Faced with slumping economies, restive populations and, in many areas, the surging threat of sectarian violence, a growing number of African countries stand at a critical juncture where they must decide who to turn to for help: to their new friends in Beijing or to those ‘lenders of last resort’ in Washington, London and Brussels.
Now that the days of 10% annual economic growth are decidedly over many African states are regretting that they did not do more to diversify their economies away from a crippling dependence on commodity exports. With oil, copper and timber prices among others remaining stubbornly low, massive debts are now piling up across the continent. Now a burgeoning economic crisis looms over Africa, prompting those old enough to remember the last time debt devoured the continent in the late 1970s/early 1980s when a toxic blend of finance and famine wreaked havoc.
Unlike four decades ago, though, when Africa’s economic fate was still firmly controlled by Europe, African leaders today seemingly have a lot more choice on who they can turn to for assistance, most notably China. The Chinese are the continent’s largest trading partner, one of its most important investors and play a critical role in building desperately-needed infrastructure. All that may be true but the Chinese are not known for shelling out billions in emergency cash to flailing economies. Maybe the Japanese? Tokyo just announced a massive $30 billion investment package to rival China’s $60 billion announcement back in December of 2015. That’s all well and good but that money will take time to have any meaningful effect and certainly cannot be used to solve the current liquidity crisis.
OK. Right. So maybe it might just be time to make a couple of awkward phone calls.
Imagine the finance minister of, say for example, Zambia doing everything he can to procrastinate having to make the call. Maybe he plays an extra game of solitaire on his PC, calls an old friend to catch up and then surprises his wife with an offer to finally pick up the kids from school. Anything to avoid making this one phone call. Alas, though, he can’t put it off any longer. Let’s just say, for fun, that it went something like this:
[RING____ RING____] “Christine (IMF honcho Christine Lagarde), ma cherie, bonjour, it has been so long since we last spoke. How are you? I know, I know it’s been too long since we last spoke and I didn’t exactly say the nicest things about your colleagues, because well, you know, the Chinese were here and spending a lot of money we thought… well, we thought… ummm… you see, it’s a little complicated and now, well, errr, yeah, you see, we need your help again.”
In addition to the IMF, China and Japan, the US is also in the mix. Weighed down by own its domestic political turmoil as the country plods through a seemingly-never ending presidential election drama, Washington appears to be less focused on Africa’s current economic turmoil than the equally troubling rise in Islamic radicalism and civil strife in Nigeria, South Sudan and across the Sahel.
This week, Eric & Cobus discuss how all of this is now playing out in Africa and analyze the complicated, difficult choices that Africans leaders confront as they engage these various international partners.
