Scramble for Africa: East v/s West
As the African miracle conƟnues with a number of the conƟnent’s
countries predicted to remain amongst the world’s fastest growing,
tradiƟonal economic partners to Africa are now faced with the
growing challenge of emerging economies making serious inroads
in a territory they once dominated. East v/s West, emerging versus
tradiƟonal partners, we take a closer look in this paper at which
block is benefiƟng most from Africa’s growth, comparing India’s and
China’s investment and trade flows with Africa with those of the US
and the EU.
Foreign Direct Investment (FDI): conƟnued dominance
of tradiƟonal partners is striking but emerging partners
are gaining momentum
Arecent surveybasedonasampleof40AfricannaƟonsundertakenby
African Economic Outlook reveal that tradiƟonal partners delivered
83% of all FDI flows to Africa for the period 2005-2010, with the EU
and the US accounƟng for 43.7% and 37.4% respecƟvely. On the
other hand, emerging partners as a whole represented only around
one tenth of FDI inflows in the sampled countries, with India and
China leading the pack. Though sƟll low, this share has more than
doubled between the first and the second half of the past decade.
AFRICA FOCUS
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Table 1: New FDI projects to Africa by source country
United States
UK
France
India
South Africa
UAE
Spain
Germany
China
Portugal
516
456
398
237
235
210
194
173
152
137
New Projects
(2007 - 2012)
A similar exercise conducted by E&Y on the number of new FDI
projects for the period 2007-2012 confirm the dominance of the US
and the EU – the laƩer led by France and UK – but also point to India
and China both having invested significantly. In fact, over the same
period, the rate of FDI projects from emerging markets into Africa
has grown at a healthy compound rate of 21% whilst investment
from developed markets has grown at only 8%. In terms of stock,
China and India had African FDI stock of US$14 billion and US$16
billion respecƟvely in 2011, compared with an esƟmated US$150
billion for the EU and US$50 billion for the US.
Trade: older partners retain a very solid base but flows
with emerging powers are growing faster
Over the last 5 years, exports from Africa to Asia have tripled,
making Asia Africa’s third largest trading partner (27%) aŌer the
EU (32%) and the US (29%). Trade with India and China is growing
exponenƟally, with the possibility of Asia emerging as Africa’s most
important commercial partner in a foreseeable future. China has
already overtaken the US as the second largest export market for
Africa aŌer the EU, with India in fourth place.
China and India’s rapidly growing economies are demanding not
only natural resource-extracƟve commodiƟes, agricultural goods
such as coƩon and other tradiƟonal African exports, but also
diversified, non-tradiƟonal exports such as processed commodiƟes,
light manufactured products, household consumer goods, food
and tourism. Because of its labour intensive capacity, Africa has
the potenƟal to export those non-tradiƟonal goods and services
compeƟƟvely to the average Chinese and Indian consumer and firm.
Global trend towards rapidly growing South-South
flows
Surging Asian trade and investment in Africa is part of a global trend
towards rapidly growing South-South flows among developing
countries. China and India are both standing at the crossroads of
the explosion of African-Asian trade and investment. Is this poinƟng
to the irreversible decline of the US and the EU in the longer term?
Most likely not. As economic recovery picks up in the EU and the
US, we should see these tradiƟonal partners holding on to their
historically dominant posiƟons with renewed vigour. AŌer all, Africa
is a baƩle they can’t afford to lose.
Sources: African Economic Outlook 2014; UNCTAD - World Investment Report
2013; E&Y AƩracƟveness Survey Africa 2013; WTO & CII. India-Africa: South-
South.
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