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Tuesday, October 21, 2014
Servaas van den Bosch
- African trade with India and China flourished over the past decade but, with unemployment rising and industrialisation failing to take hold, cracks are appearing in Africa’s much-vaunted “Look East” doctrine. Meanwhile, from across the Atlantic, Brazil is making inroads into the continent.
Could relations with the Latin American powerhouse present a more viable alternative to the East in Africa’s South-South relations?
In June a newspaper photo of former Namibian president Sam Nujoma must have raised some eyebrows at breakfast tables across the country. A grinning 82-year old stared up from front pages, intimately flanked by a pair of equally jubilant but scarcely clad Samba dancers.
The former president’s chirpy mood was – at least in part – explained by the Brazilian oil and gas exploration company High Resolution Technology (HRT) hosting a prestigious launch party in the Namibian capital, where the photo was taken.
HRT will be drilling for the black gold off the Namibian coast and expressed confidence that the southwest African nation will soon join the ranks of oil producers.
As remarkable as its 400 million dollar investment is the commitment to the continent’s wellbeing that Brazilian investors express.
HRT Chief Executive Officer Marcio Rocha Mello at the launch praised the country’s stable economy and accommodating legal framework. He also committed one Namibian dollar (0,15 U.S. dollar) per barrel to the preservation of marine reserves.
While perhaps a hollow offer as so far no oil has been found, it’s also a gesture few of the Chinese state-owned firms presently rummaging through the continent for resources would care to match.
And, in a nutshell, it perhaps signifies the different approach the Brazilians are thought to take to investment which, in contrast to China’s no-strings-attached policy, is often accompanied by social programmes or aid.
Of course Namibia is not the only African country targeted by Brazil. Brasilia has historically looked towards Lusophone Africa.
In Mozambique, for instance, diversified Brazilian mining company Vale in May opened a 1.7 billion dollars coal plant, the largest once-off investment the southeast African country has ever seen. In two years the world’s second largest miner will export 11 million tons of coal annually from the Moatizi mine.
At a recent mining conference the company announced it would continue to invest in Africa a total of 12 billion dollars over the next five years.
This is not an isolated event. Some 500 Brazilian companies are active in over 30 African countries. Writing in a recent paper, researcher Gerhard Seibert from the Lisbon University Centre for African Studies says Angola alone hosts more than a 100 Brazilian companies.
Some giants with long-standing interests in Africa are oil company Petrobras, active in Angola since 1979 and now present in virtually every oil-producing country, and construction company Norberto Odebrecht that in the early 1980s started operations in Angola, using the country as a gateway into the continent.
Many companies are supported by extensive credit lines from the state-owned Brazilian Development Bank (BNDES).
While Brazil’s relationship with Africa precedes the recent upsurge in Chinese involvement by decades, President “Lula” da Silva revived Brazil’s interest in the continent, in step with the objectives of the India-Brazil-South Africa (IBSA) forum.
During his 12 official visits he doubled the number of Brazilian embassies in Africa and boosted trade from three billion dollars in 2000 to 26 billion dollars in 2008.
“Politically and historically the context of Brazil’s engagement in Africa has changed considerably,” notes Seibert about the “Lula years”.
Adds Sanusha Naidu, senior researcher at the Human Sciences Research Council, a statutory body in South Africa: “Companies have used Brazil’s diplomatic efforts as a springboard to deploy their African activities, especially in the countries with which they have an affinity based on the Lusophone heritage.”
Brazil’s trade with the continent stood at 20 billion dollars in 2010. This is still dwarfed by China’s 107 billion dollars’ worth of trade with Africa, but is not much lower than that of the other emerging market giant India, which stands at 32 billion dollars.
Impressive figures, especially when taking into account the billions of dollars in aid that Brazil poured into Africa during the same time. Still, critics argue Brazil simply doesn’t have the muscle to match China’s African footprint.
“The argument often is that Brazil and, to an extent, India lack the support of the state which in China is the champion of foreign investment,” is Naidu’s analysis. “But you do have an extensive private sector in Brazil that for decades has nurtured its global contacts. The private sector should be the motor of promoting Africa as an investment destination.”
While there is a trade agreement between the Southern African Customs Union and Mercosur (Latin America’s Southern Common Market), observers say this is not used optimally.
Researchers of the Trade Law Centre of South Africa (TRALAC) point out in their analysis of the trade agreement between the two blocs, aptly titled “Shall we Samba?” obvious possibilities for trade, especially in the agricultural sector.
“Of interest, as well, is Brazil’s focus on renewable energy, especially biofuels,” adds Naidu. “Its focus on innovation and research and its willingness to transfer skills make it an attractive partner.”
“Now the question is how will Brazil move into the greater available space in Africa. So far Lula’s successor, President Dilma Rousseff, seems to have adopted his policies and is moving along the same trajectory.”