Why the U.S. Should Emulate China in Africa

By Asoka Ranaweera

The writer is the founder and CEO of a company that advises investors on structuring investments and developing projects in West, East and Central Africa

In early January the Obama Administration said that it will be placing an emphasis on engaging Africa in 2011. Preliminary reports indicate that the bulk of our interaction will be centered on the idea that democracy is the key to Africa’s development. It goes without saying that the Administration’s argument has many merits.

But, equally and importantly, we should champion the idea that it is investment and trade that creates jobs that allows communities and people to prosper and to raise their standard of living; thereby lifting people out of poverty and in the case of many African countries, abject poverty.

I do not think we need to look much beyond the examples of many Southeast Asian countries in general but China in particular to see what has been achieved in a few decades once the creativity ingenuity of people are coupled together with capital and trade.

Speaking of China, as its economy has grown so has its investment and trade relationships in Africa. From approximately $10 billion in trade in 2000 to $100 billion in 2008, making it the third largest trading partner behind the U.S. and EU.

China’s engagement has altered Africa’s traditional reliance on western export markets and to some extent international financial institutions such as the World Bank and the IMF.

And China’s engagement has allowed African countries to fund and develop infrastructure including in some cases entire industries. Contrary to popular belief that China is practicing a new form of neo-colonialism in Africa, evidence suggests that the relationship is much more nuanced. Remember trade theories say we exchange goods for those that we either do not have and/or cannot produce efficiently.

In the IMF’s quarterly magazine Finance & Development, March 2008, when analyzing trade patterns between Africa’s main trading partners including the U.S., the authors Jian-Ye Wang and Abdoulaye Bio-Tchané wrote “Africa-China trade largely reflects the comparative advantages of each partner, given their stage of economic development, rather than any unilateral interest by China in exploiting natural resources.”

How did China in such a short period of time generate an incredible amount of trade with Africa? One of the ways it did so was to commercially engage virtually every African country at a time when most of the west did not pay any attention to what we perceived and considered to be a virtual lost cause.

Where we in the west saw military coups, authoritarian governments, ethnic and economic instability, China saw opportunities to buy and sell. In many ways China saw in-it-self what it was 30 years ago an underdeveloped country looking for ways in, which the vast majority of its people could escape grinding poverty.

While, the rest of the world ignored most parts of Africa, China offered concessional loans, development aid, minerals for infrastructure deals, debt forgiveness and some preferential access for African goods and services. These mechanisms created a framework that enabled African countries to benefit in some ways. And when China itself began to grow exponentially it benefited the continent as whole.

Benefits to Africa included new infrastructure, new markets, and diversification away from reliance on the U.S. and Europe. It importantly meant jobs and relative pockets of prosperity and saw the emergence for the first time of a nascent middle-class that in some African countries began to also demand a voice in politics and increasingly more choice about how they are governed. Is this not what we in America are advocating for after all?

I think the Obama Administration while placing an emphasis on democracy and good governance, should really be doing all it can to promote investment and trade between the U.S. and Africa. This is an important way in, which we can strengthen African democracy by promoting prosperity and giving people the opportunity to better themselves.

Let’s not forget that despite preferential trade access mechanisms enacted by the U.S. Congress to help generate trade between America and Africa such as the Africa Growth and Opportunity Act (AGOA), 79.5% of our imports are oil and related products from the continent. And as we all know most of the corruption that occurs around the world including in Africa tends to be centered in mineral and natural resource rich countries. Are we really practicing what we preach? Clearly, we need to be doing more to encourage diversity of trade between the U.S. and Africa.

It’s especially important for the Obama Administration to do that now, because of the poor state of our economy in the U.S. The fact is that Africa, is considered to be one of the last frontier markets, and despite many problems, is growing and shows much potential for the future. We should be nurturing that growth and encouraging African countries to grow their economies by direct engagement. And in the process we should be generating lots of new jobs here in America that is bound by and to Africa.

Let’s emulate China, and use our EXIM Bank, the Overseas Private Investment Corporation and the Trade and Development Agency much more aggressively in the promotion of our business goals on the continent and lets encourage the use of these facilities for medium to small enterprises in the U.S. much more than we do right now as the beneficiaries of these facilities tend to be the largest U.S. companies. Let’s think in creative ways in, which we can help African countries in general but the private sector in particular. Finally, lets not be afraid to copy China, after all, imitation is the best form of flattery, and by doing so we can create a win-win situation for America and Africa generating jobs and closer linkages in the process.