Just a few weeks ago, world leaders convened to strategize and discuss the importance of aid in developing countries and the role of emerging economies and developed countries at the UN Millennium Development Goals Summit in New York. Sure, development and aid is an important issue for these struggling countries, but will it really help? Would throwing money at governments be the right answer to alleviating poverty in African countries?
The Ethiopian Review, provides an interesting perspective on the possibility of growth for African countries. It’s proven that African countries would gain substantial revenue from the extraction of their own natural resources. These revenues, overtime, will exceed the amount of foreign aid coming into the country as well as impact the African economies in two ways:
- Generate the economy by encouraging an African country to invest in their natural resources.
- Result in jobs for the people of the country to bring them above the poverty line.
Obviously, it is up to the African governments to promote this endeavor and decide where to invest the revenues. China, a country with a booming economy and significant population, has invested in many African countries’ and “is increasingly investing in a wide range of African countries in exchange for access rights and extraction agreements.” Paul Collier, the Academic Director of the UK government’s Department for International Development (DFID) that aims to reduce poverty and pursue the MDGs, stated that China’s investment is the most important and productive influences Africa has ever encounter.
Trade between China and Africa has grown exponentially in the past 10 years, from $10 billion in 2000 to $108 billion in 2008, and is targeted to grow even more in the coming years. Besides trade investment and development, China has taken part in infrastructural development by establishing new facilities and placing machinery in the countries, which has enabled the African countries to become more competitive with a small number of major companies (that initially ruled this sector). China’s rise in investment in Africa has already proliferated wealth in the region and it will take a little more time for Africa to see significant change. This is a re-conceptualization of what aid is. It has changed to promote what governments and the people really want for their country and livelihood.
Alongside China, DFID has been implementing and regulating business services to alleviate and improve the process to establish a business. “For example, it is now easier to start a business in Rwanda than it is Switzerland, and in Mozambique [DFID] helped reform customs procedures so that goods now clear customs 40 times faster – attracting new investments and driving growth.” Critics of China’s growing influence in the region indicate that this growth and force could potentially ignite a political unrest, which has happened in the past. This rise of Chinese immigrants could fuel anti-foreign sentiment that could potentially leave development at a stalemate position.
To resolve this situation and prevent another turmoil in Africa, Collier indicates that firms should bid for the African resources instead of having direct influence from 1 country, like China. The only reason that there hasn’t been much Western influence in the region is because of the lack of geological information available on the wealth of the soils of Africa. Collier gives an interesting statistic comparing sub-soil assets of Organisation for Economic Co-operation and Development (OECD) countries and African countries. OECD is an international economic organization comprised of 33 countries committed to fostering their market economy. Stated in the Ethiopian Review by Collier, OECD countries “per square metre, have $300,000 worth of known sub-soil assets but in contrast Africa has only $60,000.” Does that mean that Africa lacks resources? Are these member countries really that resource abundant compared to Africa? I don’t think so.
Collier believes that China’s involvement and availability of geological information would put the African countries on the radar, thus encouraging donors to fund geological surveys to be taken and make them public. Due to the insufficiency in Africa’s geological information, this can really be the driving force for their development. So hopefully, this is Africa’s fairy tale ending.