Direct Government Involvement - African Business Magazine
Direct Government Involvement

Direct Government Involvement

Growing Brazilian involvement in Africa may have been driven by private sector investment but the government is quickly playing catch-up. Lula played his part with headline grabbing quotes such as: “It’s time for Brazil to pay off its enormous debt with Africa, African blood was spilled in the plantations and the quilombos [escaped slave communities].” Indeed, the former President put a great deal of attention into strengthening ties with the African continent. He made a dozen tours of the continent during his eight years in power and increased the number of full embassies on the continent from 17 to 37 over the same period.

As in other areas of policy, Rousseff has continued this strategy and it was notable that she visited both Angola and Mozambique during her first year in power. During a tour of Angola last year, Rousseff pledged that her government would encourage the creation of joint ventures between Brazilian and African firms, the employment of African workers and also to ensure that technology transfer was a big part of the process.

This could be interpreted as criticism of the approach of the many Chinese companies in Africa who employ few local people, particularly in more senior positions. Although Chinese firms invest more in Angola than their Brazilian counterparts, Brazilian companies employ more Angolan citizens and Odebrecht is now the biggest private sector employer in the country.

The size of the Brazilian government’s aid and technical assistance budget has increased from less than $200m in 2008 to $430m this year, most of which is being spent in Africa. The scale of the fund is relatively modest in comparison with some other countries but the trend supports the notion that Brazil is becoming increasingly active on the continent. The government’s overseas development agency, Banco Nacional de Desenvolvimento Económico e Social (BNDES), is responsible for investing most of this money.

Luciano Coutinho, the president of BNDES, has identified great opportunities for Brazilian firms in “the fields of agriculture and energy, transport, technology, farm equipment, telecommunications, the petrochemical and auto sectors as well as banking and pharmaceuticals”. He has pledged that BNDES will help to finance projects in these sectors.

Transferring agricultural know-how

Agriculture is one sector where Brazilian companies could support African development. Brazil was one of the world’s biggest food importers in the 1960s but it has now transformed itself into a major agricultural exporter. In particular, Brazil is a leading producer of soya beans, which are quickly becoming one of the world’s main high protein foods, yielding far more calories per hectare of land than meat or dairy farming. Soya beans are already being harvested in Sudan and will soon be planted in Mozambique on a significant scale.

A number of rural development schemes have been set up to help transfer this success to Africa. In one scheme, farmers from Mozambique, Namibia and South Africa visit Brazilian farmers in order to learn more about alternative seed crops and organic farming.

Brazil is also a global leader in biofuel production, where crops are grown specifically for use as motor fuels. Although the development of biofuels generates great controversy because it takes fertile land out of food production, the Brazilian government has provided a $300m fund to provide loans for biofuel producers in Africa.

In July, Brasilia signed an agreement with the governments of Japan and Mozambique to jointly finance agro-industrial development in Mozambique’s Nacala Corridor through the Fundo (Fund) Nacala. It is hoped that the scheme will attract investment of $1bn each from Brazilian and Japanese private sector companies.

The venture seeks to replicate the success of a similar project that was carried out in the Cerrado area of Brazil in the 1970s, which has the same type of soil and climatic conditions as the Nacala region. The favoured crops will be selected over the next few years. Organisations involved in the venture include the Brazil-Mozambique Chamber of Commerce and Industry, the Brazilian Cooperation Agency and the Brazilian Agri-Livestock Research Agency.

Brasilia has also funded vocational training centres in Angola, Cape Verde and Guinea Bissau, but it is with social and health projects that Brazil is really making its mark on the continent. The government has helped to fund haemophilia and sickle cell anaemia centres in Africa, and is seeking to share its expertise in treating tropical diseases. Aside from BNDES, joint ventures between Brazilian companies and government bodies are setting up medical facilities, mainly in Portuguese-speaking countries.

A new anti-retrovirus drugs factory is being developed in Matola, in Mozambique, with funding from the Brazilian Ministry of Health and several Brazilian firms, including mining firm Vale, plus support from the Drug Technology Institute (Farmanguinhos) and the Oswaldo Cruz Foundation (Fiocruz) in Brazil.

The $99m plant, which will be the first of its kind to be built in Africa, is designed to increase the proportion of Mozambicans with access to antiretroviral drugs, including nevirapine, when production comes on stream at the end of this year. Only 260,000 out of the estimated 2.5m Mozambicans with HIV currently benefit from the medication.

Tying support with trade

Several government initiatives seek to encourage trade for the benefit of Brazilian companies. In May, Brasilia agreed to provide a new $2bn credit line to help Angola finance the purchase of Brazilian goods and services. The deal, which is being handled by BNDES, replaces earlier, smaller arrangements. Luanda has pledged to pay the revenue from 20,000 barrels a day of oil production into a dedicated bank account to act as a credit guarantee.

Brazil’s Minister for Industry and Foreign Trade, Fernando Pimentel, said that the agreement was designed to improve relations between the two countries, but the credit line is likely to have an equally important economic impact.

Just as importantly, African governments are becoming increasingly aware of the importance of doing business with Brazil. In August, Nigeria’s Minister of Trade and Investment, Olusegun Aganga, said: “Brazil is an influential member of the BRICS nations with a big appetite for investing in Africa, especially Nigeria. So, there is the need for us as a country to strengthen our partnership with them in order to attract big investments into our country, especially in those areas where we have competitive and comparative advantage.”

Aganga went on to sign a wide-ranging economic cooperation agreement with a delegation comprising representatives of more than 50 Brazilian companies, which was – as often on such occasions – heavy on sentiment and light on detail. Nevertheless, the fact that the delegation embarked upon the trip and that Aganga was so fulsome in his interest, indicates that Brazil is now a player on the African stage.

There is also evidence that the government has begun to use its growing diplomatic power to promote specific projects that are being championed by Brazilian firms. As Alden argues: “The Brazilian mining giant, Vale, convinced President Lula to lobby the President of Gabon directly to support its iron ore lease, citing the Chinese approach of linking state diplomacy with commercial interests; thus a new form of direct political engagement to Brazil’s approach to Africa has emerged.” In May, BNDES organised a seminar on Brazilian involvement in Africa that was attended by leading politicians and officials from Odebrecht, Vale and Petrobras.

China’s comprehensive African strategy, which encompasses political, diplomatic, economic and even geopolitical elements, far exceeds the involvement of India, Japan, South Korea, or Brazil in the continent. It has certainly been borne out of China’s meteoric economic rise but is also a function of its long-standing diplomatic tussle with Taiwan, whereby trade and aid were used to attract political recognition. Brasilia shows little inclination to copy this approach but it is prepared to intervene where it can and to offer support in sectors in which Brazilian companies have genuine global expertise.

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Written by African Business Magazine

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