A Douse of China/America in Africa Comparison

n1-highway-18I came across this CNN segment on “is China buying up Africa?”  - it seems like this perennial topic has been beaten ad nauseam.  It’s fascinating how during John Kerry’s confirmation hearing, the only Africa related question was on China in Africa, very disappointing indeed.  Countless books have been devoted to this topic, and so many scholars have become famous for jumping on this bandwagon.  So the moral of the story is, why all the fuss on China in Africa? Doesn’t it seem a bit odd that American scholars, media pundits, think-tanks, and even policy-makers care more about China in Africa, than America in Africa?? If you polled a random sample of Americans who actually care about Africa, more of them would correctly state which mineral from Zambia is shipped to China, than what does the acronym AGOA stand for. So why don’t more Americans care more about what America is doing in Africa?  It can’t be because the US’s presence is that much smaller than China – US’s total trade with Sub-Saharan Africa is around $100 billion/year, compared to China’s $130 billion/year.  The US and EU remain the largest trading partner for many of the most economically vibrant and democratic African countries (Nigeria, Ghana, South Africa, Kenya).  China is unequivocally the leading partner for more authoritarian countries like Angola, Ethiopia and Sudan – here is where the “political string” theory can be applied – some of these countries are not eligible for the duty-free, tariff free AGOA provisions, which if applied, would probably make the US their leading partners. And just like China, there is a lot of growth in America’s commercial involvement in Africa.  US exports to Sub-Saharan Africa tripled in the last decade; Africa to US exports in 2011 was $52 billion, an increase of 34% over the previous year.  Many big US companies have recently setup offices here.  I think people have to remember that both US and China are “new entrants” into Africa, as compared to the colonial EU countries.  This whole argument on how China is like the new colonial power, whereas the US is somehow the old colonial power, is quite foolishly absurd. And most importantly, what about extracting commodities? About 95% of Africa’s exports to the US are primary commodities (just like China), and whereas China extracts more minerals, about 90% of the US’s AGOA eligible imports from Africa is crude oil.  Most of American private sector activity in Africa is also in the extractive sector – oil, gas, mining, and African countries import even more Caterpillar tractors and excavators for their mining operations than from the Chinese.  Even Chinese companies operating in Africa (building roads, bridges, pipelines, quarrying and mining) buy American heavy equipments.  The only difference is, yes the Chinese brand is carried by state-owned companies, whereas US brands are being upheld by giants like General Electric, Caterpillar, Chevron, Exxon/Mobil, Halliburton etc.  So yes the Americans are in Africa extracting commodities, lots and lots of it, but yet we don’t perceive it that way because they are done by private companies. The one glaring discrepancy between US and China’s involvement in Africa is a function of the relative importance of Africa in the two countries’ outward investment portfolios.  Whereas Africa accounts for only 1% of the US outward FDI, it accounts for 13% of China’s FDI.  Of course, total US FDI is much larger than China FDI – but that’s why there is this perception China is investing so much more in Africa (relatively), since the US has EVEN LARGER FDI parked in Europe, Asia and Latin America so its contribution in Africa looks minuscule in comparison. What about the US government’s role in Africa then?  Well it may be surprising to hear that just like China Export Import Bank or China Development Bank, the US’s export credit agencies also have billions in infrastructure projects in Africa.  This is on top of all the pure grants/assistance US provide, which are mainly in the health, agriculture, security and political governance arenas.  And of course people only focus on the things they can “see” – the roads, big glamorous public buildings and stadiums, and less so on the more US specialties of water treatment plants, power transmission lines, or port facilities. And lastly – the huge ramp-up of US assistance to Africa occurred during the Bush administration – so in Africa G.W. Bush maybe more popular than he is back home??

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