Russia in Global Affairs

The years when SSA’s growth figures surpassed 1996 levels (2004-2008) can be demonstrably linked to the period when China and India (and other emerging economies) began to hugely demand commodities, as reflected in the CPI. In the energy realm, concern over predicted declines in petroleum reserves, apprehensions over the so-called “peak oil” scenario, instability in the Middle East and oil price speculation placed further pressure upwards on prices, peaking in 2008 (only to tumble after the core underwent the worst recession in a century). This reality is qualitatively different from the picture Goldman Sachs, Renaissance Capital et al. portray, where ‘spectacularly right’ policies have driven growth. Official reports from international organisations have at times bolstered this latter interpretation, postulating Africa’s “economic resurgence” as being hinged on the ability of the continent to recover from the global crisis relatively quicker than other areas of the world. Whilst true in and of itself, Africa’s growth record over the last ten years or so has occurred within the context of overall global growth. In this regard, Africa’s growth has only been around 1 per cent higher than the world average: credible, but not fantastic.

An interesting by-product of the “Africa Rising” narrative are the wild claim about Africa’s middle class, with assertions that it now amounts to over a third of Africa’s population. It emerges that this figure was arrived at by calculating the number of people estimated (using dubious statistics) to have a per capita consumption between $2 and $4. This criteria itself sets the bar at an incredibly low level, but of course then allows the ADB to add its voice to the narrative that the dawn has arrived and that the corner has been turned etc. In fact, currently only 4 per cent of Africans have an income in excess of $10 a day.

We have heard all this noise about Africa’s immanent renaissance before —on multiple occasions. It is ironic that Time magazine’s late 2012 edition celebrated “Africa Rising”, given that fourteen years earlier (March 30, 1998, to be precise), Time ran a story with the exact same title! Then, we were told that ‘Hope is Africa’s rarest commodity. Yet buried though it is amid the despair that haunts the continent, there is more optimism today than in decades’. Better times are always coming tomorrow (passages from various World Bank reports):

From a 1981 World Bank report, Accelerated Development in Sub-Saharan Africa (p. 133): ‘Policy action and foreign assistance…will surely work together to build a continent that shows real gains in both development and income in the near future’. From a 1984 World Bank report, Toward Sustained Development in Sub-Saharan Africa (p. 2): ‘This optimism can be justified by recent experience in Africa…some countries are introducing policy and institutional reforms’. From a 1986 World Bank report, Financing Growth with Adjustment in Sub-Saharan Africa (p. 15): ‘Progress is clearly under way. Especially in the past two years, more countries have started to act, and the changes they are making go deeper than before’. From a 1989 World Bank report, Sub-Saharan Africa: From Crisis to Sustainable Growth (p. 35): ‘Since the mid-1980s Africa has seen important changes in policies and in economic performance’. From a 1994 World Bank report, Adjustment in Africa (p. 3): ‘African countries have made great strides in improving policies and restoring growth’. From a 2000 World Bank report, Can Africa Claim the 21st Century?: ‘Since the mid-1990s, there have been signs that better economic management has started to pay off’. From a 2002 World Bank press release on African Development Indicators, ‘Africa’s leaders…have recognised the need to improve their policies, spelled out in the New Partnership for African Development’.

In 2008 Africa was at a “Turning Point”, restated in 2011 with the assertion that the continent was ‘on the brink of…economic take-off, much like China was 30 years ago’.

Africa’s Turning Point or Bargaining for a New Position?

The real story as it pertains to contemporary excitement about Africa seems to be in the upsurge of interest in Africa by formerly non-traditional actors. The emergence in 2009 of BRICS – Brazil, Russia, India, China and South Africa — platform generated a lot of discussion about the political, economic and even social impact of this diplomatic club on the transformations currently taking place in the world. The group has immense economic power in that it brings together countries whose populations constitute 43 per cent of the world population, whose territories make just over a quarter of the world’s land area, whose combined GDP accounts for 21 per cent of the world’s GDP, and whose reserves are huge at about US$3 trillion.

Demand for multilateral diplomacy and the collaborative leadership of most influential countries strongly increases in the world when there is need to solve the urgent challenges and answer common threats and problems. Recent developments, such as the unrest in the global economy, only demonstrates the ineffectiveness of existing organs to monopolize global governance and address all the issues from a single centre. In a world increasingly aware of the need for the deideologization of international affairs, the strengthening of the legal fundamentals of the international system are vitally needed.

High economic growth in Africa must be understood in the context of the rise in importance of various “emerging powers” within the global political economy. The relationship that these “new” powers have with Africa has elevated the continent in the strategic thinking of the extant “traditional” (largely ex-colonial) partners. As one French minister was quoted as saying, ‘Thanks to the Chinese, we [have] rediscovered that Africa is not a continent of crises and misery, but one of 800-million consumers’. Though this comment was directed at the “rise” of China in Africa, it might be equally applied to relatively new sets of economic and political linkages. Embedded in ‘a fluid period of transition in the global balance of power and the international state system characterised by traditional and emerging powers’, the continent now plays a more prominent role in international.

Africa has ‘never been in such a strong bargaining position’ than at the p resent, with numerous ‘suitors’. The growing diversity of partners potentially offers a ‘tremendous opportunity’, ‘as each country brings with it an array of capital goods, developmental experience, products and technology as well as new opportunities to trade goods, knowledge and models’. Trade with—and investment from — emerging economies potentially reduces the North’s political leverage and economic dominance in Africa, which may ‘increase the negotiating power enjoyed by [African] governments seeking to maximise local benefits’.

Decades after the European powers carved up the African continent for their own imperial needs, Africa is undergoing a new wave of resource and strategic exploitation – some are calling it the new scramble for Africa. The United States is increasing its footprint across Africa with AFRICOM, fighting terrorism and ensuring stability are the trumpeted motivations. Resource security is a more hushed objective. But it is not just about the US. During the last decade, China’s trade wit h Africa not only caught up with America’s, it has more than doubled it. The new battle for Africa does not deploy strong-arm tactics, it is now using economic and humanitarian aid, interest-free loans, preferential trade agreements and investments in infrastructure. These are a useful currency across a continent that is, for the world’s established and emerging powers, seemingly up for grabs. India, Brazil and Russia are all invested in Africa’s present and future, and old imperial powers like France are fixing to retain their loosening grip on the riches of former colonies.

China is now Africa’s biggest business partner, with roughly $200bn (£120bn) in trade in 2013 – more than double the trade that Africa did with United States, which is also behind Europ e. More than one million Chinese migrants have moved to Africa to help the cause. That speaks volumes. What started as insatiable demand from China for Africa’s rich seams of commodities – which involved the Chinese moving in to build the massive infrastructure and transport links required to get the resources out of Africa – has developed into a much broader trading relationship in all sorts of goods and services.

Africa however remains the weaker partner. The weakness is usually ascribed to the continent’ s dependent relationship in the international system and Africa’s historic insertion into the global capitalist economy. However, dependence is ‘a historical process, a matrix of action’, that permits the prospect of alteration stemming from changes in the dynamics, processes and organisation of the international system and the fundamental tendencies within Africa’s political economy. Current emergent trends, such as robust economic growth and an increasing diversification of the continent’s international relations may play important roles in this regard, yet massive challenges remain. Africa’s world market share in processing industries is extraordinarily low: SSA exports just 0.9 and 0.3 per cent of world light and heavy manufacturing exports respectively. The bulk of the growth in African exports in the last decade or more has been heavily underpinned by mining -related commodities, deeply problematic in terms of development. After all, the export growth that the Asian economies used to leapfrog development was based on an increasing list of manufactures. Africa is nowhere near that position.

Yet it is true that actors from both the global North and South are now actively pursuing closer engagement with Africa. This provides the elites of the continent oppor tunities to extract leverage in return for access. This may or may not be a good thing, depending on the conjectural circumstances in each state formation and the nature of the external partners. It cannot be taken for granted that actors such as the BRICS are interested in furthering Africa’s developmental priorities. Though Africa has possibly never been in a stronger bargaining position than at present, the key question remains: how can African leaders take advantage for the benefit of the ordinary citiz en. Currently, this does not seem to be happening. A recent Afrobarometer survey revealed that despite a decade of strong GDP growth and the incessant narrative of an “Africa Rising”, ‘there is ‘a wide gap in perceptions between ordinary Africans and the global economic community’, where ‘a majority (53%) rate the current condition of their national economy as “fairly” or “very bad” and only ‘one in three Africans (31%) think the condition of their national economies has improved in the past year, compared to 38% who say things have gotten worse’. Notably, when it came to their own elites, ‘Africans give their governments failing marks for economic management (56% say they are doing “fairly” or “very badly”), improving the living standards of the poor (69% fairly/very badly), creating jobs (71% fairly/very badly), and narrowing income gaps (76% fairly/very badly)’ (Hofmeyr, 2014). Popular opinion is thus increasingly out of sync with the “Africa Rising” narrative that has been gaining traction among government officials and international investors.

The question of levels of agency is something that needs to be at the forefront of any discussion on the role of the BRICS in Africa and the potentialities of these emerging relationships in fostering development. This is highly contingent on a variety of contextual factors and it is these dynamics that need to be borne in mind when reviewing each BRICS member’s interaction with the continent.

Emerging countries’ trade structures with Africa do not exhibit any exceptionalism and are comparable to the relationships established by the capitalist core since the colonial period, following the model of the ‘small colonial open economy’. The trade between the BRICS and Africa is clearly dominated by the exportation of commodities. ‘For all the three emerging econ omies, Africa is a major supplier of natural resources. Mineral fuels account for 70% of Africa’s exports to China, 80% of exports to India and 85% of exports to Brazil. This is comparable to African exports of mineral fuels to the US that account for over 83% of the total export basket’. It is not impossible that accrued revenues may help implement constructive change, perhaps in the direction of the welfare reforms pursued by some Middle Eastern oil producers. It is just unlikely.

What Defines the Play? – Oil and Gas.

In the past two decades, Africa has seen an unprecedented boom in oil and gas investment. With big companies shut out, or deterred from investing in the Middle East, Africa has by contrast offered multinationals relatively lenient terms and extensive access to its oilfields in the past 15 years. The continent has been able to attract money from the biggest supermajors, from ExxonMobil to Shell, looking to exploit its prolific and relatively untapped geology, particularly in the Gulf of Guinea and North Africa. It also has the world’s highest ratio of «light» and «sweet» crude oil, preferred by refiners in big consuming countries, and 83 per cent of its oil resources comes from fields yielding more than 100m barrels.

Problematically, developments elsewhere may well push Africa further down the energy dependency road as, paradoxically, exports to the West (particularly the United States) decline. In the past few years, a radical change in the forecasts for growth in American oil production and oil reserves has taken place. This has sprung from light tight oil (LTO), which includes both crude oil and condensate in all tight formations, including shale basins (LTO is frequently referred to as “shale oil”). Currently, the global oil industry is considering LTO’s potential and its likely implications for oil supply and demand. Oil companies have started to develop unconventional hydrocarbons, successfully bringing to the market several large and under-exploited oil and natural gas liquid resources. American shale/tight oil, Canadian tar sands, Venezuela’s extra-heavy oil, and Brazil’s presalt oil are the main examples. This has meant that the fear of a decline in oil supplies (the “peak oil” thesis), which would then prompt concerns about energy shortages and propel oil prices upwards, possibly leading to “oil wars” has been quietly shelved. There is now little doubt that unconventional resources through the “energy revolution” will satisfy global demand. Instead, the debate now revolves around the speed and price at which these resources can be extracted.

The U.S. Energy Department forecasts U.S. production of crude and other liquid hydrocarbons will average around 11.4 million barrels per day (bpd) by 2014, which would place the Unit ed States just below Saudi Arabia’s expected output for 2013 of 11.6 million bpd. Several forecasts put American production at between 13-15 million bpd by 2020, with the IEA (2012), suggesting that the United States may supplant Saudi Arabia as the world’s largest producer. It should be said at this juncture that Saudi oil is cheaper to tap than tight oil and LTO needs a price above $70 per barrel to be profitable (break-even prices of most tight oil are in the range of $40- $60 per barrel). However, the recent turnaround in the United States’ crude oil production is extraordinary and will have major implications for Africa (and the world). As the United States meets more of its current and future demand for oil from indigenous supplies, imports from traditional suppliers will inevitably fall. This has already started to happen in dramatic fashion.

Nigeria has experienced difficulties in finding alternative destinations for its crude and it has had to cut prices. Indeed, at the start of 2013, weak demand forced Nigeria to sell some cargoes of its oil below the official selling price. This would see Nigeria lose $380,000 on a typical cargo. Consequently, ‘Unprecedented growth in USA gas reserves inevitably eliminates USA as a destination for Nigerian gas’. In addition, the growth in gas reserves helps re-establish the United States as a major producer of industries such as petrochemicals, fertilizer etc., in effect slashing the market options for such products from Nigeria.

Another aspect is that the foregoing underscores the close intimacy between state and oil oriented power or agency, and the nature of the fractional squabbles over oil revenues on a national scale, which imposes centralist logic on the control and distribution of oil rents. The result of a ce ntralist imposition of control from past experience is both the intense horizontal struggles for access to, and control of a larger share of oil rents, but more fundamentally, vertical struggles between the marginalized and oppressed groups and the corrupt foreign capitalists, egocentric politicians or oil elite privileged individuals. These struggles also underpin the privileged class formation process mostly through strategic locationing in the distributive circuits of the politics of the oil -state often carried out through primitive accumulation activities. As such the premium on controlling political power is very high, leaving virtually no incentive or space for the democratization of state -society relations. Such features can be gleaned from politics in Nigeria, Angola, Algeria, Southern Sudan, Sudan, Chad, Gabon and Equatorial Guinea, just among few countries.

What is it that Africa Needs?

How this all fits into discussions about “Africa Rising” is that declining North American imports from African countries will likely create a new alignment in the global oil market. For countries that rely on oil exports for the majority of total annual government revenue and foreign exchange earnings, this is highly problematic. One key way in which such countries may seek to avoid the implications of declining exports to the traditional importers is to shift attention to the emerging economies, specifically Asian buyers (especially China and India). This may not all be smooth however, as African producers that produce light sweet crude may not have large enough market in Asia as several Asian refiners already process heavy crude produced by OPEC members in the Persian Gulf. However, the Asian option seems to be the only one available: the oil minister of Angola, Jose Maria Botelho de Vasconcelos, has in fact argued that ‘Emerging markets like India and China have been growing, and they have absorbed a large part of Angolan exports’. But the “solutions” to the energy revolution thus far simply implies a further intensification of an over-reliance on primary commodities, with the hope that through such a diversification of dependency, the effects of new developments in the oil industry may be mitigated: hardly a sustainable or visionary response.

Indeed, rentier strategies rather than developmental strategies tend to be negative —as the history of Africa’s petro-states testify. What is a more likely scenario is one that reifies a situation that Julius Nyerere commented on over thirty years ago, when he noted that ‘we ar e all, in relation to the developed world, dependent — not interdependent — nations. Each of our economies has developed as a bi-product and a subsidiary of development in the industrialised North, and is externally oriented. We are not the prime movers of our own destiny’. A key issue here is that ‘the production of primary goods for export creates a demand for other activities, notably transport, construction and services, which is incompatible with balanced development and channels the meagre proceeds from t he foreign sale of these commodities into expenditures which do not stimulate the rest of the economy’.

Africa needs to rethink its strategies and find ways and means to make them more compatible with the objective of sustainable development. ‘To sustain economic growth, Africa will need to enhance productivity and competitiveness through investing in infrastructure, technology, higher education and health; broadening the range of and adding greater value to exports; and making the necessary investments in productive sectors and trade facilitation. All these measures require collaboration among stakeholders under the leadership of the developmental state’. A redefinition of growth to include structural transformation is needed á la Kuznets’ definition of a c ountry’s economic growth being ‘a long-term rise in capacity to supply increasingly diverse economic goods to its population, this growing capacity based on advancing technology and the institutional and ideological adjustments that it demands’ (1971). Such a definition puts to shame the crass celebration of Africa’s recent growth rates as symbolising some sort of watershed event for the continent.

Outside of Africa, it has been well documented that structural change – that is, the reallocation of economic activity away from the least productive sectors of the economy towards more productive ones – is a fundamental driver of economic development. But there has been very little evidence on how structural change has evolved in Africa since independence across the continent was achieved half a century ago.

Africa cannot achieve sustained economic growth and transformation without diversifying the sources of its economic growth both on the demand and supply sides of its economies, UNCTAD’s Economic Development in Africa Report 2014 argues. The report says that investment is a major driver of structural transformation, and will be critical for sustaining growth for employment and poverty reduction in Africa over the medium-to long-term. Of course, governance, policies and institutions that generate, utilize and catalyze investment matter enormously. These are key because investment rates in Africa are currently low relative to what will be required to achieve national development goals. Africa has experienced relatively high growth during the past decade but the nature and pattern of this growth has not resulted in more jobs and poverty reduction because consumption has been the dominant driver. Instead, the report says, a consumption -based growth strategy must go hand-in-hand with an increase in investment, particularly investment that which increases the capacity to produce tradable goods, to reduce the likelihood of current account imbalances in the future and to diversify sources of growth on both the demand and supply sides.”

Thus, the current pattern of growth in Africa is neither inclusive nor sustainable. ‘There are various reasons for this. Firstly, African countries are heavily dependent on natural resources as drivers of economic growth. But most of these resources—fossil fuels, metallic and non-metallic minerals—are non-renewable and are being depleted at a very rapid rate with negative consequences for future growth and sustainability. The dependence on resource-based growth is also of concern to African policymakers because commodity prices are highly volatile and subject to the caprices of global demand. Such price instability has negative consequences for investment and makes macroeconomic planning challenging’. In addition, ‘higher resource rents are conducive to more corruption’ which will likely further stimulate numerous neopatrimonial regimes across Africa.

A starting point then is firstly, the correct analysis of Africa’s political economy. In short, independent efforts undertaken from within to achieve self-sustained development. Indeed, ‘the room for manoeuvre available to African actors is dependent on rather particular configurations of power and interests internationally’. Detailed analysis of each state-society complex within Africa and the opportunities and constraints that these engender, when encountering external impulses, are required. Through this, an avoidance of a ‘voluntarist emphasis on agency alone’, and ‘structural pessimism’. The outcome(s) ‘will depend on on-going struggles and those to come: social struggles (local dominated classes against dominating classes in all their political dimensions, international conflicts between the leading blocs in command positions of the states and nations. There are no evident prognoses and different ones are possible’. Given that capitalism is a global system, strategic manoeuvring necessarily must be both national and international.