Emerging partners create policy space for Africa

Helmut Reisen, Jean-Philippe Stijns 12 July 2011

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Western politicians have watched the increased presence of emerging countries in Africa with much suspicion. Insinuations run from emerging countries – above all China – bringing down governance standards in Africa to them re-indebting, de-industrialising, and cornering African countries into the production of commodities while only enriching the elites. On a recent Africa tour, US Secretary of State Hillary Clinton warned Africa to beware of “new colonialism” as China expands ties there and focus instead on partners able to help build productive capacity on the continent. Mrs Clinton must have ignored recent empirical evidence. But her statement reflects a widespread perception (Manning 2006; Naìm 2007; but see Bräutigam 2009).

We are now moving beyond the “just guessing” stage of reflection on the effects of emerging countries on Africa. The 2011 edition of the African Economic Outlook (AEO) gathers hard evidence on how emerging countries have evolved from relatively marginal to first-rank trading partners in Africa within the span of just a decade (Chapter 6, "Africa and its Emerging Partners"). It documents that economic cooperation between Africa and its emerging partners is more than just China, more than just trade, and increasingly more than just commodities.

The Outlook defines “emerging partners” as countries that were not members of the club of Western donors – i.e. the OECD Development Assistance Committee – at the turn of the millennium. Leading the pack are China, India, Brazil, Korea and Turkey, not only in terms of the scale of their economic engagement with the continent but also in terms of the breath of countries and sectors in which they are active. Here is some noteworthy evidence (China bashers take note…):

  • Trade volumes: Between 2000 and 2009, Africa's total trade more than doubled in nominal terms from less than $247 billion to $629 billion. During that period, the share of Africa’s trade volume conducted with the emerging markets grew from approximately 23% to 39%. While China represented less than 5% of Africa’s trade at the start of the decade, by the end of the decade it had trebled to nearly 16%. China's share of Africa's trade went from less than one-third of the US share to surpassing it in 2009. All the emerging partners' trade summed to less than half of the European Union's trade with Africa in 2000. By 2009, their share was almost equal and, on current trends, they will soon overtake the EU. Still, Africa's trade volume with traditional partners has doubled in nominal value; it is only decreasing in importance in relative terms and because of Africa’s very fast growth of trade with emerging partners.

Table 1. Africa’s exports of manufactured products, by destination

Source: OECD Development Centre calculations based on COMTRADE data.

  •  Resource dependence: The rise of Africa’s emerging partners has been widely analysed in terms of a scramble for African resources. While rising oil and metals exports during the 2000s make it the dominant feature of Africa’s trade over that period, African manufactured exports – including machinery, transport equipment and processed commodities but excluding processed foodstuff (SITC 6 – 9) – approximately doubled in nominal value between 2000 and 2009. Most of the increase in manufactured exports was absorbed by the emerging partners, the smaller ones in particular. Emerging partners play an increasingly important role in helping Africa diversify its production toward manufactured exports, just while US and EU imports from Africa have been turning even more commodity hungry (Table 1). Between 2000 and 2010, about 75% of China’s FDI to Africa went to oil-exporting countries. For FDI from OECD member-countries this ratio is even higher, at 85%. By implication, FDI from emerging partners is actually less concentrated in oil-exporting countries than that of traditional partners.
  • Development cooperation: Traditional partners have focused cooperation efforts on poverty reduction, social sectors, and governance in the recent two decades. The country notes of the African Economic Outlook (AEO) emphasise that the cooperation programmes of emerging partners complement this sectoral focus by traditional partners. Emerging partners, not just China, seem to focus more on infrastructure and other structural bottlenecks. It is more than just trade. New partners boost new sectors and finance mechanisms. China, India, and Brazil in particular offer alternative modalities to finance development. These emerging actors blur the borders traditionally drawn between investment and aid; trade and aid; and between private and public sector involvement. Aid is only one element of their engagement toolbox, reflecting striking differences in engagement philosophies between traditional donors and emerging partners. Western “charity” focuses on “assistance” seeking poverty reduction. The “Asian” model for co-operation emphasises the partner’s potential and seeks mutual benefits. In fact, it quite resembles the way Japan once practiced cooperation with China.
  • Their diversity is an opportunity for Africa, as they offer broader sources of finance, more appropriate expertise, technology and training, low-cost and speedy infrastructure, and cheap generics, machinery, and consumer goods. China has a perceived comparative advantage in building infrastructure, India in providing cheap generics as well as skills and services, and Brazil in helping agriculture and agro-processing. To Africa, the emerging partners offer new opportunities to trade goods, knowledge, and models. And that is how they are mostly perceived, according to a stakeholder survey in 40 of the 51 countries covered by the Outlook.

Figure 1. Perceived comparative advantage

Source: AEO 2011 stakeholder survey (AfDB, OECD, UNDP and UNECA 2011).

The question put to government officials, business people, and civil society representatives was: Who among Africa’s economic partners are typically most effective at meeting the development objectives of the country? Emerging partners are perceived to be more effective than traditional partners and multilaterals at providing infrastructure, including water, transport and energy and at helping with innovation. Traditional partners are perceived as superior for governance, above all. These results are striking given all the efforts that traditional donors have put into these sectors.

Most importantly, African governments have won “policy space”, or in plain English, the ability to make decisions to pursue their self-defined development objectives, not those of their donors, after decades of quasi-unilateral dependence on Western donors. And since Africa is prone to shocks, it is safer with a more diverse set of partners and clients.

To be sure, these new partnerships do come with challenges for African countries. African authorities need to ensure that they get their fair share of the corresponding benefits; that these are shared across society; and that competition play in favour of African countries rather than pit themselves against each other. A small African country on its own cannot be expected to have a negotiation of equals with a large emerging country. But thanks to improving cross-border infrastructure, African countries can now foster regional co-operation and economic integration, the next source for sustainable development. Greater transparency on behalf of the emerging partners would help to dispel the myths that some Africans and too many donors in Western capitals harbour about Africa’s emerging partnerships.

While there is no evidence to suggest that the new players are hindering Africa's industrialisation, debt sustainability or governance, Africa needs a clear engagement strategy. Several countries have begun formulating such strategy for engaging emerging powers: Namibia’s engagement strategy is formalised and the assistance provided by emerging partners is integrated into the national development plan; similarly, Cameroon’s engagement strategy with emerging partners is framed within the country’s development vision for 2035. In Morocco, Chinese operators are actively encouraged to invest in the country to balance Chinese imports and ease the commercial deficit; in Cape Verde, the government plays on the full range of partners to modernise productive capacity and infrastructure; in Equatorial Guinea, officials negotiate in Chinese with their Chinese counterparts.

References

African Development Bank, Organisation for Economic Co-operation and Development, United Nations Development Programme, United Nations Economic Commission for Africa (2011), “African Economic Outlook 2011”, www.africaneconomicoutlook.org

Brautigam, D (2009), The Dragon's Gift: The Real Story of China in Africa, Oxford University Press.

Manning, R (2006), “Will ‘Emerging Donors’ Change the Face of International Cooperation?”, Development Policy Review, 24(4):371-385.

Naim, M (2007), “Rogue Aid”, Foreign Policy, March/ April.

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Topics:  Development International trade

Tags:  China, Africa, India, emerging markets, South Korea, Brazil, Turkey

Helmut Reisen

Head of Reseach, OECD Development Centre

Economist, Africa & Middle East Desk, OECD