Don't worry about investment right now. You need to watch how the Chinese are tying up the rights to mineral and natural resources way into the future. And guess where all that stuff will be headed?Originally Posted by Rex Brynen
Don't worry about investment right now. You need to watch how the Chinese are tying up the rights to mineral and natural resources way into the future. And guess where all that stuff will be headed?
Doesn't make any difference at all. These resources are fungible, whatever China gets from Africa means they get less from other suppliers, which is then available for others to buy. China is doing the US a favor by investing in production in high risk environments where Americans don't want to go: they bring more material onto the market, that keeps prices down. They take the risk, we share the benefit. What's not to like? Much better for us to have China investing in new production than to have them using that pile of dollars to bid against us for the right to buy existing production.
"Tying up" anything in unstable political environments is a risky business, especially where long term investments with extended recovery horizons are involved. You make a deal with a government, you put in a few billion, or more than a few, and all of a sudden a new government wants a new deal. What do you do, send the Marines? Not likely. Western companies have learned about this the hard way; the Chinese are likely to run into it as well.
The notion of China as an unstoppable rising economic juggernaut is also misplaced... they have their share of problems and chickens have a way of coming home to roost. Look to some upheavals in the medium term future, potentially with major political implications. Remember when the simplistic among us were declaring that Japan was the rising power of the future?
I suspect the Chinese will be happy that some are reading the situation that way.
Probably true. Irrational sinophobia is of no use to the Chinese, nor is it of any use to anyone else.
http://www.theatlantic.com/magazine/...xt-empire/8018
The Next Empire
All across Africa, new tracks are being laid, highways built,ports deepened, commercial contracts signed—all on an unprecedented scale, and led by China, whose appetite for commodities seems insatiable. Do China’s grand designs promise the transformation,at last, of a star-crossed continent? Or merely its exploitation? The author travels deep into the heart of Africa, searching for answers.
Last edited by davidbfpo; 05-10-2010 at 09:20 PM. Reason: Tidy up
A scrimmage in a Border Station
A canter down some dark defile
Two thousand pounds of education
Drops to a ten-rupee jezail
http://i.imgur.com/IPT1uLH.jpg
Hello JMAReally you need an understanding of Africa. African leaders do not want outsiders starting to push for human rights or linking aid to good governance. They have a very nice little thing going.
The best thing for Africa is for the world to walk away and leave it to its own devices. This will never happen because of Africa's natural and mineral resources. China has become the biggest player and the US and the rest will be lucky to get the crumbs.
To accept the reality of the situation is the most sensible course of action.
The aid against good governance dispute is not the one I am looking at. If most African leaders do not want to have to comply with good governance, on the otherhand, donors as European powers are tired to borrow money to them.
But the question of divorce (can we call it that way) between "european powers" and Africa is deeper. Africa leaders are too quick to claim West to abuse them.
And by the way, as far as I can see, Africa Leaders do not want to be in charge of the business. They were not that quick to provide troops and equipment for Darfur or DRC...
The Power we don't take about...YOUR SAVINGS
Call me "futurist" but:
With the Electronic Herd, thousands investors use their savings (billions US$ every day), economies and countries have to compete each other to attract investments if they want to keep the pace of the economy or get left dead along the road economically (like North Korea, Iran,...).
These thousands and other hedge funds are attracted by high returns on investment and FAST. African countries whatever their political system will have to plug to Globalization if they want to survive. You can have the best gold mine in the world, if you are constantly in a state of civil war or corruption, investors won't come and your big mine won't produce a lot to feed your civil war or corruption. You are basically feeding on your own blood.
If you provide a safe, corrupt free environment, most African countries have untapped ressources that can attract these investors.
These thousand investors, much more than China or EU or US are for me, the biggest geoplotical game changers in Africa. Kabila, Kagame,...understand it.
These thousands investors require stability, transparency, good governance and if you don't provide, one click of the mouse on any trade website and their money is GONE. It's like an international/every minute referendum on how good/bad your country and its economy is.
The influence of China, US or EU over Africa looks pale in camparaison to the much defuse but HUGE influence of the electronic herd. 8 Billions US$ in 2008 came from the electronic herd as investment (not loans), while CHINA came with about 14 Billions in loans mostly.
As an African President, i would rather go to Wall Street and convince them to invest than beg Beijing for a loan i have to repay later even if it means cleaning corruption, improve education,...
FYI:
http://seekingalpha.com/article/3424...at-opportunity
http://www.africaneconomicoutlook.or...ct-investment/
Well you are not an African President.
A loan from Beijeng can be directly diverted into a a Swiss bank account and the only thing the Chinese want is a lock onto the particular natural resources they have a strategic interest in. The Chinese are not interested in all that human rights and 'good governance' stuff.
So your African President signs a deal with the Chinese to allow them exclusive access to exploit a certain range of natural and mineral resources for the next 50 years in exchange for the Chinese to build a showpiece sports stadium (and quietly make a deposit into a certain Swiss bank account). And the Chinese will import their own (trustworthy) labour to do most of this work.
You may not like it but there is nothing you or anyone can do about it.
Last edited by JMA; 05-11-2010 at 02:48 AM.
The deal in actuality will only be valid until a few colonels get tired of the crumbs, decide that the President needs an intimate meeting with a bullet, and figures out that they can earn much more from nationalizing the investment and selling the goods to the highest bidder than they could from bribes.
Bribing your way into African contracts is nothing new... it didn't always work out well for Western companies back in the day, and I suspect that the Chinese may encounter a few surprises down the way. I wouldn't be at all surprised to see a severe anti-Chinese backlash coming along in many of these countries, especially where they are importing large numbers of laborers and acquiring agricultural land. The way that many Chinese treat Africans personally may emerge as an irritant as well. I'm remembering a comment from an Angolan businessman, along the lines of "we thought the whites were racist, we didn't know what racism was until we dealt with the Chinese".
We'll see how it works out, but I suspect that China's neocolonial venture in Africa will trip up on many of the same issues that have derailed other neocolonial ventures. As long as the money is coming in they're likely to be tolerated, but when the mines and factories and farms are built and the money's going out, that's likely to change.
I don't think it's accurate to say the Chinese are "shouldering the US out of the way". They're simply operating in environments far beyond the risk tolerance of US companies.
Hy JMA
Well, you seem to be eager with Chinese. I do follow much of what you say on their presence in Africa: dirty deals and imported manpower. But this is not working on the long run, France and UK made that experience long ago. About USA, as you so well said: USA policy in Africa has not been consistent enough in the last 20 years to really allow USA to be a big player on that continent. But they do have something going on today. South Africa and Austral Africa might not be the priority of Africom, I would admit that.
As you mentioned in one of your post in the beginning of the discussion, this is in relation with what is happening in Sudan. And I do agree more and more on that point. Sudan past elections and coming referendum are a corner/white stone for Africa, do the cntinent like it or not.
I am actually working on the comparison I did on Sudan referendum and Berlin conference. And what you are saying is finding some echo in me. But I would not be that pessimistic (well not that dark in the darkness). China is like any other economical power: they will soon need fair and free legal environment to do business, even in Africa. On that point, I think that Dayuhan is close to reallity.
But what I really feel behind bitterness in your posts is the need for Africa leader to change. And I do agree with that feeling. But what role do you see for Africa in its future? Do you really think that solution is in external power? I know, you said leave Africa alone. But it’s a little short young man
A loan from Beijing might allow for some corruption, and not benefit the local companies (as the workforce and expertise is brought from China), that's not the issue and i don't deny it.
The Namibian example is very revealing: http://www.telegraph.co.uk/news/worl...ion-probe.html
Now, look at the economics of a deal in Africa:
"Profit = Sales - Taxes (almost non existent) - Corruption money. "
You can easily conclude that Corruption is a diverted form of Tax (instead of benefiting most, it benefits only a few but for the payer, it makes no economic difference). Additionnaly, corruption is an unstable, secret potentially ever increasing tax because unregulated.
Countries going greedy on taxes (or corruption) tend to scare investors away.
Let's make two distinctions here: African Countries with little ressources and with huge ressources.
Little ressources: For countries with little ressources like Namibia, Rwanda,... with little attractivity to investors, high taxes or corruption further reduce already meager potential benefits for the investor. It just decreases the interest of investing in those country.
Lots of ressources: For countries like DRC or Angola, with lots of ressources, again the corruption tax reduces their attractivity but the potential gains of investing there far outweight the losses due to corruption. So What ? Anti-corruption laws in most western countries are making it increasingly difficult for western companies to sweeten their deals but China has different standards. Again, the Electronic Herd is the mitigating factor: THE VERY FACT that you mention the link between China and Corruption is part of the solution. China is investing around the world. It can hardly continue disreguarding "good governance" practice for long if it gives it a bad name.
Let me give you an example: The Milk scandal. Chinese corrupt officials killed many by using improper milk. http://www.chinadaily.com.cn/china/2...nt_5421631.htm
The Chinese authorities had to hit hard on those companies to avoid other Chinese food companies to loose all their markets abroad.
My conclusion being, China will learn, as we did, that bad practice by our companies in Africa bring short term advantages but long term disadvantages:
* Bad image in main client markets ( i mean the real big ones-EU, US),
* Corruption feeding leads to more corruption untill benefits are outweight by disavantages
* Companies that tend to use corruption abroad import it back to their homeland.
In both cases, China's dealing with corrupt governments will have to change, on the short term for the less juicy countries, on the long term for the most juicy countries.
Fedding corruption to gain market shares is a great entrance strategy but rapidly it becomes a huge liability.
This 'divorce' will not happen as Africa is sitting on natural resources and China is more than willing to fill the gap if western countries pull out. Western countries will try to remain engaged with Africa, will compete with China and finally lose out to China as the dominant player. China needs the natural resources to fuel its economy and is growing in confidence and is already shouldering the US out of the way, so what chance have the UK and France?
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