http://www.businessweek.com/articles/2014-07-31/how-the-u-dot-s-dot-can-rival-china-in-africa#p2
High Stakes in Africa: Can the U.S. Catch China?
By Howard W. French July 31, 2014
Illustration by 731
To be attentive to history is to be on the lookout for pivotal moments, and in the geopolitics surrounding Africa, the 1990s stand out as a hugely pivotal time.
With the Cold War scarcely over, the West turned its attention away from the continent, largely defining its problems as humanitarian issues, which are traditionally the lowest station of foreign policy priorities. Western Europe, which had colonized Africa decades earlier, reoriented its focus to Eastern Europe, attracted by what it saw as large, capital-starved markets with well-educated workers who would nonetheless be satisfied being paid bargain-basement wages by the standards of that continent.
The U.S. took a different route. With a focus dominated by security, it invested its energy and treasure in a series of interventions in the greater Middle East, leading to a series of costly and inconclusive wars in the Islamic world.
In the 1990s, China’s economic reforms were just beginning to rev up, and the People’s Republic was able to survey the world with the fresh eyes that an emergence from a long period of relative isolation brings. The leadership understood that the good run the country had enjoyed since opening its economy to foreign investment in the 1980s could carry it only so far, and that to sustain growth, China had to hold its own in the global economy by finding new international markets. In 1996 the Chinese committed to a policy known simply as Going Out and selected Africa as a priority zone for expansion.
Many people who have focused on China’s burgeoning ties with Africa since then have made the easy mistake of believing the country’s strategy is mostly a natural resources play. They’ve missed the big picture of why Africa has become so important to China and of why this is so relevant to the U.S. and other big, globalized economies that may now have to hustle to get into the Africa game.
Africa’s resource wealth is certainly of huge importance to China, a manufacturing superpower that is urbanizing and building infrastructure on an unprecedented scale. Unlike Western powers, however, China sees raw materials as only one of the three pillars of its Africa strategy. The second pillar involves using Africa as a springboard to help Chinese businesses emerge as global players.
Over the past decade, Chinese companies have built bulging order books in Africa, cutting their teeth in a part of the world where Western competitors, when present at all, have not brought their A team. The Chinese astutely calculate that the wealth they accumulate in Africa and the lessons they learn will serve them well as they push into bigger, richer, and tougher markets. Examples of this strategy are particularly abundant in telecommunications, where companies such as Tecno (cell phones) and ZTE (000063:CH) (mobile phone infrastructure) have relied on Africa in part to launch themselves globally.
Boasting scores of already mature multinational corporations, Western countries would not be mistaken to think they had relatively little to learn from this aspect of China’s expansion into Africa. The third pillar of Beijing’s strategy, though, could well become the game changer. Understanding that, for the remainder of the century, the bulk of global population growth will take place in Africa, China is making a long bet on the emergence of vibrant, high-consuming middle classes there, and with each year this wager is looking smarter and smarter.
Although at a glance Africa still looks overwhelmingly poor, it’s recently become the fastest-growing region of the world, and its share of global gross domestic product has increased to 4.1 percent, from 3.4 percent in 2000—a trend that figures to accelerate. Africa already has a middle class larger than India’s, albeit a balkanized one. And as the economic emergence continues, it will benefit more and more from new technologies that will allow it to leapfrog communication and infrastructure hurdles.
Perhaps most important is Africa’s so-called demographic dividend, which over the next few decades will place most of the population in the most productive, youthful, and heavily consuming phase of life. Young people in Africa resemble less and less the peasant multitudes of the past. Instead, they are urban and highly globalized in terms of culture. African investment in education, among the highest in the world in terms of percentage of GDP, can barely keep up with the heavy demand for learning. The thirst for education can be seen in United Nations data that show enrollment in secondary schools jumped 48 percent in sub-Saharan Africa from 2000 to 2008; higher-education rates grew 80 percent.
China’s dreams of Africa are not unlike the Western dreams of China over the past century, which consisted of an immense volume play: a vision of selling a yard of cloth or a gadget or a bauble to every Chinese person. The only difference is that the Chinese are increasingly in a position to make their dream come true.
China’s investment isn’t limited to a natural resources play. Africa has a middle class larger than India’s
Anyone who travels in Africa today can see that vision being patiently implemented. It consists of gradually familiarizing consumers with Chinese products, from mattresses to mobile phones. Building brand equity in the markets of the West is daunting and prohibitively costly. The biggest and best Chinese brands are fighting for a toehold there, but for the most part China is placing its chips on this demographic end run in Africa, seeing past the aging, debt-saturated markets of the West.
Where does this leave the U.S. and others who have been sleeping on Africa? The mature, rich economies have little interest in competing with China in low-end manufacturing and cheap consumer goods. That said, there is a worrisome complacency in the U.S. corporate world about the continent, which leaves an open path for China to move up the value chain in African markets.
The Obama administration, which has generally made little impression on the continent, has been smart to push electricity generation as a priority aim in Africa. Over the past decade or so, China has been the main actor in terms of African infrastructure development, with its companies racking up huge profits constructing highways, ports, airports, and railway systems. The continent is as underserved in electrical power as it is in roads, and this is a sector in which the U.S., if it is disciplined and ambitious, can make a huge difference in the years ahead, doing good while doing well. The Obama initiative, known as Power Africa, was announced in June 2012. It relies on a mixture of government and private financing and aims to double the African electricity supply, by adding 10,000 megawatts to production. A recent Senate bill proposes doubling that goal.
Being disciplined means not only maintaining consistent priorities toward Africa, but also rethinking how one talks about the continent. The U.S. corporate world is in need of massive reeducation about Africa, and Washington must learn to speak about opportunity there without muddling the message with talk of terrorism and security, which have increasingly dominated U.S. policy toward the region since the end of the Cold War. Obama’s pan-Africa summit, starting on Aug. 4 in Washington, is a chance to start making a difference.
This does not mean abandoning an emphasis on democracy or neglecting the importance of stability and good governance. On the contrary, it means recognizing that Africa is overdue for a more mature kind of conversation, in which its economic life is not subsumed by other topics. That means recognizing, belatedly, that robust, inclusive economic growth can probably do more for the continent than any amount of military planning.
Finally, Western countries may never compete across the board with their Chinese counterparts in the African infrastructure boom, but they are neglecting another kind of infrastructure in which they hold a massive advantage: education.
American schools are investing heavily in China and the Middle East, but their biggest potential markets and greatest potential impact are arguably in Africa, where the population is expected to nearly triple, to a projected 3 billion.
The prolific bank robber Willie Sutton, asked why he robbed banks, had a charmingly simple answer: “That’s where the money is.” Almost every young Chinese person dreams of an American education. Why should American universities and other schools train their sights on Africa? Because in the 21st century, that’s where the students will be.
High Stakes in Africa: Can the U.S. Catch China?
By Howard W. French July 31, 2014
Illustration by 731
To be attentive to history is to be on the lookout for pivotal moments, and in the geopolitics surrounding Africa, the 1990s stand out as a hugely pivotal time.
With the Cold War scarcely over, the West turned its attention away from the continent, largely defining its problems as humanitarian issues, which are traditionally the lowest station of foreign policy priorities. Western Europe, which had colonized Africa decades earlier, reoriented its focus to Eastern Europe, attracted by what it saw as large, capital-starved markets with well-educated workers who would nonetheless be satisfied being paid bargain-basement wages by the standards of that continent.
The U.S. took a different route. With a focus dominated by security, it invested its energy and treasure in a series of interventions in the greater Middle East, leading to a series of costly and inconclusive wars in the Islamic world.
In the 1990s, China’s economic reforms were just beginning to rev up, and the People’s Republic was able to survey the world with the fresh eyes that an emergence from a long period of relative isolation brings. The leadership understood that the good run the country had enjoyed since opening its economy to foreign investment in the 1980s could carry it only so far, and that to sustain growth, China had to hold its own in the global economy by finding new international markets. In 1996 the Chinese committed to a policy known simply as Going Out and selected Africa as a priority zone for expansion.
Many people who have focused on China’s burgeoning ties with Africa since then have made the easy mistake of believing the country’s strategy is mostly a natural resources play. They’ve missed the big picture of why Africa has become so important to China and of why this is so relevant to the U.S. and other big, globalized economies that may now have to hustle to get into the Africa game.
Africa’s resource wealth is certainly of huge importance to China, a manufacturing superpower that is urbanizing and building infrastructure on an unprecedented scale. Unlike Western powers, however, China sees raw materials as only one of the three pillars of its Africa strategy. The second pillar involves using Africa as a springboard to help Chinese businesses emerge as global players.
Over the past decade, Chinese companies have built bulging order books in Africa, cutting their teeth in a part of the world where Western competitors, when present at all, have not brought their A team. The Chinese astutely calculate that the wealth they accumulate in Africa and the lessons they learn will serve them well as they push into bigger, richer, and tougher markets. Examples of this strategy are particularly abundant in telecommunications, where companies such as Tecno (cell phones) and ZTE (000063:CH) (mobile phone infrastructure) have relied on Africa in part to launch themselves globally.
Boasting scores of already mature multinational corporations, Western countries would not be mistaken to think they had relatively little to learn from this aspect of China’s expansion into Africa. The third pillar of Beijing’s strategy, though, could well become the game changer. Understanding that, for the remainder of the century, the bulk of global population growth will take place in Africa, China is making a long bet on the emergence of vibrant, high-consuming middle classes there, and with each year this wager is looking smarter and smarter.
Although at a glance Africa still looks overwhelmingly poor, it’s recently become the fastest-growing region of the world, and its share of global gross domestic product has increased to 4.1 percent, from 3.4 percent in 2000—a trend that figures to accelerate. Africa already has a middle class larger than India’s, albeit a balkanized one. And as the economic emergence continues, it will benefit more and more from new technologies that will allow it to leapfrog communication and infrastructure hurdles.
Perhaps most important is Africa’s so-called demographic dividend, which over the next few decades will place most of the population in the most productive, youthful, and heavily consuming phase of life. Young people in Africa resemble less and less the peasant multitudes of the past. Instead, they are urban and highly globalized in terms of culture. African investment in education, among the highest in the world in terms of percentage of GDP, can barely keep up with the heavy demand for learning. The thirst for education can be seen in United Nations data that show enrollment in secondary schools jumped 48 percent in sub-Saharan Africa from 2000 to 2008; higher-education rates grew 80 percent.
China’s dreams of Africa are not unlike the Western dreams of China over the past century, which consisted of an immense volume play: a vision of selling a yard of cloth or a gadget or a bauble to every Chinese person. The only difference is that the Chinese are increasingly in a position to make their dream come true.
China’s investment isn’t limited to a natural resources play. Africa has a middle class larger than India’s
Anyone who travels in Africa today can see that vision being patiently implemented. It consists of gradually familiarizing consumers with Chinese products, from mattresses to mobile phones. Building brand equity in the markets of the West is daunting and prohibitively costly. The biggest and best Chinese brands are fighting for a toehold there, but for the most part China is placing its chips on this demographic end run in Africa, seeing past the aging, debt-saturated markets of the West.
Where does this leave the U.S. and others who have been sleeping on Africa? The mature, rich economies have little interest in competing with China in low-end manufacturing and cheap consumer goods. That said, there is a worrisome complacency in the U.S. corporate world about the continent, which leaves an open path for China to move up the value chain in African markets.
The Obama administration, which has generally made little impression on the continent, has been smart to push electricity generation as a priority aim in Africa. Over the past decade or so, China has been the main actor in terms of African infrastructure development, with its companies racking up huge profits constructing highways, ports, airports, and railway systems. The continent is as underserved in electrical power as it is in roads, and this is a sector in which the U.S., if it is disciplined and ambitious, can make a huge difference in the years ahead, doing good while doing well. The Obama initiative, known as Power Africa, was announced in June 2012. It relies on a mixture of government and private financing and aims to double the African electricity supply, by adding 10,000 megawatts to production. A recent Senate bill proposes doubling that goal.
Being disciplined means not only maintaining consistent priorities toward Africa, but also rethinking how one talks about the continent. The U.S. corporate world is in need of massive reeducation about Africa, and Washington must learn to speak about opportunity there without muddling the message with talk of terrorism and security, which have increasingly dominated U.S. policy toward the region since the end of the Cold War. Obama’s pan-Africa summit, starting on Aug. 4 in Washington, is a chance to start making a difference.
This does not mean abandoning an emphasis on democracy or neglecting the importance of stability and good governance. On the contrary, it means recognizing that Africa is overdue for a more mature kind of conversation, in which its economic life is not subsumed by other topics. That means recognizing, belatedly, that robust, inclusive economic growth can probably do more for the continent than any amount of military planning.
Finally, Western countries may never compete across the board with their Chinese counterparts in the African infrastructure boom, but they are neglecting another kind of infrastructure in which they hold a massive advantage: education.
American schools are investing heavily in China and the Middle East, but their biggest potential markets and greatest potential impact are arguably in Africa, where the population is expected to nearly triple, to a projected 3 billion.
The prolific bank robber Willie Sutton, asked why he robbed banks, had a charmingly simple answer: “That’s where the money is.” Almost every young Chinese person dreams of an American education. Why should American universities and other schools train their sights on Africa? Because in the 21st century, that’s where the students will be.
on. Aint no way a Chinese dude is gonna make more money in Africa than me.
