BRIC, Africa need to bridge barriers

What are the contributing factors to these conflicts? What factors are hindering BRIC-Africa economic cooperation? How can the Africa-BRIC relationship be improved so as to create a win-win situation for both parties?

As a result of the BRIC countries engagement with Africa, there has been a sizeable flow of foreign direct investment (FDI) into Africa, which often results in the establishment of companies in Africa by BRIC entrepreneurs. The activities of some of these companies have resulted in frictions, particularly in the area of labor relations. Even though these companies employ Africans, in some instances, these companies sometimes operate without regard to the safety and environmental laws of the land, thereby resulting in injuries and sometimes death. Another area of concern is the influx of expatriate workers from the BRIC economies. Very often African governments have signed contracts with the BRIC nations containing clauses that allow for the importation of expatriate staff, despite the availability of local skill sets to perform these roles.

Another factor that has strained cooperation between BRIC and Africa is the impact of their trade on the local industry. As a consequence of Africa opening its market to investment from the BRIC economies, a number of local industries have been unable to compete with the cheap imports coming from the grouping, which eventually results in the demise of these industries. A good example is the case of the textile industries, in which cheap textile imports from China resulted in the loss of hundreds of thousands of jobs in Nigeria, Lesotho and South Africa. The flooding of Chinese goods into a number of African countries has also stifled the development of the African manufacturing sector.

A lack of transparency in dealings between Africa and the BRIC nations also acts as a barrier to a harmonious relationship. One area where the lack of transparency is apparent is in the area of contract negotiation. Some of the contracts agreed between the BRIC nations and the African governments contain "Trojan horse" clauses, which allow for high import content and imported labor, thereby undermining local industries and employment. Furthermore, details of a number of agreements signed between African states and China are not subject to public scrutiny, thereby creating suspicion as to the real motives of these contracts. Very often, aid to African states has been used by the BRIC countries to obtain monopoly rights to the countries' mineral resources. A number of corrupt African government officials also demand bribes before awarding contracts, thereby making it difficult for BRIC investors to operate.

The support to some African regimes by some of the BRIC economies in order to access the countries' resources has often resulted in ill feelings toward BRIC among the citizens of a number of African states. This could backfire.

Furthermore, there appears to be information asymmetry in the dealings between African governments and BRIC. While the BRIC nations know what they want from their engagement with Africa, it is not really clear what Africa hopes to get in return. There is no coherent and holistic African program of engagement with each of the BRIC member countries. As a result of the inability of African governments in adopting a united front when dealing with BRIC, they are unable to exercise a strong bargaining power during negotiations.

In order for a harmonious Africa-BRIC economic cooperation to thrive, both parties will need to consider the following:

African member states should adopt a unified approach in their engagement with BRIC. Rather than engaging separately with each of the BRIC countries, African governments should combine as a single bloc as this will put Africa in a strong bargaining position. African governments should also discuss and develop a BRIC policy, which would spell out what it expects to get out of the Africa-BRIC economic engagement. Furthermore, African governments should set up think tanks or fund research on BRIC with a view of gaining a better understanding of BRIC engagement in Africa.

There should also be more transparency in BRIC-Africa economic engagement. China should provide more information about its foreign aid to Africa, including project costs, loan value, loan terms and repayment conditions. Furthermore, "Trojan horse" clauses contained in contracts, which are detrimental to local employment and industry, should be discouraged. However, allowances should be made for the employment of imported skilled workers where there is a paucity of the relevant skills in the local market. African governments should be more transparent in their operations by discouraging corrupt officials from demanding bribes from BRIC investors.

The BRIC economies will also have to balance their economic objectives with moral responsibility. For BRIC nations to achieve their objective in their economic engagement with Africa, it is important that the populations in countries where they have investments are treated fairly. African governments will have to monitor the activities of its trading partners to prevent instances whereby local industries and employment are undermined.

African governments, in conjunction with BRIC, should work out modalities to enable Africa businesses to access the vast BRIC market. Furthermore, as the BRIC economies continue to move up the manufacturing value chain, African governments should position their economies to exploit the vacuum left by BRIC advancement up the value chain. Africa should also learn from the development models adopted by the BRIC countries and, where feasible, collaborate with them in applying an African solution using the BRIC developmental experience.

The ever-expanding BRIC-Africa economic engagement presents a great opportunity to lift Africa out of poverty and at the same time provides BRIC with access to Africa's strategic resource assets. Bridging the current barriers in trade between the two blocs will go a long way in making the relationship more of a two-way and win-win cooperation.

The author is the macro strategist for Diadem Capital Partners Ltd, London.

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