African Development Economics Part 1: Assistance, Partnership or Exploitation?

Africa is typically portrayed as a singular and tragic entity that is wrought with poverty, war, and corruption. This stereotypical characterisation of dependency and Africa as a monolith is a harmful trap that needs to be avoided when discussing development economics in the region.

While the above problems can undoubtedly be found, it’s incredibly important to recognise the diverse cultures, experiences, perspectives, and realities throughout the region. It’s also critical not to underestimate Africa as an area of immense economic potential and progress.

Contrary to the stereotypical image of isolated communities of hunter-gatherers, over 50%[1] of Africans live in urban environments as part of an ongoing process of urbanisation. As can be seen in this video[2], these environments form beautiful cosmopolitan cities that house a vibrant start-up ecosystem[3], potential[4] for future growth, and a growing entertainment sector. For example, Nigeria’s film industry – known by many as Nollywood – is only behind India as the second largest film producer in the world[5].

Moreover, many African countries have had fantastic economic performance and there is immense potential for Africa to become a powerhouse through a booming population and substantial improvements in key indicators. For example, Our World In Data[6] has collated rich data which demonstrates that meaningful progress has been made through reductions in extreme poverty, child mortality, and undernourishment. This is occurring as the continent undergoes a population boom with a more educated and democratic citizenry, leading to projections that there will be $5.6 trillion[7] in African business opportunities by 2025. This will likely consist of an emerging dynamism through telecommunications, agribusiness, and energy[8], alongside a promising potential 400% increase[9] in venture capital investment between 2015 and 2019. While the pandemic has dampened this progress in a number of areas, many African countries have shown astounding resilience by forming 7 of the 10 highest GDP-growth countries[10] in 2020.

However, continued progress is needed to ensure Afrofuturist[11] aspirations become a reality and the persistence of substantial poverty remains a significant challenge. Additionally, progress varies greatly across regions and it is important not to obscure challenges in some countries with successes in others. It is within this context that this piece will form the beginning of a two part series focussing on two case studies of countries outside Africa before examining intra-regional initiatives.

The Problem with External Economic Engagement

One of the major problems with intercontinental investment into Africa is that it fosters a dependency[12] on the continent’s rich commodities. This is problematic as it doesn’t allow for the benefits and risk mitigation associated with having a diversified economy. Commodities are also prone to significant price fluctuations[13] and their extraction can be environmentally destructive[14] in addition to creating negative health outcomes[15] for local communities. Importantly, commodity extraction doesn’t require the same human capital development or innovation that manufacturing or service driven growth paths[16] involve.

This is a critical element to consider when analysing the actions of intercontinental countries and corporations into Africa.

The Role of France in Francophone West Africa

Before analysing the current role of France in West Africa, one must acknowledge the past horrors of colonialism in the area. This is so that the long-term ramifications are understood and so that contemporary accusations of neocolonialism can be contextualised.  The extent of the wrongs committed by France are too extensive to list and can instead be found in this documentary[17], France’s own upcoming attempt to document[18] their involvement, and other resources[19].

Unfortunately, French leaders still embody this colonial condescension through Emmanuel Macron’s statement that Africa has “civilisational”[20] problems or Nicolas Sarkozy’s infamous Dakar speech[21], wherein he declared that Africa had not “fully entered into history”. This unsurprisingly provoked uproar and advocacy for West Africa to shift away from France due to a lack of foundational respect.

France’s current involvement in West Africa is wide-ranging, but there are a few key economic areas to highlight. 

To this day, France retains a degree of monetary control over West Africa through the operation of the West African CFA Franc, which will be retired soon as of an announcement in December 2019. This currency union involves 8 Francophone countries and requires France as a guarantor, pegging to the Euro, and 50% of reserves to be held in France. The CFA Franc has been suggested to be a means for France to maintain influence over West Africa[22] and has had a number of deleterious economic impacts[23]. While this currency will be replaced with the ECO, some commenters argue[24] that this is simply a rebrand. It is also worth noting that no current changes have been announced for the equivalent currency in Central Africa.

France has also notably shifted away from commodity oriented investments and loans towards an increase in the foreign aid budget with the following grant targets[25]: “to fight against poverty, to counter climate change, to bolster public health, to expand education services and to achieve gender equality”.

China’s Belt and Road Initiative (BRI) in East Africa

The BRI is a program of massive global investment by China, which includes an impressive 46 out of 54 African countries. Within an African context, a significant proportion[26] of this investment has been made in East African countries such as Ethiopia and Kenya. The BRI has been criticised on the basis of issuing predatory debt, being a smokescreen for military and geopolitical expansion, and environmentally damaging investments, all of which you can read more about in an article[27] I co-wrote last year.

While the above concerns and many others are worth consideration, these diverse investments must be considered on a case-by-case basis[28] and condescending towards recipients of BRI loans needs to be avoided. While Zambia defaulted on their unsustainable debt[29] during the COVID-19 crisis, it appears as though countries such as Ethiopia have benefitted from an autonomous and well-considered decision to engage in a mutually beneficial way.

Research and modelling[30] has found that BRI investments in East Africa mostly benefit larger countries, improve intra-African trade, and result in substantial boosts to infrastructure and industry. However, the projects have been subject to criticism[31] that they don’t tend to foster skilled labour development in Africa or develop other fundamentals of economic prosperity, and that they are predominantly debt-instruments instead of grants. These mixed results and the sustainability of the BRI in Africa are brought into question by the fact that investment has decreased[32] in recent years as China makes greater domestic investments.

There are also questions of respect and bigotry amid reports of racist attitudes towards Africa associated[33] with the BRI and anti-African discrimination[34] within China.

Key Takeaways

From this analysis it can be determined that intercontinental engagement in Africa needs to be founded on a basis of respect and autonomy to be truly effective. Moreover, it’s critical that the shift away from commodity dependency continues and that loan terms are crafted carefully. However, this doesn’t necessarily involve the improvement of fundamental institutions and state capacity that are key drivers of growth. This aspect of the development equation can be driven by Africa itself.

References

[1] OECD. 2020. Africa’s Urbanisation Dynamics 2020: Africapolis, Mapping a New Urban Geography | READ online. [online] Available at: <https://read.oecd-ilibrary.org/development/africa-s-urbanisation-dynamics-2020_b6bccb81-en#page1> 

[2] https://www.youtube.com/watch?v=Fl1r-KwJ8NQ

[3] Kazeem, Y., 2019. Africa’s fintech boom is creating niche ecosystems to power the industry’s future globally. [online] Quartz. Available at: <https://qz.com/africa/1761147/johannesburg-nairobi-and-lagos-rank-as-africas-top-fintech-hubs/> 

[4] United Nations. 2016. Africa Renewal: Africa’s cities of the future. [online] Available at: <https://www.un.org/africarenewal/sites/www.un.org.africarenewal/files/Africa_Renewal_EN_April_2016.pdf>

[5] PWC. 2017. Spotlight – The Nigerian film industry. [online] Available at: <https://www.pwc.com/ng/en/publications/spotlight-the-nigerian-film-industry.html> 

[6] Africaindata.org. 2021. Africa In Data. [online] Available at: <https://africaindata.org/#/title-slide>

[7] McKinsey. 2016. LIONS ON THE MOVE II: REALIZING THE POTENTIAL OF AFRICA’S ECONOMIES. [online] Available at: <https://www.mckinsey.com/~/media/mckinsey/featured%20insights/Middle%20East%20and%20Africa/Realizing%20the%20potential%20of%20Africas%20economies/MGI-Lions-on-the-Move-2-Full-report-September-2016v2.ashx>

[8] EY. 2020. Why Africa is becoming a bigger player in the global economy. [online] Available at: <https://www.ey.com/en_gl/tax/why-africa-is-becoming-a-bigger-player-in-the-global-economy>

[9] Kene-Akofur, T., 2021. How African startups raised investments in 2020. [online] Techcrunch.com. Available at: <https://techcrunch.com/2021/02/11/how-african-startups-raised-investments-in-2020/> 

[10] Winkler, M., 2020. African economies shine amid global coronavirus chaos. [online] Australian Financial Review. Available at: <https://www.afr.com/policy/economy/african-economies-shine-amid-global-coronavirus-chaos-20201126-p56i26> 

[11] Ogbunu, C., 2020. How Afrofuturism Can Help the World Mend. [online] Wired. Available at: <https://www.wired.com/story/how-afrofuturism-can-help-the-world-mend/> 

[12] United Nations. 2019. State of CommodityDependance 2019. [online] Available at: <https://unctad.org/system/files/official-document/ditccom2019d1_en.pdf> 

[13] Chambers, M. and Bailey, R., 1996. A Theory of Commodity Price Fluctuations. [online] Journal of Political Economy. Available at: <https://www.jstor.org/stable/2138947?seq=1> 

[14] United Nations. 2017. Commodity dependence and the Sustainable Development Goals. [online] Available at: <https://unctad.org/system/files/official-document/cimem2d37_en.pdf> [Accessed 30 March 2021].

[15] Mapani, B. and kribek, B., 2012. ENVIRONMENTAL AND HEALTH IMPACTS OF MINING IN AFRICA. [online] Unesco.org. Available at: <http://www.unesco.org/new/fileadmin/MULTIMEDIA/HQ/SC/pdf/IGCP594-Proceedings__Windhoek_12-Part1.pdf> 

[16] Rodrik, D., 2008. Normalizing Industrial Policy. [online] Drodrik.scholar.harvard.edu. Available at: <https://drodrik.scholar.harvard.edu/files/dani-rodrik/files/normalizing-industrial-policy.pdf> [Accessed 30 March 2021].

[17] https://www.aljazeera.com/videos/2010/9/5/the-scramble-for-africa-a-history-of-independence

[18] Nylander, F. and Lemkin, R., 2021. Will Macron’s new commission face up to all of France’s colonial atrocities? | Femi Nylander and Rob Lemkin. [online] The Guardian. Available at: <https://www.theguardian.com/commentisfree/2021/feb/16/macron-commission-france-africa-colonial-atrocities-niger> 

[19] https://www.france24.com/en/africa/20200630-special-edition-how-the-legacy-of-european-colonialism-is-shaping-africa-s-future

[20] Attiah, K., 2017. Macron blames ‘civilization’ for Africa’s problems. France should acknowledge its own responsibility.. [online] Washington Post. Available at: <https://www.washingtonpost.com/news/global-opinions/wp/2017/07/14/macron-blames-civilization-for-africas-problems-france-should-acknowledge-its-own-responsibility/> 

[21] Ba, D., 2007. Africans still seething over Sarkozy speech. [online] Reuters. Available at: <https://www.reuters.com/article/uk-africa-sarkozy-idUKL0513034620070905?edition-redirect=uk> 

[22] Kane, P., 2017. Macron’s Francafrique. [online] Aljazeera.com. Available at: <https://www.aljazeera.com/opinions/2017/7/23/macrons-francafrique> 

[23] Signé, L., 2019. How the France-backed African CFA franc works as an enabler and barrier to development. [online] Brookings. Available at: <https://www.brookings.edu/opinions/how-the-france-backed-african-cfa-franc-works-as-an-enabler-and-barrier-to-development/> 

[24] Faye, M., 2020. Cinq choses à comprendre sur l’Éco, une alternative “françafricaine” au franc CFA – BBC News Afrique. [online] BBC News Afrique. Available at: <https://www.bbc.com/afrique/region-55413027>.

[25] Sauvage, G., 2020. France shifts policy on aid to Africa to counter rising Chinese influence. [online] France 24. Available at: <https://www.france24.com/en/africa/20210306-france-shifts-policy-on-aid-to-africa-to-counter-rising-chinese-influence> 

[26] Standard Charter. 2019. Belt and Road in Africa: East Africa’s early advantage. [online] Available at: <https://www.sc.com/en/feature/br-in-africa-east-africas-early-advantage/> 

[27] Francis, C., Kariyawasam, A., Hu, J. and Griffiths, B., 2020. The Belt and Road Part 2: The International Stage. [online] Cainz.org. Available at: <https://cainz.org/8855/> 

[28] African Development Bank. 2018. African Economic Outlook 2018 : Macroeconomic Developments and Structural Change Infrastructure and its Financing. [online] Available at: <http://akb.africa-union.org/auc/handle/AKB/45721> 

[29] BBC News. 2020. Zambia on brink of defaulting on foreign debt. [online] Available at: <https://www.bbc.com/news/world-africa-54928836> 

[30] Mukwaya, R. and Mold, A., 2019. Modelling the economic impact of the China Belt and Road Initiative on EastAfrica. [online] Gtap.agecon.purdue.edu. Available at: <https://www.gtap.agecon.purdue.edu/resources/download/9118.pdf>

[31] Venkateswaran, L., 2020. China’s belt and road initiative: Implications in Africa | ORF. [online] ORF. Available at: <https://www.orfonline.org/research/chinas-belt-and-road-initiative-implications-in-africa/> 

[32] Hayle, T. and Kynge, J., 2021. China focuses on Africa energy as Belt and Road lending dries up. [online] Ft.com. Available at: <https://www.ft.com/content/96824505-7972-481f-9ac8-838c557a25a6> 

[33] Zhang, C., 2018. Racism and the Belt and Road in CCTV’s Spring Festival Gala. [online] Thediplomat.com. Available at: <https://thediplomat.com/2018/02/racism-and-the-belt-and-road-in-cctvs-spring-festival-gala/>[34] Pai, H., 2020. The coronavirus crisis has exposed China’s long history of racism. [online] The Guardian. Available at: <https://www.theguardian.com/commentisfree/2020/apr/25/coronavirus-exposed-china-history-racism-africans-guangzhou>