regarding it as a dumping ground for surplus production at unfair prices. South Africa may be proud of its ‘acceptance’ by the other BRICs powers, but should not delude itself: it is a relative pygmy among four giants. South Africa has also tried to establish comparable trade relations with India, using Indian settlements on the East African seaboard as a base. The bulk of India’s trade is either with West Africa (oil) or South Africa – and it does the most trade with South Africa: 25 per cent of India’s trade with sub-Saharan Africa goes to South Africa. India sees it as a gateway to trade and investment in the rest of sub-Saharan Africa.
Much depends on the growth and handling of the economy. South Africa is a middle-income emerging market supported by an abundant supply of natural resources, well-developed financial and legal communications, energy and transport sectors and a stock exchange that is the seventeenth largest in the world. Even though the country possesses a modern infrastructure that supports a relatively efficient distribution of goods to major urban centres throughout the region, some components of the system impede growth. The economy began to slow down in the second half of 2007, as a result of an electricity crisis cutting supplies. The state power supplier Eskom encountered problems with ageing plants which were not meeting energy demands: this necessitated load-shedding cuts in 2007 and 2008 for both residents and businesses in major cities. In 2009, the GDP, in reaction to the world crisis, fell by 20 per cent. Unemployment, poverty and inequality stand out as major challenges to the government with unemployment affecting 26.6 per cent of the workforce in 2016. South Africa possesses immense actual and potential economic capacity: it has major mineral resources and can feed itself in normal times, though it is subject to periodic drought. In fact it produces a surplus of foodstuffs – both staples and commodities, and has some of the finest offshore fisheries in the world. The World Bank rates South Africa as a middle-income economy. It has the largest economy in Africa (2016) and was the twenty-eighth largest in the world (in 2015). It is seen as a newly industrialized nation, yet a quarter of the population still live on less than $1.25 a day.
Work still needs to continue on relations between blacks and whites – and in particular how whites can be an acceptable minority – and is likely to be part of the South African scene for years to come. In 1999 Mandela stood down as President after serving one term (from 1994), to be succeeded by Thabo Mbeki. Mandela said at the time of the 1994 elections that his first priority was to address the needs of the people who voted for him. The ANC won that election comfortably. After standing down as president, and aside from his role as elder statesman of South Africa, Mandela acted as a peacemaker elsewhere, especially in troubled Burundi, until in the new century he was no longer able to travel and gradually ceased to play any role in national affairs. He died in 2013.
As deputy president under Mandela, Thabo Mbeki first served jointly with F. W. de Klerk until 30 June 1996 when he became sole deputy. He confronted but did not resolve any of the post-apartheid problems that faced South Africa. Mbeki’s strengths were in foreign affairs and, contrary to what pessimists had predicted, he managed to attract a large amount of foreign investment. He also provided leadership in the United Nations for the non-aligned movement. Mbeki was widely criticized for his controversial stand on AIDS. He questioned the link between the HIV virus and AIDS and claimed that poverty as much as the virus was to blame. However, he was generally considered more effective in the international field than in home politics.
After eight years with Thabo Mbeki as president, a power struggle developed for the leadership of the ANC which ended in the defeat of Mbeki in favour of Jacob Zuma, who was seen to be more radical. Zuma became South Africa’s third black president in May 2009.
Nigeria and South Africa are two of the most successful countries on the continent. Both are fully, if precariously, democratic and each is the natural leader of its region. But then comes the disappointment. Africa badly needs leadership in the face of all the external pressures it has to contend with. Apart from material assets, it has the potential to lead a ‘Rainbow Society’ as part of Mandela’s Renaissance. It has singularly failed to do this. Many South Africans saw with satisfaction the prospect of a Rainbow Society that would help eradicate all the stains of the apartheid period. Blacks and whites could share control of a country that was big enough to contain both and act as an example to the rest of the continent, even as the rise of ISIS and extreme Islam put new strains on Africa. At a time when real leadership was needed, a policy of ‘grab’ took control of ANC policymakers. A Rainbow Society meant sharing and working for the common good both of South Africa and Africa as a whole. South Africa possesses immense actual and potential economic capacity: it has huge mineral resources, can feed itself and produce staples for export. In other words, it has surplus capacity that should enable it to assist growth in its neighbours. Ideologically, economically and socially, much was expected of it.
However, Jacob Zuma has emerged as an inept president, who has been accused of maintaining his position by handing out sinecures rather than employing suitable candidates for public service. In The Independent in December 2015, journalist Justin Cartwright wrote a scathing attack upon Zuma’s incompetence (appointing and firing three finance ministers in as many days, for example) and alleged corruption and described South Africa as a failed state. Unhappily, many would accept that description of what ought to be Africa’s leading nation.
Under-development is a condition that limits progress, but to what extent could membership of the BRICs group alter this status? Progress in terms of growth in different sectors cannot be attributed to membership of the BRICs group. Retail sectors are growing by around 4 per cent a year and there is increasing investment in infrastructure. Major sources of African exports are from Nigeria, Kenya and South Africa, and there is clandestine illegal export of mineral ores from the eastern Congo. GDP figures for the BRICs countries are $2.4 trillion for Brazil, $1.8 trillion for Russia, $1.8 trillion for India and $7.3 trillion for China, while South Africa registered a mere $408 billion (figures for mid-2014). Africa should be less concerned as to whether South Africa is accepted as a BRICs member than that it is part of the world capitalist system and that it apparently accepts this status. What the other BRICs countries want is access to Africa’s resources and an opening up of its markets to BRICs penetration.
Excitement at the growth achieved is not matched by the depths of growth that would be the real outcome if BRICs membership were proclaimed to be continental. A by-product of the BRICs story is the concept of the trio of Brazil, South Africa and India acting as a separate group. According to the United Nations Economic Commission for Africa (UNECA), ‘African trade is in primary commodities with few linkages to the rest of the economy.’ China has become a major contributor to the deindustrialization of Africa and thus of its continuing under-development. In Africa Rising? BRICS – Diversifying Dependency (2014), Ian Taylor notes: ‘It hardly needs repeating that most commodity-rich African countries which are the main partners of the emerging economies on the continent, have poor records in terms of inequality, human development indices, etc.’ It is not in China’s interest to change this situation. China ideally wants to deal with governments that are dependent on selling to China what it wants. The growth of Chinese interests in Africa is the most significant development for Africa over the last fifteen years to 2015. China wants resources; Africa has them. The question is, at what cost to Africa? Meanwhile China is providing an alternate development model. For Africa, sustainability is a key growth objective, but how realistic are African expectations in relation to its Chinese aid relationship? Is a swap underway with Africa seeking dependence upon China which is replacing the old colonial powers as a guarantor of stability.
Brazil, at certain levels of development, may still claim to be a developing economy, but its relationship with South Africa is more that of a big brother than
as of equals in development terms. Most of Brazil’s exports are manufactured goods, simple technologies and food commodities. It is also a growing source of aid. India, on the other hand, is following China as an increasing source of investment. The Second Africa–India Forum Summit was held in Addis Abba in May 2011 and represented Africa’s move towards diversification and widening relations away from north–south trade. India–Africa trade for the years 2012–13 was substantial and growing.
If we return to consider the BRICs group as a whole, does South Africa, along with the other four members, represent a cohesive trading block, or is its economy too small to rank with the other big four economies (Brazil, Russia, India and China)? Does Africa’s current rate of growth warrant inclusion in the BRICs group? Growth in Africa has been accompanied by de-industrialization: manufacturing as a share of economic growth (GDP) fell from 15 per cent to 10 per cent between 1990 and 2008 and mining output still represents 70 per cent of all exports today. In the early days of independence it was generally recognized that the new nations that emerged as a result of the break-up of the European empires required external assistance to establish economic bases of their own. The United Nations set up the UN Economic Commission for Africa (a symbolic gesture) that recognized the basic weakness of inherited economic bases. UNECA represented a liberal view that the new nations required economic assistance in a historic time for Africa. It did not mean – and should not have been intended to mean – that such assistance was to be provided as a permanent addition to the budgets of new countries. In economic terms, it is true, the new nations were largely dependent upon primary exports of mineral ores and agricultural commodities, but in many cases they were only too ready to switch away from such dependence and develop manufacturing bases that would add value to the resources they possessed. There was a surge of growth in the immediate post-independence period, but too often and too readily politicians opted for the easy way to pay for development by relying upon the various forms of aid on offer. The colonial powers may have lost physical control of their African colonies, but they still laboured hard and successfully to control economic development and steer it in directions that did not infringe upon their interests. External investments in Africa were largely confined to oil and commodities and half a century after the independence era had brought high hopes of change the situation had changed little. Africa remained a vast resource base, but offered little in terms of trade and attracted little sophisticated economic investment.
The twenty-first-century scramble for Africa’s resources could be said to have been launched in 1996 when China’s leader Jiang Zemin unveiled a new external approach to Africa. The most contentious aspect – from a Western viewpoint – was the policy of ‘aid without strings’ which successfully undermined the current Western attitude to the continent. The new Chinese approach to Africa was outlined at an Africa–China forum in Addis Ababa, although it took the West some time before it realized the significance of China’s policy. China began to raise expectations in Africa as to what a friendly aid donor could achieve. Its great Asian rival India followed the Chinese example by holding the first India–Africa Forum in 2008. External attention helped Africa present itself as an investment partner and a robust economic performance over the years 2000–2011 gave some hope of a new emerging Africa. The idea of a new ‘Scramble for Africa’ at the end of the twentieth century with the Western powers (Europe and the United States) on one side and China on the other may seem like a strange rewrite of what had gone before, but realistically the competition was underway.
The West’s discovery of the importance of transparency and accountability and democracy has all been post-Cold War and trying to enforce such principles upon a reluctant Africa was never in the continent’s interest. Western aid and investment was used as a means of controlling the politics and economies of the continent to the West’s benefit. What China has done is bring a new dimension to power rivalries in Africa and render the West’s approach redundant. However, the likelihood is that China will become part of a new-old pattern of exploitation comparable to the old colonial approach and the two sides will settle down to join the scramble for Africa’s resources.
By 2015 a new generation of young business entrepreneurs for whom innovation is not a threat was entering the workforce and will most likely transform African society. The imperial framework meant that Africa could not make its own wealth, but was forced to import goods from those (imperial) powers. Africa lacked basic infrastructure except for roads and ports for the export of its resources. The private sector now holds the key to African control over its own economic development. The greater the emphasis on African capitalism, the sooner its major economies will break existing ties with the old system and make the adding of value the key to growth. The task of entrepreneurs must be to create an African form of capitalism.
New business systems are being introduced and, for example, advanced mobile payment systems to agriculture are being adopted. The capacity to transform Africa’s economic sector exists. The continent must abandon the old system resting on the extraction and export of its raw materials that has impoverished it. Moreover, if Africa is to fulfil its economic and political potential and become self-sufficient, it must do all in its power to encourage the growth of the private sector. The potential exists, but has yet to be fully developed.
NIGERIA
Africa’s other economic powerhouse, Nigeria, has recently been showing signs that it will achieve an equilibrium in both politics and economic development. The largest, most influential country in black Africa, Nigeria’s population in 2015 stood at approximately 186.9 million (making the seventh largest in the world). Average per capita income stood at $2,800. Two of the world’s great religions – Islam and Christianity – divide the country between them: 50 per cent Muslim, 40 per cent Christian, with indigenous religions at 10 per cent. Africa expects a lead from Nigeria – which sometimes it gets. Meanwhile, like the continent as a whole, Nigeria has to come to terms with China.
In the 2000s, Nigeria was China’s third largest trading partner in Africa. However, China faced an uphill task in obtaining any sizeable oil deals because the long-entrenched Western oil majors had been embedded in the market for years. In any case, the Delta War made new entrants into the region doubtful. Even so, in 2004 China passed the $500-million mark for trade in non-oil products, including agricultural commodities and timber obtained by Chinese companies working in joint ventures with Nigerian partners. In July 2005, China and Nigeria signed an $800-million crude oil sale agreement (of five years’ duration) that gave China the right to an annual purchase of 30,000 barrels of oil a day. China also won a licence to operate four of Nigeria’s oil blocks and is considering investing in sectors other than oil, including the rehabilitation of two power stations and the supply of arms for the Delta War. Marking the difference between the United States and China in their respective approaches to investment, the head of the Nigeria Investment Promotion Commission said: ‘The US will talk to you about governance, about efficiency, about security, about the environment. The Chinese just ask “How do we procure this licence?”’
If oil is not a curse, as it has often been said, it certainly appears to bring as many problems as benefits in its wake. The Chinese, hovering on the edges, found that Nigeria proved an uneasy field in which to operate. The collapse of oil prices was a disaster for the Nigerian government which depended on oil revenues for half its income. Oil has also precluded the development of other resources, including agriculture which provides 60 per cent of the country’s workforce with employment. The Delta War, as discussed earlier in this Afterword, has now been waged for more than a quarter of a century. There have been genuine attempts to resolve the differences in this conflict, the last by President Umaru Musa Yar’Adua before his death in 2010, but the war continues. Meanwhile, kidnapping, piracy and armed violence are on the increase in the Delta region, while the flow of oil has been cut back drastically.
Like many African countries Nigeria had built up debt problems, but the beginning of the new century saw a spectacular breakthrough with the assistance of aid from the IMF. Nigeria began by eliminating much of its international debts. Following the signing of an IMF standby agreement in August 2000, Nigeria obtained a debt-restructuring deal from the Paris Club and a $1-billion credit from the IMF – both contingent on economic reforms. Nigeria pulled out of its IMF programme in April 2002, after failing to meet spending in exchange rate targets, thus making it ineligible for additional debt forgiveness from the Paris Club. In November 2005, however, the Abuja government won Paris Club approval for a debt-relief deal that eliminated $18 billion of debt in exchange for $12 billion in payments – a total package worth $30 billion of the country’s global $37 billion external debt. By 2011 Nigeria had been classified as a mixed economy and, according to World Bank criteria, Nigeria had achieved middle-income status.
Nigeria possesses an abundant supply of natural resources – natural gas, coal, bauxite, tantalite, gold, tin, iron ore, niobium, lead and zinc – as well as good financial and legal networks, communications and transport sectors and the second largest stock market on the continent. The growth rate of the economy in the years 2008–2011 was 8 per cent and its international standing in terms of GDP was twenty-third (in 2015). It is the largest trading partner of the United States in sub-Saharan Africa and up to the recent collapse in oil prices supplied 11 per cent of US imported oil. Nigeria is the fiftieth largest market for US goods and a major source of foreign investment. It is the largest economy in sub-Saharan Africa after South Africa and American interest in the Nigerian market is certainly a boost to development. But petroleum remains the key to the economy, providing 40 per cent of GDP and 80 per cent of government revenues.
With all its resources, Nigeria needs to diversify and provide alternative sources of income apart from oil. It needs to rethink its strategic approach to development problems and come up with ways to make its policies more compatible with its stated object of sustainable development. Even aside from oil, Nigeria has the resources to become a major economy. The World Bank maintains that reducing poverty and increasing per capita incomes should be the centrepiece of a fair and just national policy – too many Nigerians still have to survive on the equivalent of $2 a day in a country that has such large oil revenues. Nigeria continues to be a regular recipient of US aid. In Africa Rising? Ian Taylor suggests that a genuine change is taking place in Africa, at least on the economic front, but we shall have to wait and see. Predictions of change are often little more than aspirational hopes. Africa suffers from poor trade structures, while dependency on aid or other bail-outs remain central to development practices.