An analysis of how each of the BRIC countries implements its commercial strategies on the African continent starkly reveals that hopes that the alliance will deliver development progress for the continent are misguided. Instead they are seeking to fulfil their own commercial interests while shoring up their international legitimacy and credibility.
National interest still trumps friendship in international relations. The notions of solidarity that were popular among developing countries in the 1950s and the 1960s have no resonance in 21st century diplomacy, which is largely driven by commercial considerations. Many developing countries still view the advent of rising powers – some of whom were part of the Third World movement known as BRIC (Brazil, Russia, India and China)* that positioned itself to counter imperialism – as offering promise for development progress. However, BRIC countries are not primarily driven by Africa’s development concerns, but are seeking to fulfil their own commercial interests, as well as to use Africa as an avenue for shoring up their international legitimacy and credibility.
Undoubtedly, economic incentives form a core element of each of the BRIC countries’ interests in Africa. These countries share a common desire to gain access for their goods and services to the burgeoning consumer markets in Africa. With a combined population of over 900 million, and evidence of gradually increasing levels of household spending, Africa is viewed as a potentially profitable and largely untapped frontier for investments and exports of manufactured commodities. To be sure, Africa is viewed as an underdeveloped market for low-technology, but also cost-effective manufactured goods and services. Furthermore, Africa also presents an opportunity for the BRIC countries – China and India in particular – to access markets like Europe and the United States, due to the preferential access into those markets granted to less developed countries, especially in the case of textiles and apparels.
In particular, the growth of the ‘middle class’ has become the key narrative of Africa’s resurgence. With African countries experiencing rapid economic growth, combined with rapid urbanisation, the middle classes are projected to expand, with an accompanying youth bulge in urban centres. This potentially acts as a magnet for external actors, such as China and India, to tap into this growth dynamic. Fast-moving consumer goods are especially targeted, since this rising middle class will presumably consume ever-larger quantities of goods and services. Urban centres also require services infrastructure, such as banking, telecommunications, energy and transportation, in ways that build linkages with physical infrastructure development – another important area of opportunity for the BRIC countries. Already, mining, agriculture and infrastructure projects are at various stages of development and completion across the continent, and companies will need to provide a range of goods and services to fill the growing demand, especially for capital inputs. Add all this up, and Africa’s developmental needs are likely to drive a virtuous cycle of expanding demand, employment creation, trade and fiscal revenue generation for decades to come as the demographic dividend plays out. Recognising this, each of the BRIC economies has devoted significant attention towards penetrating the African export markets in a way that best fits its national economic interests. In the case of China, Africa represents a ready market for Chinese manufacturers. While its imports are dominated by raw materials, China exports primarily finished products to Africa, including a range of machinery, textiles and electronic items. In this respect, China has been quick to recognise the market potential in Africa, which it sees as a prime market for low-cost electronic and consumer goods as well as exports of light manufacturing, agro-processing, apparel products and communications and other services. Even though there has been a gradual shift in China’s commercial foray into Africa, especially outside of the resource-rich economies, broadening out to services and manufacturing, the security of supply of natural resources remains the thrust of China’s commercial diplomacy on the African continent.
Consider, for example, China’s trade relations with sub-Saharan African countries. While China overtook the US as Africa’s single largest trading partner in 2009, with the value of trade topping US$126,5 billion in 2010, much of the two-way trade has been skewed in China’s favour. The only exceptions to this general rule are resource-rich countries, such as Angola, the Republic of Congo, the Democratic Republic of Congo, Zambia, and Equatorial Guinea, which have sustained trade surpluses.
Indeed, as much as 87% of China’s exports to Africa consist of equipment and machinery, textiles and clothing and other manufactured products. China is also interested in Africa’s labour market. Africa boasts a large reservoir of untapped labour resources, making it an ideal location for China’s labour-intensive industries. To reform its current development model, China needs to outsource and relocate its labour-intensive industries, as well as low-skilled jobs to Africa, while developing more capital-intensive, high-tech industries within China. The rising labour costs in China have made the need for reform increasingly urgent, and forced many Chinese manufacturing enterprises to relocate production to cheaper destinations.
Africa also represents an important market for China’s arms sales. Following the end of the Cold War, Chinese weaponry began to penetrate the African markets, replacing the Soviet Union, by offering lower priced weapons and ammunition. Between 2003 and 2006, Chinese arms exports to Africa were the third largest of all countries.
Similarly, Brazil’s growing presence in Africa has been motivated by strong commercial diplomacy considerations. It is no coincidence that Brazil, for example, has been actively engaged in several countries in which both China and India have been scouring for commercial opportunities. Brazil has not been merely focusing on Lusophone countries, even though the bulk of its relations have been with these countries, in particular Angola and Mozambique. Brazil sees Africa as a key consumer market for its manufactured goods, and sees the expansion of exports of manufactured products to Africa as a means to stave off de-industrialisation. Brazilian exports to Africa, which include many agricultural products, together with manufactured and semi-manufactured goods, are far more diversified than its imports from the continent. As of 2012, manufactured products accounted for 42% of Brazil’s total exports to Africa. Brazil has a growing commercial footprint on the African continent. Even so, despite Brazil’s desire and efforts to grow its commercial and financial relations with Africa, trade remains relatively low and is confined to the Lusophone countries, notably Angola and Mozambique. Beyond the Lusophone countries, the country has an economic presence in countries such as Ghana, Gabon, Nigeria, Senegal, Kenya, Ethiopia, Namibia and South Africa. Companies such as Vale (mining), Odebrecht (infrastructure), Petrobas (oil) and Embrapa (agriculture) are iconic Brazilian companies that are making a mark on the continent.
For its part, India’s economic interest in African countries has also been propelled by a desire to access the continent’s sizeable and largely untapped export markets. At present, India’s manufactured products represent about 51% of its total exports to Africa. Indian firms have been particularly keen to improve the penetration of electrical and electronic products and automobiles in African markets. The Indian government has invested heavily in key industries in Africa, such as telecoms, consumer manufacturing, automotive and resources.
Trade and investment have also been important drivers of Russia’s foray into Africa. In 2012, total trade between Russia and sub-Saharan Africa amounted to US$3 billion. Russia’s focus has mostly been confined to tapping into markets within Africa’s minerals and energy sectors. Russian companies have also broken into such markets as science, engineering and arms. The arms trade, in particular, has been a crucial aspect of economic relations between Russia and Africa. Arms exports from Russia to the world reached US$13 billion in 2011, with 10% of those destined for North Africa (especially Algeria) and 7% to sub- Saharan Africa.
South Africa is one Russia’s key African trade partners. In 2002, bilateral trade totalled US$138,1 million, and grew to almost US$1 billion in 2012. Major Russian companies operating in South Africa include the Renova Group (exploration and production of manganese ore), Norilsk Nickel (production and mining of nickel) and the Evraz Group (production of vanadium and steel). Through the state-run nuclear company, Rosatom, Russia has been focusing on ramping up its supply of nuclear reactors to African countries. This includes South Africa, which is believed to be a frontrunner for the procurement of 9 600 MW of nuclear energy, and Egypt for the construction of four nuclear reactors at 1 200 MW each. In March 2015, Rosatom and the Nigerian government signed a cooperation agreement for the design and construction of four nuclear reactors at a total cost of US$20 billion. Furthermore, Ghana has concluded a cooperation agreement with Rosatom on the peaceful development of nuclear energy. Aside from exporting their goods and services to Africa, a yearning to gain access to Africa’s natural resources is another key driver of the BRIC countries’ involvement on the continent. The abundance of natural resources in Africa has piqued the attention of the BRIC countries, both for their own economic interests, but also for reasons of energy security. As the BRIC countries industrialise with unprecedented speed, their fast-growing economies demand increasing supplies of oil, gas, timber and other natural resources to fuel development. Africa, with rich reserves of minerals and raw materials, is a key source of these supplies. In the case of both India and China, in particular, Africa is critical as a source of natural resources and raw materials, especially oil. Due to its limited exposure to the world’s main conflict zones, its general openness to foreign participation, and high quality, African oil supplies are of considerable strategic importance to these countries. China became a net-crude oil importer in 1993. Today, it is the second-largest consumer of oil in the world and around 25% of its oil imports come from Africa.
Africa is regarded as a key source of natural resources to serve as inputs into production and to fuel China’s energy needs, while also serving as a market for Chinese exports, all of which are key to China’s continued economic growth and development. Indeed, large-scale economic development in China is increasingly throttled by the depletion of domestic energy reserves and natural resources, meaning that access to much-needed natural resources is a key element of China’s relationship with African countries. At the same time, China is also attempting to reduce its dependency on the Middle East to fuel its energy needs. China’s internationalisation strategy has balanced investments in the financial sector and technology acquisitions in the West with expansion into, what was in the past regarded as peripheral economies, in Africa. It is heavily engaged in the African economies across energy, agriculture, finance, and telecommunication sectors.
For its part, India needs to import 90% of the crude oil and natural gas required to feed its industrial appetite. The International Energy Agency predicts that India’s oil dependence will increase from 2,1 million barrels a day in 2007 to 6,6 million barrels a day in 2030. As the world’s fifth-largest consumer of energy, India is keen to match its needs with Africa’s growing production output. Deepening relations with Africa – especially oil-producing countries, such as Nigeria and Sudan – has been crucial to India’s energy security considerations.
In contrast to India and China, Brazil’s involvement in Africa is less motivated by natural resources needs. Brazil is not reliant on imports of natural resources from Africa, as it is a natural resource-abundant country itself, with ores, oil and fuel products contributing a significant share of the country’s total exports. Instead, the resource-based specialisation of Brazil’s large-scale enterprises is central to the country’s activity in the resource sectors of African countries. Since Brazil does not need to secure energy and resources overseas, the presence of companies, such as Petrobras, in foreign markets derives from a desire to internationalise and diversify its markets. In this sense, the Brazilian state-owned oil company Petrobras and the mining company Vale are, “deeply involved in the extraction of Africa’s resources”, and oil and other natural resources account for almost 90% of Brazil’s imports from Africa. Having operated in the oil-rich African states of Angola, Benin, Gabon, Nigeria and Senegal, Petrobras is regarded as a key actor in fulfilling the Brazilian state’s ambition to secure oil supplies.
Akin to Brazil, accessing natural resources is not central to Russia’s interests in Africa. Internationally, Russia is an important producer of minerals, oil and gas. In 2012 alone, natural gas and oil contributed close to 30% of Russia’s gross domestic product and accounted for nearly two-thirds of total exports. Simply put, Russia does not have the same need as China, or even India, to purchase natural resources. That said, Russian companies are striving for increased access to the mineral wealth of countries across the continent. The financial crisis of 2008 exposed the extent to which Russia relies on oil and gas to support growth, and encouraged the Russian political and business elites to look towards the abundant energy reserves available in Africa.
Russian imports from Africa include, among others, manganese, chrome, nickel, zinc, lead and bauxite. More than 30 large Russian companies are involved in the development of Africa’s natural resources projects. In South Africa, Russia aims to control nearly half (45%) of South Africa’s uranium enrichment market. Russia also hopes to use South Africa as a springboard from which to establish a competitive position in Africa’s natural resources sector, focusing particularly on the extraction of nickel, chromium, diamonds, zinc and cobalt.
The above analysis illustrates that the contemporary era of global diplomacy has witnessed growing and intense political and economic competition, not only between developed and developing countries, but also among developing countries. It reveals that the booming presence of the BRIC countries in Africa is driven by these countries’ national interest, and the notion of a collective interest of the Global South is largely a misnomer in contemporary international political economy.
There is no doubt that the BRIC countries, especially China, are redefining and will continue to influence the African continent’s global geo-political positioning, while also redrawing its economic landscape. It is hard to predict how relations between these countries and Africa will develop in the future. Yet it is clear that they will be largely shaped, not only by the evolving political and economic forces in Africa, but also by the changing international and domestic policy priorities of the BRIC countries.
* South Africa is excluded from this analysis as the focus of the article is on how the non-African members of the BRICS formation pursue their commercial strategies on the continent.