SWEET SPOT

Competition for the spheres of influence in Africa is of particular importance amid the obvious geopolitical trends of the past decades and are clearly visible in the future.

For major external players, Africa is a means to strengthen the competitive edge of their economies through the efficient use of the natural and manpower resources of the impoverished continent. It is enough to note that Africa is an absolute leader in reserves of bauxite, manganese, uranium, a number of rare metals, platinum, coltan, cobalt, and other fossil raw materials, which are widely used in the most advanced industries. For former metropolises, the current situation seems to be a chance to ‘return’ or strengthen their position in the African market, while for other major players it is a chance to create long-term bases of presence on the continent with a view to expanding this very presence. This mainly concerns countries such as China, India, Russia, Turkey, the UAE and so on.

Actions of these players have recently attracted increasing attention. It would be a mistake to think that it was only China that set the tone in the ongoing race for Africa. Absolute indicators suggest otherwise. Thus, the US, France and Great Britain are the most considerable investors in Africa in terms of the number of foreign direct investment (FDI) projects implemented on the continent.

The coronavirus pandemic and the subsequent global lockdown have had a negative impact on FDI rates around the world, specifically in Africa. According to the latest World Investment Report published by the UN Conference on Trade and Development (UNCTAD), foreign direct investment in Africa in June 2021 decreased by 16%, or $40 billion, compared to the same period in 2020.

The decline in FDI in 2021 has been particularly severe in resource-dependent countries due to low prices and declining energy demand. Amid the slow vaccination campaign and the emergence of new COVID strains, significant risks remain associated with the volatility of foreign investment in Africa.

However, the expected growth in demand for commodities, new opportunities due to the restructuring of the global supply chain, approval of key projects, and the forthcoming finalisation of the Sustainable Investment Protocol under the African Continental Free Trade Area Agreement could lead to increased investment in 2022.

This, therefore, triggers the various power centres to improve their methods of competition, leading to a tougher struggle for spheres of influence on the continent.

American interests in Africa

The US is now one of the obvious leaders in promoting economic cooperation with the African countries. This policy is effectively coordinated through the US Office of African Affairs, which develops and is responsible for trade and investment policies with 49 sub-Saharan countries.

The American FDI to Africa peaked in 2014. However, during the 2020 pandemic, it fell to $47.5 billion. Currently, the US direct investment to Africa is smaller than to any other region of the planet.

On his latest African tour of the region, the US Secretary of State Anthony Blinken said his government intended to ensure that investment in Africa grows without creating unsustainable levels of debt. In fact, he hinted at the actions of Beijing, which uses long-term debt obligations of partner countries as an effective tool of influence. During Blinken's stay in Dakar, contracts worth more than $1 billion were signed between four US companies and the government of Senegal. The US described these deals as examples of Washington helping the African countries build market infrastructure through transparent and sustainable deals.

The US is investing "without burdening a country with a debt it cannot handle", said the US Secretary of State. This has been the key message of the US diplomacy in the region so far, which may indicate Washington's intention to move from a conventional 'defence' to a more offensive approach to Africa.

Global Gateway for Africa

The EU is trying to be just as active. In November 2021, Brussels announced a €300 billion global investment programme until 2027 called the Global Gateway. The project involves investments in various sectors, including digital technologies, climate and energy, transport, health, education and scientific research in the third world countries, where Africa is considered an important destination. A summit between the EU and the African Union slated for February 17, 2022 will define the contours of future cooperation under the Global Gateway programme.

Remarkably, during the same period the current EU presidency will be held by France, which has strategic interests on the African continent. Paris is trying to maintain and diversify its investments in Africa and to strengthen its politico-military influence, including through the Global Gateway programme.

Europe clearly holds the lead in total investment in the African economy, being the continent's largest investor with €239 billion in foreign direct investment in 2018. Collectively, the EU also remains the largest provider of official development assistance. During 2018-2019, the EU provided €17bn in aid to the African private sector, as well as €5bn for major infrastructure projects. Over the same period, the European Fund for Sustainable Development raised more than €24bn from private funds and European public development banks jointly invested more than €30bn in the African continent.

Over the next seven years, it is planned to provide €29bn to sub-Saharan Africa under the EU's new Global Gateway funding instrument. Another €12.5bn will go to North African countries. Priorities are also being discussed within the EU to form a foundation for national and regional interventions in sub-Saharan Africa and North Africa. Reducing risks to private investment and sovereign lending in Africa will be an important element of this collective effort.

The African facet of the Chinese Belt

In parallel with European engagement, China is also developing new approaches to materialise its own ambitious goals in Africa. At the same time, it is important for Beijing to demonstrate that it is not pursuing political objectives in the region and is not trying to influence the actions of political elites of particular states through investments. Beijing's interprets its actions through the logic of the global One Belt, One Road initiative, which offers optimal cooperation schemes with China through multi-level cooperation programmes and the implementation of large-scale infrastructure projects.

In this context, on November 29-30, 2021, the 8th traditional forum on China-Africa cooperation was held in Senegal. The summit was attended by African leaders and the Chinese Foreign Minister Wang Yi. This is one of the key events to identify current priorities for interaction between the parties and to set the near-term trade, economic, and investment agenda. 

Remarkably, China's total direct investment in African states exceeded $43 billion by the end of 2020. Over the years, China has established more than 3,500 companies on the continent, with private enterprises accounting for most of the investment.

Horizons of cooperation

In contrast to the EU and China, Russia acts as a more modest partner for African countries. In 2019, Russia's trade with the continent was only about $20 billion, which is many times less than Africa's trade turnover with other foreign economic partners. By comparison, trade turnover between China and Africa in 2020 was $383.3 billion. Nevertheless, Moscow is now using all available economic tools to strengthen its reputation on the continent. In particular, by pursuing an investment policy based on competitive advantages (nuclear technology, oil and aluminium production, etc.), as well as writing off $20 billion of African debts, which was announced at a bilateral summit in 2019. Moscow makes it clear that it is returning to Africa as a great friend of African states and intends to pursue a friendly behaviour that was once demonstrated by the Soviet Union there. The only difference is that today ‘friendly regimes’ are seen as those states that are willing to accept and guarantee the security of Russian investments.

The total volume of accumulated Russian investments is estimated at $17 billion. Meanwhile, a second Russia-Africa summit is also planned for 2022. The intention is to define the current priorities of cooperation and to strengthen Moscow's competitive position in its rivalry with other power centres. Meanwhile, Russia insists not on the scale of investments, but on their efficiency in terms of strengthening the competitive position of Russia's leading companies in the world markets.

Turkish priorities in Africa

Turkey is one of those countries that opted for a more aggressive strategy towards Africa. In October 2021, the Turkish President Recep T. Erdogan paid an official visit to several West and Southern African states before addressing the 3rd Turkey-Africa Economic and Business Forum with 29 ministers from different countries and representatives of four regional organisations. On December 18, another, a more high-profile event with an African focus took place in Istanbul—the 3rd Turkey-Africa Partnership Summit. It was attended by 16 heads of state and 102 ministers from various African countries. Participants of the event approved the 2022-2026 Action Plan, which includes a list of projects to be implemented in Africa in the coming years with the support of Turkey.

As of 2020, Turkish-African trade turnover has exceeded $25 billion, while Turkish investments in Africa have increased to $7 billion. The goal is to increase the turnover indicator first to $50 billion and then to $75 billion.

A notable feature of Turkish foreign policy towards Africa is an intention to consolidate African countries' actions to "fight the injustice of the current political order". Turkish President calls for reform of the United Nations, which includes a significant number of African states. It is believed that their possible votes in support of the Turkish position may ensure the promotion of Turkish initiatives at the global level.

Smaller players are also actively looking at Africa. These are primarily more affluent states looking to diversify their economic opportunities.

In particular, Azerbaijan, the incumbent chair of the Non-Aligned Movement, the majority of whose members are African countries, seeks to engage in dialogue with the leading states of the region, most notably North Africa. Egypt and Morocco are Baku's traditional partners. Back in 2018, Egypt was counting on Azerbaijani investments in its major national projects, above all in the development of the Suez Canal. At the same time, the Moroccan authorities intended to attract Azerbaijani capital into their economy. However, the coronavirus pandemic and restrictive measures prevented these plans from happening.

Perhaps the former plans will be updated in a new capacity as soon as possible.