Tuesday, 28 December 2010

The irresistible rise and rise of Africa-China trade

Two-way trade between Africa and China from January to November this year was worth US$114.8 billion, that is a 43.5% increase over the same period last year according to Beijing. These figures reinforce China's position as the single biggest trading partner with Africa, and one that is catching up fast with the entire European Union, an economic bloc with 25 member states.


These latest trade figures were released on 23 December as part of Beijing's White Paper on Africa-China economic and trade cooperation which argued strongly that both sides were benefiting. 'Practice proves that China-Africa economic and trade cooperation serves the common interests of the two sides,' the White Paper said, 'helps Africa to reach the UN Millennium Development Goals, and boosts common prosperity and progress for China and Africa.' 


Published by the State Council Information Office, the 29-page White Paper referred to a 'new historical starting point' in Africa-China relations which would boost trade, investment as well as the development of infrastructure and technical skills. 


Part of the White Paper can be read as a riposte to Western criticism of China's economic operations in Africa. A senior United States' official was reported to have referred to China's role as 'pernicious' in leaked diplomatic cables. But the authors insist that Beijing is willing to cooperate with other countries in Africa: 'China would like to work with other countries and international organisations to enhance consultation and coordination with African countries... and jointly promote peace, development and progress.'


Almost as important as the volume of trade is the pace of the increase: seven years ago Africa-China trade was around $10 bn. and two decades ago it was just about $1bn. The key driver is of course China's search for resources – oil, gas, copper, cobalt, iron ore, bauxite – all of which Africa has in quantum. That's clear enough from a cursory examination of the composition of trade: African exports to China are still dominated by exports of crude oil and unprocessed minerals; Africa imports mainly competitively priced manufactured goods and building services from China.


So far the pattern of China-Africa trade has mostly repeated the pattern of Europe-Africa trade. But there are some crucial differences. China has no colonial baggage in Africa, unlike Europe, and Beijing's Africa policy is unfolding at a time of rapidly growing demand for African resources across Asia. Economies such as India, Indonesia, Korea and Malaysia are growing almost as fast as China and their demand for resources is likely to mean record prices for African oil and mineral for a decade or more.


This coming bonanza from energy and mineral exports could finance an economic transformation of Africa. Africa's estimates gross domestic product of around $1 trillion in 2010 – about the same as Russia or Brazil – could double within a decade due to Asian demand. As that happens, Africa will become increasingly important as a market for goods and services and many more of its billion people will become middle class consumers.


Much will depend on how African governments negotiate the supply deals and manage the revenues. The China-Africa deals, which involve opaque countertrade and barter arrangements, will come under greater scrutiny – in the same way as the terms that Western oil and mining companies have secured in Africa. Chinese companies will also face more scrutiny on the ground from civic society activists in Africa over accountability and working and environmental conditions. 


Some African governments relish Beijing's stated policy of non-interference in local politics but civic activists and opposition politicians are less convinced, fearing it can help bad governments face down pressure from other quarters. When the manager of a Chinese-owned mine in Zambia shot some protesting workers in November, President Rupiah Banda toned down criticism of the company while his opposition rival Michael Sata berated the managers and used the incident as part of his campaign for next year's presidential elections.


Certainly, China-Africa relations are getting more important to both sides and more complex at the same time. Just as African governments have been pressurising the USA and European governments for better market access, they are making the same demands of China. They also want to process more of their exports to China. Beijing will have to address another African concern – that its growing role in African economies (mainly in extractive industries so far) neither creates many jobs nor transfers much technology. The legions of Chinese workers – both skilled and unskilled – that seem to accompany most of Beijing's big ticket projects in Africa are a big point of contention.


Some of this may be changing as China steps up investments in the mineral processing, textile manufacturing and even motor vehicle production. Some analysts suggest that Africa might become a workshop for Chinese companies as well as a market where they can test products ranging from the most basic industrial goods to really sophisticated luxury products.


For now, few Asian countries – let alone their European counterparts – can rival China's price advantage. China's ability to build infrastructure – power stations, roads, ports and railways – at such low prices explains why Chinese companies have won more than 50% of all the public works contracts in Africa. If they maintain that reputation for price and add reliability and accountability to it, the trend of fast rising Africa-China trade seems set for the coming decade.





Monday, 20 December 2010

Confidential Agenda (Week ending 26 December)


NIGERIA: PRIMARY PASSIONS

For an accidental President, Goodluck Jonathan is taking to the national political contest with alacrity. After a mini-national tour, Jonathan's campaign team have announced that 20 out of the 26 state governors loyal to the People's Democratic Party (PDP) will back his nomination as the party's candidate at its national convention in Abuja on 13 January.

That's good news for Jonathan as he battles former Vice-President Atiku Abubakar, the consensus candidate of the north, for the nomination. Neither side can afford to relax and both will focus their attention on the state governors and assemblies to win over party opinion.

And those opinions are far from settled. This week, the party is reviewing nominations for candidates for the state and national assemblies and the state governorships. The primaries for the governorships are due on 9 January, four days before the presidential primaries: so if the incumbent PDP governors win re-nomination for a second term that should help Jonathan. But a few upsets in the governorship primaries, especially in the North, could spell trouble for his campaign.

In the next month, Nigerians will also learn more about the likely presidential and governorship candidates put forward by the other parties such as the Action Congress of Nigeria and the Congress of the People. And electronic voter registration is due to start shortly after the new year. The success of that exercise will in large part determine the credibility of the national elections being organised by the Independent National Electoral Commission under Attahiru Jega.

GHANA: THE LOAN DANGER

The struggle for the good governance of Ghana's oil industry started long before the celebrations to the first commercial oil exports on 15 December.

Civic activists and opposition parliamentarians are already warning about signs of financial laxity. Their current focus is on the government move, narrowly approved in parliament in early December, to change Clause 5 of the Oil Revenue Management Bill to allow oil-backed loans. These are loans that the government takes out and then repays by shipments of oil instead of cash.

Ghana's Civil Society Platform on Oil and Gas is set against it. More doctrinal opposition comes from the IMF, which routinely disapproves of the practice and forbids many of its borrowers to contract oil-backed loans.

The IMF objects because such loans can cause debts to spiral upwards when oil prices are unstable. The use of oil-backed loans by oil-producers such as Angola, Congo-Brazzaville and Nigeria has undermined efforts for greater accountability and, even if oil prices are high, the loans attract higher than usual interest rates and the handling fees and agency arrangements take a large slice out of revenues. Vice-President John Mahama insists it will all be different in Ghana and that the government will be using oil-back credits for vital investments to improve infrastructure.

In the first test of this strategy, Accra is seeking a $500 million syndicated pre-export, oil-backed loan led by Deutsche Bank. Civic activists and MPs will be watching developments very closely in the coming weeks.

TUNISIA: THE TIGER'S ROAR

There are real tigers as well as economic tigers in Tunisia these days. The United States Ambassador to Tunis, Robert Godec, described in a leaked Wikileaks cable how 'Monsieur Gendre' (Mr Son-in-law), Sakher el Materi, has a pet tiger called Pasha which eats four live chickens a day. Materi is married to President Zinedine Ben Ali's daughter Nesrine and, appropriately, keeps most of his money in a company called Princesse Holdings.

The American Ambassador says that Materi finds it hard to understand popular resentment at the luxury, conspicuous consumption, excess and nepotism of the Ben Ali clan, known locally simply as 'The family'. The Ambassador's cables dismiss one claim – that Tunisia is a police state. Why not? Because, the cable says, 'even the police report to The Family.'

According to the cables, President Ben Ali has called on his son-in-law Materi to popularise a moderate interpretation of Islam through his radio, television and publishing enterprises. Is Materi, as Ambassador Godec noted, very devout or is he both devout and also well aware that to succeed his father-in-law he must satisfy the strongly religious presidential old guard? Whatever Materi's game plan, the leaked US cables will not have helped it much by putting it under the spotlight.


RWANDA: PARIS AND KIGALI'S NEW DIPLOMATIC ACCORD

Of course, under the constitution of the French republic, political matters and legal powers are clearly separated. But occasionally diplomatic interests challenge that principle; for example, when the French courts names six close allies and colleagues of President Paul Kagame for questioning by investigating magistrates in the case of the shooting down of President Juvénal Habyarimana's plane on 6 April 1994, the eve of the genocide.

The case has become a particular mission for Jean-Louis Bruguière, the former anti-terrorist prosecutor in Paris. The most prominent of the men to face questioning are Defence Minister James Kaberebe and the Chief of the General Staff, Colonel Charles Kayonga. A formal arrest is normally required in such cases, but the interviews were arranged in Burundi, so removing that potential for embarrassment. The two French pilots and a flight attendant, along with Burundi's President, Cyprien Ntaryamira, and seven others also died alongside Habyarimana after surface-to-air missiles struck the private jet.

When France issued arrest warrants for these six in 2006 Rwanda broke off diplomatic relations, but now the two countries are co-operating. An official statement fro Kigali welcomed the latest enquiry as a way of clearing the names of the accused and said the case was originally centered only on 'political manipulations by people interested in destabilising Rwanda.' President Nicolas Sarkozy visited Rwanda in February, the first visit by a French President since 1975 and although the case has been a small headache, it wouldn't go away. The latest moves sound like an accommodation between the two countries and Bruguière's retirement must have helped.

SOUTH AFRICA: TARGET DE BEERS

Just as South Africa starts its long summer holiday, reports have emerged of a looming corporate multibillion dollar battle – for control of that family-run diamond conglomerate, De Beers. This time the predator is Anglo-American which already owns 40% of the firm which has remained a private company. Botswana owns 15% and the Oppenheimer family own 45% (their stake held through an entity in Luxembourg is valued at between US$3-5 billion).

Anglo, which itself has been under takeover pressure in recent years, may favour buying out the Oppenheimer family and then making De Beers part of its own organisation. Since the demise of apartheid in South Africa, the management of Anglo and De Beers have tried to untangle their system of opaque cross-holdings and myriad overseas subsidiaries.

In the late 1990s, Anglo transferred its main stock exchange listing to London and both companies have concentrated their efforts on the international markets and are doing less in South Africa. Indeed South Africa has lost substantial tax and other revenues following this move. Policy-makers in President Jacob Zuma's government will be watching this latest twist with much interest: the companies remain hugely important employers in South Africa and their fortunes partly reflect the health of the national economy.

Tuesday, 14 December 2010

Confidential Agenda (Week ending 19 December)

KENYA: Naming names or no names
Kenyans eagerly await the announcement due at 17.00 Nairobi time on 15 December from the Chief Prosecutor of the International Criminal Court, Luis Moreno Ocampo, about its efforts to investigate and prosecute the perpetrators of the post-election violence in 2008. Many believe that Ocampo will name the six politicians and business people that he deems most responsible for the violence that killed more than 1500 people and displaced another 300,000.

But we hear some senior Kenyan politicians have made representations to the Court, requesting Ocampo not to make public the identities of the suspects until the cases have been considered by the pre-trial chamber – that is the judges who decide whether the six should be formally charged by the ICC. If Ocampo does go ahead and name the people he holds responsible for the killings, expect a sharp reaction from their supporters in Nairobi and beyond. Kenya’s security forces will be on high alert on 15 December.

COTE D'IVOIRE: How many divisions has the UN?
The stand off between rivals Alassane Dramane Ouattara and Laurent Gbagbo – both claiming to have won the presidential election and now forming rival governments – looks set to drag on. The machinery of international outrage at Gbagbo’s attempts to steal the election is creakily gathering momentum. The critics are all the more effective because they are led by the regional Economic Commission of West African States and backed up by the African Union. And then the United Nations Security Council endorsed the independent electoral commission’s announcement of Ouattara’s victory.

However, it could take more than the opprobrium of these worthy councils to shift Gbagbo. Tensions are mounting and local rights groups report attacks on Ouattara's supporters in Abidjan. Gbagbo’s cheerleaders are calling for action against Ouattara and his protectors in the UN force. If violence does break out, the terms of engagement of the more than 9,000 blue-helmeted police and soldiers serving the UN mission will have to reviewed. This is shaping up to be the toughest test to date of the African Union and the UN’s willingness to defend free elections.

ANGOLA/SOUTH AFRICA: Dos Santos visits the comrades
Angola's President José Eduardo dos Santos arrives in South Africa on Tuesday 14 December for a state visit to consolidate his friendship with President Jacob Zuma and to sell some oil and gas to Africa’s biggest economy. Dos Santos prefers Zuma to ex- President Thabo Mbeki. Indeed, some say Luanda backed him financially in the battle for the South African presidency. Two years ago Zuma visited Luanda in what looked like a state visit – but for the minor detail of Mbeki still being President.

Expect much glad-handing, announcements of undying fraternal comradeship and plenty of energy deals. Angola and South Africa’s Petro SA are joining forces to build a 200,000 barrel-a-day oil refinery in Lobito, and there is bold talk of a gas pipeline linking Angola to Namibia and South Africa. With good relations between all three countries, and Angola’s substantial gas reserves, this could provide a well-priced solution to South Africa’s chronic electric power problems.

WESTERN SAHARA/MOROCCO: Back to the table without a road map
On 16 December, the Polisario Front and the Kingdom of Morocco resume informal talks about a solution to the problem of self-determination for Western Sahara under the auspices of the Personal Envoy of the Secretary General for Western Sahara, Christopher Ross. The last round, in New York in November, made no real progress and was quickly followed by Polisario protests in Laayoune and harsh reactions from the Moroccan military that led to several deaths. The progress of the talks has not been affected by the outbreak of violence and Ross talks hopefully about a converging of positions.

There is a fairly big gap, however. Morocco wants only ‘autonomy’ for Western Sahara; Polisario demands that the promised referendum be held with independence as an option on the ballot paper. Neither side has produced any proposals about how those huge differences might be navigated.

SOMALIA: Doubts about Kenya’s military bid
As talk of mercenaries being recruited to fight in Somalia reverberates around East Africa, the UN’s top Relief official Mark Bowden painted a grim picture of conditions in the country after 20 years of crisis. The toll includes 1.46 million people chased from their homes, continuing food supply problems and expectations of more drought. To that must be added the prospect of more violence.

The US diplomatic cables released by Wikileaks included reports that Kenya was trying to mount an armed intervention over its Somalia border, apparently with China supplying the weaponry. Until now, Kenya has studiously stayed out of regional security efforts in Somalia, leaving Uganda’s President Yoweri Museveni to lead the charge against the Islamist insurgents, Al Shabaab. Nairobi’s reluctance to get involved was based on fears that an intervention would be socially divisive (there are hundreds of thousands of Kenyan Somalis) and that Kenya would be an easy target for supporters of Al Shabaab seeking revenge.

Monday, 6 December 2010

Confidential Agenda week ending 12 December

CÔTE D’IVOIRE: Laurent Gbagbo against the world

This week diplomats and their organisations are ratcheting up the pressure on Laurent Gbagbo to accept that he lost the second round of the presidential election on 28 November and hand power to his rival Alassane Ouattara. The regional Economic Community for West African States (Ecowas) is meeting on 7 December in Abuja, following a strong statement from its Chairman, Nigeria's President Goodluck Jonathan, in support of Ouattara who was announced winner with 54% of the vote by the Commission Electorale Indépendante. Gbagbo's allies in the constitutional council claimed unconvincingly that electoral fraud in the north invalidated Ouattara's win.

Along with Ecowas, the United Nations Secretary General Ban Ki-moon and the African Union have all endorsed Ouattara's win. All these organisations are trying to cut Gbagbo's room for manoeuvre and force him to compromise.

Yet so far the crisis has worsened with both sides claiming the presidency and naming their own parallel governments. Much hope is resting on former South African President Thabo Mbeki, whom the African Union has despatched to Côte d'Ivoire to mediate between the two rivals. Although regarded as sympathetic to Gbagbo in the past, Mbeki has referred to Ouattara as President.

Mbeki's approach to Gbagbo, according to a veteran journalist formerly based in Abidjan, is to 'lead the madman with the bomb out of the cinema'. He compared the situation to one of Congo-Kinshasa's periodic crises when oppositionist Etienne Tshisekedi demanded that Mobutu Sese Seko should be placed 'hors d'état de nuire' – that is rendered harmless.

Many are preparing for the worst such as the International Criminal Court's Deputy Prosecutor, Fatou Bensouda, who reminded all sides that Côte d'Ivoire has been a signatory of the ICC since 2003 and called for restraint: 'All reported acts of violence will be closely scrutinised by the Office.'


SOUTH AFRICA: Trades unions warn Walmart on recognition

South Africa's trades unions are warning the United States' Walmart that they will insist the company, which last week announced a US$2.2 billion purchase of 51% of the equity of local supermarket chain Massmart, respects trades unions' rights in all wage bargaining negotiations. However, Walmart, which owns 55 brands in 15 countries, vigorously opposes union organisation and has been sued in the USA for sexual, racial and pay discrimination. Concerned about such conflicts, South Africa's Minister for Economic Development Ebrahim Patel has set up a panel to review the effect of Walmart's entry into the local market.


UNITED STATES: The cables that failed to shock Africa

The United States' diplomatic cables released by Wikileaks have produced few gasps of surprise in Africa, although a few oppositionists in countries such as Sudan worry that reports that they talk to US diplomats might endanger their safety.

So far we've heard that US diplomats regard Egypt's President Hosni Mubarak as not committed to free elections, that Kenya's government is extremely corrupt, Zimbabwe's President Robert Mugabe is a wily politician and his opponent Morgan Tsvangirai is inexperienced.

Some cables offer more elucidation such as the US view of French President Nicolas Sarkozy's failure to rein in the institutional corruption of France-Afrique after reforming minister Jean-Marie Bockel was ousted in 2008 when he incurred the wrath of the late President Omar Bongo Ondimba.

'The Bockel case is significant because it shows that killing France-Afrique is easier said than done; that France-Afrique has a life of its own, with vested interests on the African side that the French perhaps underestimated when deciding on the new policy; that African leaders can manipulate France-Afrique for their own ends as well as the French can or could; that a clever, skillful leader like Bongo can fight far above Gabon’s weight and humble a French politician of Bockel’s stature; and that France should take care in not trifling with Africans (which is what Sarkozy said in Dakar that France would no longer do). Bold talk of signing France-Afrique’s death certificate ended with Bockel’s departure and has not resurfaced. Bongo made his point.'


UGANDA: Kampala and Tullow join forces in Congo-Kinshasa

Ireland's Tullow Oil seems to have got President Yoweri Museveni's government back on side following its negotiations over tax payments with Kampala. We hear that Tullow's chief executive Aidan Heavey is working with Uganda's oil minister Hilary Onek to help the company's case in a dispute over ownership of its oil blocks in Lake Albert, on the Congolese side of the border.

Formerly chief critic of Tullow, Onek now seems to favour a rapprochement perhaps swayed by the investment involved. With its partners, France's Total and the China National Offshore Oil Corporation, Tullow has put together a financing package of around US$6billion for an oil refinery in western Uganda and a pipeline to the Kenyan coast.


SOMALIA: Who is Puntland picking a fight with?

We hear that the United Arab Emirates is the mystery Middle Eastern government financing the training and equipping of a 1000-strong anti-piracy militia in Puntland, the semi-autonomous state in northern Somalia.

Puntland President Abdirahman Mohamed Farole says the new force will hunt down pirates on land in the Galgala mountains. Although the pirates operate along Somalia's long coastline, the mountains are home to Mohamed Said Atom, whom the United Nations accuses of supplying arms to Al Shabaab, the Islamist insurgents.

Previously accused of benefiting from piracy, the Puntland regime seems to have joined the battle against the pirates and Shabaab. That may have something to do with reports of vast oil and gas reserves along its coastline and calls for better maritime security by would-be prospecting companies.


ZIMBABWE: ZANU-PF prepares the army for elections

On 15-18 December, the Zimbabwe African National Union-Patriotic Front will hold its congress to set out its plans for next year's national elections. Party Chairman Simon Khaya Moyo will campaign for 'total control of our resources through indigenisation and empowerment'. But Moyo was less forthcoming on the party's military plans for the polls. Our correspondents in Zimbabwe report the launching of 'Operation Boys On Leave', which provides for the granting of leave to army officers allowing them to return to their home towns and campaign for the party. Moyo said he had heard nothing of such plans. Yet a journalist in Bulawayo was arrested last week for suggesting that 'war veterans' were being recruited into the local police.