Obama bids to forge African ties

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Barack Obama1 Reuters. US President Barack Obama.

Cape Town - When Uganda sought bids last month for an $8 billion (R85 billion) contract to expand the East African nation’s rail network, it only invited Chinese companies to apply.

That condition, agreed to by the Ugandan and Chinese governments, illustrates the hurdles US President Barack Obama must overcome as the US tries to challenge China’s status as Africa’s number one investor and trading partner.

China’s trade with the continent exceeded $200 billion last year, more than double that of the US, which it overtook five years ago.

Obama will step up his efforts to forge closer ties with Africa when he hosts more than 40 of the continent’s leaders at a summit in Washington next week.

While the World Bank projects African growth of 4.7 percent this year, the US is looking beyond securing deals and access to a consumer market of 1 billion people to promoting democratic principles and countering Islamist-inspired security threats from Nigeria to Kenya.

“China has got a massive head start,” Daniel Silke, director of Cape Town-based Political Futures Consultancy, said in a July 23 phone interview.

“From both a diplomatic and economic point of view, China has made all the running over the last few years so there is quite a catch-up for the US”

China has held five conferences with ministers and leaders across Africa since 2000 as it fosters ties with a continent that provides both resources and a market for manufactured goods.

Nigeria has the potential to be one of the world’s top 20 economies by 2030 with a consumer base exceeding the current populations of France and Germany, New York-based McKinsey said in a report last week.

 

Strings Attached

 

In November, China said it would extend $1 trillion of loans to Africa by 2015, most of it via Export-Import Bank, the South China Morning Post reported, citing Zhao Changhui, the lender’s chief country risk analyst.

Chinese Premier Li Keqiang detailed $10 billion of new loans on a four-nation African tour in May, including financing for 90 percent of a 380-mile rail (611-kilometre) link between Kenya’s capital, Nairobi, and the port of Mombasa.

“The Chinese strength really comes in projects funded by China itself,” said Paul Hinks, chief executive officer of Symbion Power, which has built power plants in Nigeria and Tanzania and competed with Chinese firms for World Bank-funded projects.

China’s Foreign Ministry in Beijing didn’t respond to an e-mail seeking comment.

 

Corruption Perceptions

 

While oil companies such as Exxon Mobil and retailers like Wal-Mart Stores and YUM! Brands have entered the African market, other US businesses have held back because of fears about corruption and security risks.

“Part of the challenge involves reorienting Africa as a continent of opportunity,” said Witney Schneidman, senior international adviser for Africa at Covington & Burling, a Washington, DC, law firm.

“Too many still see it as a continent of crisis.”

Nigeria, Africa’s biggest economy, ranked 144th in Transparency International’s 2013 corruption perceptions scorecard of 177 countries.

South Africa, the number two economy, ranked 72nd.

The US was placed 19th and China 80th on a list topped by Denmark.

While the US Commerce department expects more than $900 million of business deals to be announced at the three-day summit that starts August 4, they won’t necessarily be the result of direct competition with Chinese companies.

 

Different Expertise

 

“We build airplanes and the Chinese do road construction,” said Todd Moss, a former State Department official who is a senior fellow specialising in US-Africa relations at the Center for Global Development in Washington.

“It’s not like we’re regularly going head-to-head.”

Exxon Mobil, Chevron and Anadarko Petroleum have the technological edge over their Chinese rivals when it comes to deepwater exploration.

China National Offshore Oil is active in six African nations, its website shows.

It typically gets involved after the most challenging exploratory drilling is complete.

“In petroleum I’m not aware of one instance where an American company has lost out to a Chinese company,” said Schneidman.

“A lot of Africa’s oil is offshore in deepwater and Chinese companies do not have the technical expertise to develop it.”

 

Security Focus

 

For the US, soaring production of shale gas has reduced its reliance on African crude, with total imports from the continent plummeting by more than a fifth last year.

Meanwhile, Islamist-inspired attacks have surged in countries from Nigeria to Kenya, heightening concerns about the threat posed to US security interests.

“The imperative for the US to protect its strategic oil interests in Africa is diminishing extremely rapidly, if it’s not already vanished,” said Martyn Davies, chief executive of Johannesburg- based Frontier Advisory, which provides research on emerging markets.

“The US is viewing Africa through a security lens more than ever before.”

American and Chinese executives have done battle over contracts for some mining concessions and railway equipment and in some instances have shared the spoils.

South Africa’s state transport company Transnet split a $4.7 billion contract for 1,064 locomotives in March between China’s CNR Rolling Stock and CSR Zhuzhou Electric Locomotive, Canada’s Bombardier and General Electric.

 

Good Governance

 

Since US President Bill Clinton signed the 2000 African Growth and Opportunity Act, giving sub-Saharan nations that practice good governance duty-free access to US markets, Washington has weighed a broader set of interests.

George W. Bush instituted an anti-AIDS program that’s helped secure treatment for more than 6.7 million people since its founding in 2003 and has Africa as a primary beneficiary.

Last year, Obama unveiled a $7 billion plan to double access to power in six African nations that practice good governance.

Two-thirds of people in sub-Saharan Africa lack electricity.

Africa will welcome both American and Chinese partners, provided they cater to the continent’s needs and ambitions, according to South African Trade and Industry Minister Rob Davies.

The European Union offers another alternative, with the 28-nation bloc doing more than $420 billion of trade with Africa last year, about double that of China.

“The fact that you have got both the US and China increasingly involved in Africa helps us in dealing with both of them,” Davies said in a July 21 interview in Cape Town.

“It’s not just one of them who can come along and dictate all the terms. We have got several possibilities.” - Bloomberg News



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