Tuesday, March 26, 2013

More and more...  

Africa looks ready to take off to...somewhere. Obscure items that caught my eye.
IT HAS been an astonishing past year for gas discoveries in east Africa. Large finds off the coasts of Mozambique and Tanzania have turned those countries into major players in the world gas market. A more modest discovery off Kenya has led to optimism that richer finds are on the way. The flow of dollars into the region should help finance essential development and lead to a decline in expensive fuel imports. But with the benefits comes the threat of damaging side effects if the countries do not manage their buried treasure carefully.
One of the risks these countries now face is “Dutch disease”, a term coined by The Economist. If a large influx of foreign money pushes up the value of local currencies, traditional exporters might struggle to remain competitive, despite their access to cheap and reliable gas. Mozambique’s government plans to raise $6-8 billion a year in gas exports, which would treble the country’s export volume and could put pressure on its traditional exports.
According to Antonio Franco, a Maputo-based representative of USAID, agriculture is the most likely sector to lose out. “Niche markets, such as shrimps, will be less affected as they have high profit margins. But producers of basic commodities such as corn, cotton and cashew nuts could face big problems because they compete on price.” This is particularly problematic because three quarters of the population works in agriculture. [More]
I'm not sure this presents a huge problem for ag developers like Aslan (from my former posts) since they are looking at the domestic market (mostly feed supply). A strengthening currency would not pressure interior prices as it would those operations aiming at exports.

Meanwhile, the Chinese have found their lack-of-charm offensive isn't working all that well.
But in recent weeks, two prominent Africans have wondered aloud about their own expectations. “We have had some bad experiences with Chinese companies in this country,” Botswana’s president Ian Khama said in a recent interview with the Johannesburg-based Business Day newspaper.
In the future, “we are going to be looking very carefully at any company that originates from China in providing construction services of any nature,” he added, saying other African leaders shared his views. 
Mr. Khama blames the electricity cuts in his country on a Chinese firm’s slow work to build a power plant. The governor of Nigeria’s Central Bank, Lamido Sanusi, has a broader worry.
“China takes our primary goods,” such as oil and minerals, to fuel its economic boom “and sells us manufactured ones. This was also the essence of colonialism,” Mr. Sanusi wrote in a recent opinion article published in the Financial Times. “Africa is now willingly opening itself up to a new form of imperialism.” 
Even some Chinese scholars are nervous that the behavior of Chinese companies in Africa – often accused of poor environmental and labor relations standards – will sour China’s relationships.
“China’s main challenge is to demonstrate that it is not repeating the old practices of the European powers,” warns Pang Zhongying, an Africa specialist at Renmin University in Beijing. “China has to match its deeds to its words … or Sino-African relations may have no future.” 
Oil and coal accounted for 50 percent of Chinese imports from Africa last year. Minerals and other raw materials made up the bulk of the balance. In return, China exported mainly electronics, machinery, spare parts, and consumer goods. 
Though the pattern of China’s trade with Africa does indeed replicate colonial patterns, says Professor Brautigam, “China is just reacting like everyone else to what they find in Africa – raw material exporters,” because African countries themselves have failed to industrialize. [More]
When I was in SA, the stereotype of Chinese immigrants was the convenience store owner. The bigger problem is the addition of yet another hard-to-assimilate ethnic population into a roiling multicultural society.

All of these reports - good and bad, however suggest to me one optimistic development: money is being made in various ways and increasing amounts. When this happens, natives take notice and learn. It won't be pretty or particularly honest, but it is a step up from a conviction that subsistence living is all there is.


Anonymous said...

As you have said before, China is all about China and the Africans should be cautious and suspicious of their motives and track record. The Chinese don't respect intellectual property rights either as the U.S. has seen in "flash drive bandits" trying to sneak out of the country.

Bill Harshaw said...

Buried somewhere in today's NYTimes is the surprising statement: Malaysia has invested more money in Africa than China. That's got to be in error, but it was in the Times!