By Snowy Khoza
For decades the two global centres of power, the West (led by Europe and the Americas) and the East (led by China) have presented two contrasting approaches to economic development on the African continent. The West’s approach has been driven by conditionality, selectivity and direct financial support, while the East’s approach has been driven by non-conditionality, market building, and infrastructure delivery with tangible economic development. Below, Dr. Snowy Khoza describes how economic development dynamics in Africa have undergone a paradigm shift, with the influence of the East now more pronounced than ever before, and argues that Western and Eastern approaches to economic development in Africa must be used in combination to realise growth and transformation.
Economic Development in Africa: The Western Approach
The Western approach to economic development has been characterised by conditional support and aid funding with a bias on the selection of the recipient country. Furthermore, the support has been directed towards consumption rather than investment, fundability and macroeconomic management. By 2000, 80% of the World Bank and International Monetary Fund’s co-finance to Africa went to ‘good performers’.1 The question as to who the good performers are and what the basis for the measurement is remain unanswered. The Western approach presents a case of selectivity which has not worked in Africa’s favour in its attempt to address the economic development challenges that continue to plague the continent.
In addition, the West’s conditionality approach assumes that aid and investment work best in well governed countries, where corruption is not a big problem, and therefore more funding should be allocated to these countries. Corollary: poorly governed countries blighted by corruption should be denied aid. However, countries least likely to satisfy the West’s definition of good governance, transparency and anti-corruption are also countries that need aid most. Herein lies the problem of the West’s approach: by seeking guarantees that aid will be applied towards the intended objectives and distancing themselves from unsavoury regimes, the West has effectively denied aid to the majority of poor people on the continent.2 The irony in this is that despite the West’s conditionalities for investment to democratic states in Africa, the United States’ largest trading partner is China, a one party state.
The formula the West has applied to post-independence and post-1960 Africa is one that has focused on democracy-building over market-building. The Chinese approach is the exact opposite. Intellectually, it is always preferable and easier to focus on putting in place democratic structures as a pre-condition to aid. However, in countries where poverty is still rampant, an uncomfortable counterargument can also be made, based on the continent’s track record for the last 50 years. In most of Africa, political growth remains as stunted as economic development. Political maturity, in the sense of a robust enough democracy for elections to result in actual power change, for the most part only works in countries like Ghana, where economic development is already advanced and broad-based,3 South Africa and most recently, Senegal and Kenya.
The Eastern Approach
By contrast, the East’s approach to economic development in Africa is based on an unconditional and unselective path with the main objective being developmental and tangible results. In fact, Chinese companies are active in most African countries these days, exploiting the continent’s vast natural resources and pursuing ‘pit-to-port’ infrastructure projects long promised but never quite delivered by the West. These are all goals that African leaders have pursued for a very long time. In the past, a toxic combination of corruption, murky ties between ex-colonial powers (and their business elites) and the new rulers and overly complex planning structures derailed project after project. Given the Chinese companies’ ability to deliver projects on time and on budget (in most cases, at no financial cost to the host countries) it is no doubt that the Chinese offer Africa’s governments and people a clean-cut deal – if you work with us, we will build it, period. No ifs, ands or buts.3
Given that Africa’s economic growth has long been stunted by the lack of a dependable internal transportation infrastructure — within and between countries – which significantly limits trade, the Chinese offer is more than tempting and presents an opportunity of historic proportions.3
Combining the Two Models
Both approaches to economic development have their shortfalls. For the western model, these include issues such as:
• Underemployed labour, capital flight, too little investment and high transaction costs
• Bureaucratic governance structures and unfavourable business environments
• Failure to establish a working capitalist mode of production
• Long lead times for infrastructure delivery due to African governments’ lack of political will to implement western programs, such as the IMF’s structural adjustment program.
For the eastern model, these include issues such as:
• Unconditional support to unsavoury regimes which further fuels corruption
• Direct employment is minimal as the Chinese employ their own staff and contractors
• No transfer of skills
• Increasing indebtedness of African countries as payments for infrastructure development is linked to extraction of resources without beneficiation.
In spite of these shortfalls, there is general consensus from both powers that Western and Eastern approaches can co-exist to benefit Africa in a number of ways. Recent communication from these two camps indicates a convergence in their thinking on economic development in Africa.
With President Barack Obama under pressure from Congress to push America’s agenda on the continent and his visit to three African countries with well-established democracy – Senegal, South Africa and Tanzania – now in full swing, it is not surprising that four of his six trip objectives are aimed at increasing trade and investment in Africa. It is evident that America sees Africa as a new growth frontier and a strong trading partner going forward. Although the President will, as part of his visit, meet with civic organisations, democracy is not listed as a trip objective.
During his recent state visit to three African countries – Tanzania, South Africa and the Republic of Congo – the newly appointed Chinese President Xi Jinping stressed that China’s policy towards Africa is aimed at achieving mutual benefit, a win-win for all and ensuring realisation of all parties’ dreams. The President’s key note address at the BRICS Summit, entitled ‘Work Together for Common Development’, emphasised the importance of ‘equality, democracy and inclusiveness’.
Given the above, it is recommended that the following be employed in order to build synergies between the two approaches for the benefit of Africa’s development aspirations:
• China’s investment in productive infrastructure is effective in removing barriers to development and therefore needs to be encouraged
• Tied aid minimises opportunities for corruption as funds do not pass through recipient governments and domestic companies. China should be encouraged to use local labour, perhaps through a quota system
• The West needs to relax conditions and selection criteria and rather advocate for human rights and equality in line with President Xi Jinping’s call
• China has a comparative advantage in infrastructure building while the West’s advantage lies in its well-developed financial institutions, systems, services and social development. The two camps should be encouraged to work together in the same countries without necessarily choosing not to opt out of countries where the other is dominant
The West needs to be encouraged to focus on development rather than aid investment.
While Western and Eastern approaches to economic development in Africa are in contrast, they all speak to the development needs of Africa. Therefore, synergies have to be created with a focus on development, infrastructure and economic growth rather than aid. Africa is witnessing an unprecedented improvement in political maturity and stability which should complement its developmental aspirations. Both President Obama and President Jinping understand the importance of Africa in trade and investment and have shifted in their approaches to economic development for Africa.
Whatever the preferences of the East or the West, it is clearly Africans who have to make the choice of whether to prioritise democracy or markets first.3
About the Author
Dr. Snowy Khozais CEO of Bigen Africa, and a strategist with 20 years management experience and directorship skills in the South African public and private sector. She was previously Group Executive: Business Technologies and Facilities at the Development Bank of Southern Africa, and founding Chair of Knowledge Management Africa. She has also chaired the multi-billion Rand Trans Caledon Tunnel Authority. Dr. Khoza has a PhD in Social Policy from Brandeis University (USA) and an Executive MBA from the University of Cape Town. Dr. Khoza has been invited to address the 2013 FIDIC Conference on The Challenges of the Next FIDIC Century: What Engineers and their partners will need to address the next hundred years. The FIDIC Conference will take place in Barcelona from 15 – 18 September 2013.
1. The World Bank: World Economic Indicators 2000
2. RH Wade: Globalisation, Poverty & Income Distribution 2002
3. Stephen Richter: How China’s Approach in Africa Complements the West’s Thursday, September 06, 2012 http://theglobalist.com/storyid.aspx?storyid=9743
4. Xiaobing Wang and Adam Ozanne: Two Approaches to Aid in Africa:China and the West 2012
5. Daniel Kaufman & Arti Kraay: Growth Without Governance; World Bank Policy Research 2002 Working Paper No.2928