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Friday, 06 December 2019

More opportunities for Africa

This week’s Africa-Russia Summit chaired by Egypt and Russia in Sochi on the Black Sea marks the return of Russian investment to the African continent, writes Attiya Essawi

Attiya Essawi, Tuesday 22 Oct 2019
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Since Egypt became president of the African Union (AU) in February this year, Cairo has said that its priorities at the helm of this pan-African organisation are socio-economic development through providing jobs for African young people and improving the industrial and agricultural systems on the continent to achieve food security and bolster cooperation between the AU and international, regional and local partners for peace and development.

Egypt will work on building cultural and civilisational bridges between the peoples of Africa and on the AU’s institutional and financial reform.

In April, President Abdel-Fattah Al-Sisi told Russian Foreign Minister Sergei Lavrov that Egypt’s priorities in Africa were development, improving infrastructure, and regional and economic integration by implementing the AU’s 2063 Development Agenda. At the Tokyo International Conference on Africa’s Development (TICAD) in August, he also stressed the importance of technology transfer and support for programmes to enhance Africa’s capabilities, develop its human resources, and provide it with the tools to reach the goals of the Development Agenda and the 2030 Sustainable Development Plan.

Al-Sisi called for further scientific and development cooperation to take advantage of the continent’s natural resources and diversify its energy sources by supporting renewable and new energy projects that would help to alleviate some of the environmental effects of climate change.

He called for a focus on three fundamentals to expedite transforming Africa into the economic partner we all want to see. The first is to develop Africa’s infrastructure through trans-border projects such as connecting Cairo and Cape Town in South Africa by land and an electrical grid between the north and south of the continent. He mentioned connecting the Mediterranean Sea with Lake Victoria and other rail, road, and renewable energy projects.

The second is to activate all parts of the African Free-Trade Zone, which will slash the prices of many commodities and increase the continent’s competitiveness on the global stage, as well as attract investments in industry and the modernisation of the continent’s economies. The third is the top priority of providing more jobs and labour-intensive work opportunities, especially for young people. This would require mobilising national and international investments, attracting capital and localising technology.

Al-Sisi called on the private sector and multinational firms to invest in Africa with its open markets and rich opportunities and wealth. He also asked international, African and regional financial institutions to provide financial guarantees to build the continent’s capabilities and provide the best conditions to fund development efforts while keeping in mind the particularities of the African countries.

The first Africa-Russia Summit, held in Sochi on the Black Sea from 23-24 October and co-chaired by President Al-Sisi and Russian President Vladimir Putin, is another step on the road to the international support that Egypt has called and worked for with various donor countries in order to secure assistance to the African countries in achieving the desired economic development and raising the living standards of their peoples.

Russia is a technologically developed country, and it has decided to boost its influence in Africa and open new markets for its products. This will open the door for the African countries to ask for more assistance, similar to what China, Japan, France, the EU, India, Turkey and the US are already providing, as they compete for the vast markets of the continent representing some 1.2 billion consumers and its abundant raw materials representing 40 per cent of the world’s natural resources.

If the African countries are truly able to take advantage of these things, they will reap immense benefits for their peoples.



FIRST AFRICA-RUSSIA SUMMIT: This is the first summit of its kind btween Russia and the African countries, and it was attended by more than 40 African leaders and more than 300 Russian and African businessmen attending the Economic Forum held at the same time.

The latter is expected to see the signature of several key trade, economic and investment agreements in a variety of vital sectors. Moscow abandoned most of its projects in Africa and stopped its aid programmes in the 1990s after the collapse of the former Soviet Union, and it is now looking for new partners to revive old ties. It has proposed an initiative for cooperation with the African countries in specific fields that will benefit both sides, especially in managing natural resources, opening energy markets, investing in African oil and gas fields, mining and mineral production, and other projects.

Russia is also helping to promote the nuclear industries and the peaceful use of nuclear energy and nuclear cooperation with some 20 African countries, including Egypt. The latter has signed an agreement with Russia to build a nuclear plant, representing an investment of some $29 billion. Russia’s need for African commodities will also be met by the new cooperation agreements, including for rubber, marine products, cocoa, coffee and tea. These will help to boost security and military cooperation, which will help the African countries to keep their citizens safe while boosting Russia’s weapons industry.

When Putin came to power in Russia in 1999, he restored diplomatic, economic and military relations with the country’s former allies and sought to build new political alliances. He visited Algeria, South Africa and Morocco, while then Russian prime minister Dmitry Medvedev toured Angola, Namibia and Nigeria to promote trade projects. Moscow also provided weapons and military trainers to the Central African Republic and Cameroon and signed military agreements with Congo-Kinshasa, Burkina Faso, Uganda and Angola, while cooperating with Sudan on nuclear energy and working with Zimbabwe and Guinea in the mining industries. However, its investments and assistance still remain small compared with the Chinese, European, US and Japanese footprint on the continent.

Russia sends some $400 million in aid annually to Africa, 60 per cent of which goes through international organisations such as the World Food Programme and the UN High Commission for Refugees, with the remaining 40 per cent being in the form of bilateral cooperation including assistance in the sectors of education, healthcare, agriculture, environment and energy. It has large investments in South Africa’s gold mines, gas and diamonds in Namibia and Angola, coal in Côte d’Ivoire and Ghana, and oil and gas in Algeria. It increased its trade with Africa by 17 per cent last year to reach $20 billion, 30 per cent of which was with Egypt alone.

Africa is in dire need of economic and development aid to develop its economies, which cannot sustain its growing populations at present despite their immense natural wealth that it still exports too cheaply because it does not have the resources or the technology to take proper advantage of them. This is why it is so important for the African countries to cooperate with Russia and other world powers to propel the continent’s economies forward and to transform them from being chiefly reliant on agriculture to being more reliant on industry and technology. This will change the lives of millions of poor people on the African continent, provide jobs for millions of the unemployed, and improve the sometimes still deplorable education, health and other services on the continent.

According to the World Bank’s bi-annual report “Africa Pulse”, issued on 9 October, Africa will likely be home to 90 per cent of the world’s poorest people by 2030, and the continent does not have enough funds to invest in its own poverty reduction programmes. The World Bank revealed in its earlier annual Africa poverty report, issued on 19 March, that half of the population of Sub-Saharan Africa lives below the poverty line, and the poorest countries in the world are African, with one exception.

More than one quarter of the world’s hungry now live in Africa, where one fifth of the population suffers from malnutrition. Some 25 million people are believed to be infected with HIV, and they are in urgent need of proper health facilities and the medicine needed for treatment. The World Bank adds that since the early 1990s the world has made great progress in reducing overall hunger rates from 36 per cent to 10 per cent, but Africa’s population has climbed from 278 million to 461 million during the same period.

Experts at the US Melinda and Bill Gates Foundation, which funds many development and healthcare projects in Africa, have predicted that 44 per cent of the world’s hungry in 2050 will reside in only two African countries: Nigeria and the Democratic Republic of Congo. This is despite the fact that these are the two richest African countries in terms of natural resources.

The World Bank has explained the rise in poverty, despite economic growth, on the continent, as being due to several factors. First, fast population growth is expected to double the continent’s population by 2050, and second, wars and armed conflicts in Africa now account for half the conflicts in the world, frustrating agriculture, increasing the number of refugees, and impacting the environment and encouraging flooding and drought that leads to crop loss. Third, disease spreads quickly in Africa because of the lack of basic healthcare facilities, and this leads to fewer workers and drops in food production. The continent also has defective agricultural infrastructure, including roads, irrigation systems, storage facilities, and agricultural supplies.

According to the World Bank, the lack of political stability in Africa is a main reason why many development plans have failed. Africa will need four or five decades before its political systems are stable enough to reap the rewards of economic growth and broaden their benefits in a sustainable fashion, it says.



CHALLENGES AHEAD: Other reports indicate that Africa suffers from some of the greatest poverty rates in the world, with some 47 per cent of the total population living in poverty and 30 per cent suffering from hunger and malnutrition. Some 70 per cent of people are unemployed or not formally employed in the Sub-Saharan African countries.

Africa’s debts have reached more than $400 billion, and servicing these takes up between 35 and 60 per cent of GDP, while most of the African countries’ citizens live on as little as $1.25 per day. Unemployment among African young people stands at around 60 per cent, only 25 per cent of the population have permanent jobs, 70 per cent live without electricity, 65 per cent without potable water, and 200 million suffer from malnutrition. Africa’s labour force will also increase from 180 million in 2006 to 300 million by 2050. These things will require a new Marshal Plan to prevent a brain drain from the continent, since 56 per cent of those qualified and needed for development projects emigrate to Europe, the US and Canada because job opportunities at home are limited.

Thousands of Africans die of hunger even though the continent is home to 60 per cent of the world’s agricultural land, with much of this not being used due to a lack of resources. For example, the plains extending from Senegal in the north to Angola in the south (1.5 billion feddans) could produce enough food to meet the world’s needs twice over, but only 10 per cent of this land is currently being used. In South Sudan, only five per cent of 75 million feddans are being used, while only 30 per cent of Uganda’s 35 million feddans, and even more in Sudan and Ethiopia, is being used.

If the developed countries were to cooperate with the governments of these countries to grow food on even part of this land, not a single African would starve, and it could provide food for millions of people in other parts of the world.

The World Bank has warned that 43 million Africans will be subject to extreme poverty in the coming 15 years due to drought and the rising cost of food if some $16 billion in aid is not sent to them to assist in facing the effects of climate change that will impact Africa. This is so even though the continent only produces three per cent of global greenhouse emissions.

Although 40 per cent of the world’s natural resources are found in Africa, according to the Royal Institute for International Affairs (Chatham House) in London, the lack of local investments, representing no more than 15 per cent of the GDP of the African countries, do not take advantage of these resources in ways that can achieve the needed economic and human-resource development.

There needs to be more outside investments, financial assistance and technology. Africa is sitting on $124 billion barrels of oil, or 12 per cent of the world’s reserves, and 500 trillion cubic feet of natural gas, or 10 per cent of the world’s reserves. It produces 90 per cent of the world’s platinum, 50 per cent of its gold, and 40 per cent of its diamonds. However, it only receives 1.2 per cent of global investments worth $650 billion compared to 19 per cent of global investments in Southeast Asia and 28 per cent to the developing countries in general.

Africa receives direct assistance, loans and investments worth $134 billion annually, producing an output of $192 billion, but $35 billion of these investments are believed to be lost in corrupt deals. The continent only benefits from 1.6 per cent of its potential water resources despite deficiencies in agricultural production and the need to import the majority of its food, since it incurs $48 billion in crop losses due to the bad condition of roads and the lack of storage facilities and inability to reach markets.

According to reports by specialised organisations, Africa needs sustainable development plans worth $2.5 trillion annually, $150 billion of which is for infrastructure alone, to address the expected population growth to 2.5 billion people by 2050, the majority of whom will be young people. These plans will not be possible without partnering with the private sector and international financial institutions, and if they are not financed those who are left behind may protest or even resort to violence.

Only seven per cent of the potential 300,000 Megawatts of electricity needed for African development is currently available, which means large investments are needed. Only 25 per cent of the 800 million people in Sub-Saharan Africa have mains electricity, and at present the electricity production of these countries combined is no more than that of Spain, which has a population of 46 million.

Regarding the agriculture that will be needed to end the famines that have killed millions of Africans and still threaten the lives of 70 million Africans today, the US aid agency USAID has said that 60 per cent of the world’s agricultural land lies unused in Africa, which also only uses 1.6 per cent of its water resources, compared to Asia’s use of 14 per cent. The UN Food and Agricultural Organisation has said that Africa has great potential to achieve development if its farmers are given more assistance in growing and marketing their crops.



OBSTACLES: There are many obstacles to investing in the African countries, most notably poor or non-existent infrastructure.

Rampant corruption in some countries allows corrupt officials, particularly those working in the investment sector, to pocket sums that sometimes reach 25 per cent of the total capital cost of a given project. This causes foreign investors to hesitate before taking such risks. Many African countries also have laws that obstruct investment and limitations on transferring profits overseas, along with rudimentary banking systems, inflated tariffs on imported equipment, a lack of security, and an absence of the genuine democracy needed for stability to take root. There are also ethnic, tribal and religious wars within some countries or across borders with others, causing investments to be unsafe.

A report by African and British civil-society groups has revealed that Africa receives some $134 billion in aid, loans and direct foreign investment annually, including the $35 billion siphoned off by corrupt officials. A survey published in 2004 showed that the African countries also possess more than $200 billion in overseas investments that their governments have been unable to retrieve. According to a UN report, corruption costs the African peoples some $60 billion annually, even as the number of African millionaires has increased by 145 per cent over the past 15 years compared to global rates of 73 per cent, according to New World Wealth, an organisation which gauges the number of wealthy people around the world.

All this must change if Africans are serious about achieving the desired development with worthwhile foreign assistance. In order for conferences on the continent’s development to be fruitful, the goals of these gatherings must be acted upon and African governments must take coordinated and serious steps to create the necessary climate to implement what needs to be done. If the investment-hostile environment in many African countries does not change, these conferences, together with official visits and the pleas of humanitarian-aid groups, will be futile.

The investment climate will only improve if African governments work diligently to end corruption, reform economic structures, implement real development plans that create jobs for the millions of the unemployed, and convince the brains needed for development not to leave the country. They must also respect human rights and stop harassing the opposition and stirring up ethnic conflicts in countries teeming with tribes and ethnicities. They must not allow cronyism to persist to the benefit of a ruler’s tribe or ethnic group at the expense of others or start wars with the outside to distract people from difficult lives.

Yet, there are success stories in Africa. Some countries have succeeded in capitalising on international competition to their advantage, even if the majority have not due to domestic instability, frequent military coups, various conflicts, a lack of the clear vision needed for development, a lack of natural resources, and corruption that discourages foreign and local investors. Donors’ national interests and policies may also act as obstacles to African development.

Egypt is one of the lucky countries on the African continent that has succeeded in capitalising on the available opportunities. It has received $6 billion in Russian investments, $15.1 billion from Europe, $7 billion from China, $2.25 billion from the US, $3 billion from India, and $880 million from Japan.

Ethiopia and Angola have achieved an economic growth rate of over 10 per cent of GDP with the help of China, which has established itself on the African continent since the start of the new millennium through its products, investments, companies, and work on 4,000 projects in the race for economic development. In Ethiopia, China is building dams, roads and railways, and it has just finished the Addis Ababa underground network at a cost of $475 million. It is also building a railway between Djibouti and the Ethiopian capital at a cost of $3 billion. It has established a cell-phone network in the country that has raised the number of users from 900,000 to 20 million.

In Kenya, China has built railway systems worth billions of dollars, the second phase of which was opened a few days ago. Angola is by far China’s largest African investment, however, where Chinese companies are building railways and 70 per cent of government buildings in the capital Luanda, together with rebuilding the infrastructure destroyed by the civil war. China has also signed a deal with Nigeria to connect its cities through a railway network at a cost of $15.5 billion, also building three oil refineries and a fuel complex at a cost of $23 billion.

It has signed 26 agreements with South Africa worth $6.5 million, mostly for infrastructure projects. In addition to these Chinese investments, many other African countries will likely receive significant new investments once Russia re-enters the scene after the Sochi Summit.

 

*A version of this article appears in print in the 24 October, 2019 edition of Al-Ahram Weekly.

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