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Europe’s Courting Of Africa

Europe’s Courting Of Africa

With the EU economy under severe threat, Europe has been turning its gaze increasingly towards Africa in a bid to increase its exports and ensure supplies of commodities for its industries. But with China now the most important trading partner for Africa, the continent’s approach to the renewed European interest is lukewarm.

Not for the first time, Europe is turning its lascivious eyes toward Africa. The dark history the two continents share with each other continues to evolve and, while never simple, is becoming increasingly complex.

Europe currently finds itself in an extremely precarious economic position. The Eurozone especially is facing a crisis that threatens the continued existence of the single currency that so much was staked upon. The Republic of Ireland’s extraordinary growth in the first eight years of this century, helped by its economic cycle harmonising, serendipitously, with that of the euro, came to a juddering halt when the banking crisis, which originated in the US, spread worldwide.

To avoid bankruptcy, the government was forced to accept a multibillion-euro bail-out package and a painful austerity plan to get its economy back on track.

Then Greece followed, with rioting in the streets of Athens, and another bail-out package that did not resolve the crisis but was more akin to reinflating a tyre when the hole has not been repaired.

A second bail-out followed, reluctantly. But with Italy and Spain sliding towards similar crises, and few of those who supported the introduction of the single currency in the first place now saying they would still think, knowing what they do now, that it was such a great idea, prospects for the immediate future look bleak.

Trade within the EU is vital to its members, but with growth so tentative throughout the Eurozone, exports, a key driver of growth, are being stifled.

French and German banks are exposed to approximately half of the debt in Europe’s most vulnerable countries, and Britain, though not part of the euro, is itself heavily exposed, not least of all because more than half of its exports go to Europe.

As a result, European governments are looking elsewhere for export markets. Africa, being a continent of terrific potential for growth is one such market that is being courted. Indeed, David Cameron, the British prime minister, risked criticism at home by flying to South Africa for trade talks in the midst of a phone-hacking scandal back home which went to the heart of his government. In the most severe political crisis to hit Britain since the Profumo affair in 1963, it is alleged, and indeed in some case already proven, that senior journalists at the world’s biggest selling English-speaking newspaper, the News of the World, hacked the private voicemails of celebrities, politicians and young murder victims and their parents, with confidential information provided by officers in the Metropolitan Police and allegations of a cover-up that brought high-profile resignations within the force. That the newspaper’s editor at the time went on to become the UK government’s communications officer turned the spotlight on Cameron, as he had appointed him against strong advice, and raised questions about his and his predecessors’ relationship with the media baron, Rupert Murdoch, whose influence on British politics was deemed to have become too insidious. But that was not enough to keep the prime minister from leaving his post and making a pilgrimage to Africa.

When Europe was in recession, Africa’s economies grew, albeit from a low base, and that growth has increased at a time when Europe and, indeed, the US, still exist on a knife edge and could yet see their economies contract in a much feared ‘double dip’ recession.

There is now an increasing sense that not only is aid not the answer for Africa in the long term but that it might be going so far as to retard Africa’s development in all areas.

Naturally, foreign assistance will have a role to play still, especially given the current desperate situation in Somalia, but more and more the emphasis is on trade and direct foreign investment. China has stolen a march on the rest of the world when it comes to Africa. It has and will continue to outinvest all its competitors in Africa. But as that investment generates growth, Africa will be in more of a position to make its presence felt in the international marketplace.

Further underlining the importance of Africa, the UK government, despite making cuts to public spending in the region of $100bn, has ring-fenced its foreign aid budget. Such is the financial situation in the UK that the country will not have any new aircraft on its aircraft carriers until 2020, but money is still being sent abroad, much of it to Africa.

This is not just generosity. The UK sees at least a large proportion of that aid as an investment which will pay dividends further down the line.

Time for fresh thinking

There is a market of approximately 300m people to the south of Europe, stretching across North Africa and the Middle East. But Europe’s trade with the region stands at around 10%. Add to that the 350m people in Europe and that is a vast market place that all sides can benefit from.

Its close geographical proximity to North Africa means Europe has more at stake in its future than trade. In recent months, Italy has had to cope with large numbers of refugees from the region, Libya particularly. Europe’s leaders worry about instability in North Africa making the short journey across the Mediterranean and ‘infecting’ Europe.

While the US was cool on military intervention in Libya, it was Europe which assumed leadership on the matter and backed the rebels. Indeed, it was Italy who went further and urged Nato to arm the rebels – a move that was initially resisted by other European governments. But with no resolution to the unrest in Libya in sight then, Europe started to think again about providing weapons to the anti-Gaddafi forces. The ambiguous wording of the UN Security Council Resolution 1973, which speaks of “all necessary measures”, appears to override the arms embargo in the previous resolution (1970).

The French government has admitted supplying the rebels with arms during an aid drop of food, water and medicine. Noticing that the rebels on the ground were in worsening danger, they threw in some weapons too.

All this goes to show that Europe is not insulated from north Africa, and that it believes taking a more active role in its future is essential to its future.

It is hoped that eventually an African common market will be built without the encumbrance of borders, duties and time-consuming customs and, ideally, a uniform set of laws and regulations to ease the passage of trade and to reduce costs. However, no one is under any illusions that this will take a very long time.

Writing in South African publication, Business Day, British prime minister, David Cameron, said: “In the past, there were marches in the West to drop the debt. There were concerts to increase aid. And it was right that the world responded. But they have never once had a march or a concert to call for what will in the long term save far more lives and do far more good – an African free trade area. The key to Africa’s progress is not just aid. It is time for some fresh thinking.”

Germany’s chancellor, Angela Merkel, had already been on a tour of Africa by the time Cameron arrived with a number of her country’s business leaders in tow, also promoting trade as opposed to aid. Having already visited Kenya and Angola, Merkel concluded her trip with a stop in Nigeria, where she met with President Goodluck Jonathan.

Speaking of the challenges ahead for the West African country, the German chancellor admitted there were a number of “impediments” to overcome if the people of Nigeria were to prosper, and she added, “Germany will want to be at Nigeria’s side and to help Nigeria in this endeavour.”

The exact nature of Germany’s end of the bargains being struck has been criticised by politicians in Berlin. In particular, the deal to sell Angola up to eight patrol boats, which Merkel defended by saying all countries have the right to to defend their own borders, was seen by many as a build-up of armaments, with critics pointing to Angola’s human rights record.

“Germany is a fair and decent partner, not only interested in making profits but concerned with the development of Angola,” said Merkel, who pledged to help Angola rebuild after years of civil war and boost trade between the two countries, which already stands at more than half a billion dollars.

Allaying mutual suspicion

For Africa, for so long not in control of its own destiny, these new international partnerships offer an opportunity to finally take a seat at the top table of global finance and politics. This may allay cynicism among Africans about entering into relationships with countries from the colonial past. This time, Africa stands to gain both financially and influentially from its dealings with Europe.

Trade is two way. African countries will not just buy goods from Europe. They will want to sell their own too. The opening up of trade with Africa will provide a much-needed boost for the EU’s exporters in the short term, but in the longer term, Europe’s producers will face stiff competition from African imports. There is some caution among European producers, who fear competition from Africa and the prospect of cheaper labour displacing European workers.

However, caution is felt by African producers too, who worry, not unreasonably, that they will not be able to compete with the more highly developed European industries.

It may be that African economies, especially those on the Mediterranean, will see this as an opportunity to diversify their industries in close cooperation with its EU partners. In much the same way that the United Arab Emirates is boldly moving away from an oil-based economy and is more than keen to establish itself as a regional hub of strategic importance, so North African economies particularly have the chance to play the same role for Europe.

The social and political instability gripping North Africa may make the region seem an unlikely prospect for such developments, but if the move to democracy succeeds, countries like Egypt, Tunisia and Morocco will be better placed to take advantage of the changing global marketplace than they otherwise might have been.

But as much as there is an issue of trust which needs to be overcome, in that Africans still remember vividly their treatment at the hands of European colonial powers, there is also a perception problem going the other way.

At a conference hosted by Bloomberg in London in June called Eye On Frontier Markets – Eye On Africa, the speakers, who included Dapo Olagunju, group treasurer of Access Bank, when asked about the matter of corruption in Africa when doing business, made the point that the problem has been overstated and should not be a block to anyone wishing to invest in the continent.

For many Europeans, who only hear news about Africa when there is a famine and are asked to donate money, the perception is one of a continent that is beyond helping itself. Trade instead of aid, therefore, can help begin the slow process of changing people’s minds, on both sides, about each other.

A free trade zone between Europe, and even parts of Africa where goods are exchanged cheaply and easily and where skilled African workers are free to move about the EU, is a long way off. In the short term, however, bilateral trade agreements seem a likely way forward, and equal partnerships with some of the world’s biggest economies, such as those of Germany, France and Britain, as well as those with China and other countries, might well see Africa emerge as a voice that the world listens to.

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Written by African Business Magazine

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