University of Johannesburg: G7 scramble for Africa presents a golden opportunity

The Group of Seven (G7) comprising Canada, France, Germany, Japan, Italy, the United Kingdom and the United States held its semi-annual summit between 11 and 13 June 2021 in Carbis Bay in the UK. With a combined Gross Domestic Product (GDP) that makes up 45% of the global economy and making up the top 10 global exporters, top 10 United Nations donors and the top 15 of the countries with the highest per capita income, the G7 is an important global policy coordinating forum.

Held under the theme “Build Back Better”, the summit sought to chart a way forward in addressing the global health crisis caused by the Covid-19 pandemic, focusing particularly on the global vaccination roll-out which is the only path out of the pandemic. The countries also set their sights on managing the post-pandemic global economic recovery and committed to seizing the opportunity to begin the work of building a net-zero emissions and climate-resilient economy.

In their plans for global economic recovery, the countries undertook to initiate “a green and digital transformation that will increase productivity, create new decent and quality jobs, cut greenhouse gas emissions… and protect people and the planet as we aim for net zero by 2050”. In this regard, the group said it would propose a “new deal with Africa” including working with the International Monetary Fund (IMF) to advance climate finance to the tune of $100-billion to the low-income countries.

A paper commissioned by the G7 presidency for the summit declared this time “a special moment in history offering the chance and indeed the duty for the G7 to lead a globally coordinated recovery driven by sustainable investment and innovation by both the private and public sectors”. This will be part of the transition to and reconstruction of the global economy into a climate-resilient and environmentally friendly mode with a view to boosting human, physical, natural and social capital.

The paper calls for a systemic change that will see a scaling up of quality investments in low-carbon energy, transport, telecommunications, agriculture and construction industries to boost physical capital. Investments in health and education, strong institutions and social cohesion, and in the protection of the natural environments like agricultural land, food, and maritime and aqua spaces will anchor the 21st-century economy.

For a climate-centred economy to be truly successful it must be genuinely global with no country or region left behind, since climate change and environmental degradation are global phenomena that do not respect national borders. As such, developing countries that have been left at the periphery of the old economic model must be brought in as active participants in the new economic model. Hence, the paper calls on the developed countries to put in place a global investment programme intended for the developing world like the “Marshall Plan” that saw investments flow to western Europe for the post-war reconstruction in the 1950s.

Several instruments and channels have been lined up to boost investment in sustainable infrastructure in developing and low-income countries. These include considering debt relief and debt swops for the 70 low-income countries, 38 of which are in or at risk of debt distress. This could mean cancellation of old debts and provision of cheaper ones, extending the Debt Service Suspension Initiative (DSSI) or swopping debt for climate and nature-friendly policies and projects.

The G7 could also provide concessional finance through concessional loans, guarantees and insurance to low-income countries. The IMF, where the G7 countries exercise significant influence, could be used to provide advice on climate-friendly policies and be encouraged to integrate climate and environmental factors into its lending and capacity-building functions.

The IMF could also use the proposed $650-billion Special Drawing Rights, which would go a long way in boosting the forex reserves of debt-stressed low-income countries by easing their access to credit which would promote investment in sustainable infrastructure and set in motion the transition to a green and net-zero emissions economy. The IMF will be key in providing expertise to developing countries on inserting climate and environmental factors in their projects, enhancing their feasibility.

Finally, multilateral development banks (MDBs) like the World Bank and African Development Bank (AfDB) could also be engaged in providing policy, technical and financial assistance instruments, mobilising private finance and helping improve the investment climate in developing countries. The G7 countries could help scale up the MDBs’ lending capacity to aid more investment in green and sustainable infrastructure.

If this paper is anything to go by, the West seems to be seriously considering scaling up investment in Africa and the wider developing world to effect a global transition to a green economy as part of the post-pandemic economic recovery. This could mean billions of dollars in investments to Africa in the medium to long term, which could not be more timely considering that the continent is in the process of implementing the African Continental Free Trade Area (AfCFTA), the success of which hinges on investment in infrastructure.

However, these overtures from the West must also be read in the context of the prevailing global geopolitical rivalry between the West and China with a view to understanding how Africa fits into the larger scheme of things. This potential “new deal with Africa” comes amid China’s Belt and Road Initiative (BRI) which has been signed by 40 African countries since it was announced by the Chinese President Xi Jinping in 2013. Since then, China has invested a total of $187.59-billion in BRI projects across Africa, translating into an annual average of $23.45-billion per year.

The BRI has seen the construction of tens of thousands of kilometres of rail and road networks, airport and seaport infrastructure, expansion of telecommunications and construction of massive dams and energy power plants in various African countries. However, the West has criticised the BRI as China’s political project meant to trap weak and small African countries in Chinese debt and thus undermine their sovereignty when they fail to pay back.

The BRI has also been criticised for being environmentally insensitive by paying scant regard to the natural environments and ecosystems affected by its projects, thus placing the lives and livelihoods of people and animals who live there in jeopardy. Hence the G7’s “new deal with Africa” could be designed to counter China’s BRI, thus turning the continent into a geopolitical playground of the great powers.

It is interesting that the G7 Summit took place just three months before the Forum for China-Africa Cooperation (Focac), scheduled for September in Senegal. In the 2018 Focac, China announced its intention to avail $60-billion in aid and investments to Africa over the next three years leading to 2021. Thus, Focac will give China a chance to respond to the G7’s latest initiative.

A golden opportunity for Africa
The prospect of “new money” coming to Africa presents opportunities and challenges for the region. While there is no doubt that market size and access to natural resources are key determinants of aid and investments (FDI), the “new deal with Africa” and the BRI are arguably about reputational legitimacy rather than sheer altruism. Irrespective, the consequential investments and aid into various ailing sectors in Africa including health/vaccines, energy, environment and infrastructure could foster development.

However, the underlying question remains how to yield optimal development outcomes from the proposed aid and investments. This question stems from the narrative of mismanagement, corruption and accounting irregularities/siphoning of funds for personal gains leading to donor fatigue and steady erosion of investments by traditional/Western donors. The emergence of China as an “aggressive” (sometimes dubbed “rogue” by Western counterparts) investor in Africa has stirred a renaissance of interest on the part of the latter.

The mainstream answers to this question include building institutional capacity and good governance, and a conducive investment climate — political and economic stability, improving the regulatory environment, and upskilling the existing labour force. While these are crucial to the implementation of development projects for the betterment of the African people, the scramble by great powers offers Africa an opportunity to rewrite this narrative. Though these cannot be addressed overnight, acting with agency and adopting a “people-first” approach to development are steps in the right direction.

Aid and investments, which may be construed as beneficial to the recipient state, often have undertones of agenda-setting. Investors may use these to promote and propagate ideologies or principles. For instance, the quest to build a net-zero emissions and climate-resilient economy is top of the agenda for the Western bloc, particularly the United States. This has huge development implications for Africa. While Africa is predicted to be the worst hit by a changing climate, highlighting the need for a sustainable approach to development, the “aggression” with which the US pursues this agenda and the subsequent pace at which Africa is required to transition underlines the power dynamics between the Global North and South.

An issue that becomes important to and is prioritised by the Western bloc becomes construed as a “global” agenda, eroding the agency of the developing world in choosing what issues to prioritise. Recipient states should thus decisively channel such new funds into addressing selected priority issues to yield short-, medium- and long-term benefits. To do this effectively, these governments must prioritise the wellbeing of their people over selfish interests.

Beyond building institutional capacity is the need for a “people-first” approach to development. Reports on the mismanagement of Covid-19 relief funds in Africa exposes the flawed understanding of the concept of development. Aung San Suu Kyi argues “development as growth, advancement and the realisation of potential depends on available resources — and no resource is more potent than people empowered by confidence in their value as human beings”.

The sanctity of human dignity should always be at the heart of any form of development, especially in Africa; not GDP figures or high-rise buildings.

New funds that are made available to the region for development purposes must be channelled towards improving human existence with dignity. The “government” is a chain of departments and offices carrying responsibilities. If enough people within this chain siphon funds, service delivery and development is undermined. The mismanagement of the PPE funds and the State Capture case in South Africa are examples of this reality. Punishment mechanisms as implemented by the state are crucial to avert such behaviour.

Regional governments must seize the opportunity presented by the scramble between great powers for reputational legitimacy in Africa. It is an opportunity to act with agency and to prioritise human wellbeing in the pursuit of sustainable development.

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