Africa at risk of economic capture

Africa may be sitting at the centre of the most consequential supply chain realignment in a generation, but it is at risk, not just of missing this geopolitical opportunity, but of having that opportunity captured, writes Jon Foster-Pedley in Daily Maverick opinion piece. Foster-Pedley says the threat comes not just from foreign powers, but from networks of political elites, corrupt intermediaries, and extractive, embedded criminal organisations that have historically moved fastest into many governance vacuums the continent has produced. ‘These dynamics are not unique to Africa, but they are particularly costly here given the scale of unmet development needs and the intensity of geopolitical interest. What happens next will be critical. The International Monetary Fund (IMF) describes a world fracturing into blocs: US-aligned, China-aligned, and a contested middle ground of non-aligned connector economies. Much of Africa occupies that third space. Here, the optimists see opportunity. The realists see both opportunity and a trap – because potential unanchored to institutional capability does not stay neutral. It gets captured.’ In this shifting world order, can African leaders act to move themselves up the value chain, or at a minimum, negotiate substantially better terms at the lower rungs using genuine leverage rather than hope?, asks Foster-Pedley.

‘Much of it hinges on whether they can develop sufficient capacity and co-ordination to set and enforce the terms of extraction before someone else sets them for them. Nowhere is this choice more stark than in Africa’s mineral wealth. Africa holds a remarkable share of the minerals required for the global energy transition: copper, cobalt, lithium and rare earths. The demand is significant and growing. But demand alone does not create leverage.’ Leverage exists, he says in the DM, when one can credibly say one controls something someone else needs. In addition it has to be delivered reliably, and the terms of that delivery will build long-term industrial capability. ‘Without that combination, Africa risks remaining what one recent policy discussion described as “a price-taker in a geopolitical auction”, central to everyone’s industrial strategy but author of none.’ Foster-Pedley says the current wave of resource nationalism, including export bans in DRC and Zimbabwe, illustrates the danger. A poorly designed export ban often does less to discipline the extraction machine than to reroute it through channels that are even less transparent. Ghana is taking a more sophisticated approach, building a regulated Gold Board with traceability and financial controls rather than simply prohibiting exports. Botswana offers the longer lesson: patient, repeated renegotiation of its diamond partnership with De Beers, each round expanding local beneficiation, skills transfer and processing commitments.’

The lesson, he states, is not that export restrictions are wrong, it is that they function only when a state can process, police and predict, which requires institutions, energy infrastructure, logistics and regional co-ordination. Infrastructure is another area of contestation, notes Foster-Pedley. ‘The Lobito Corridor, connecting Angola, the DRC and Zambia, is simultaneously described by the EU as a sustainable development initiative, by Washington as a strategic connectivity project tied to critical mineral supply chains, and by the US Development Finance Corporation as a $553m investment in Angola’s Benguela railway. Same project, three framings. That tells you that this is contested infrastructure whose contractual terms determine who benefits, over what period, and on whose conditions.’ He points out in the DM that when when deals are structured primarily in confidential arbitration venues, with security arrangements that bypass normal oversight and off-take agreements that run for decades, the question of who actually negotiates on Africa’s behalf becomes urgently relevant. ‘The point is not to reject foreign capital, but to have the capability and the negotiating strength to ensure it is deployed through transparent, rules-based contracts that build domestic capability as they deliver returns to investors.'

'Regional integration offers perhaps the only real antidote to this dilemma. But the argument for integration is often reduced to the false binary of perfect pan-African unity or every country going it alone. This is costing the continent dearly, because the vacuum left by a lack of coordination is not neutral; it is too often filled by sophisticated criminal extraction networks that are better at cross-border operations than the fragile legal regional institutions meant to constrain them.’  According to the DM piece, Foster-Pedley believes that South Africa, Nigeria, Kenya and Egypt have the institutional depth, the financial markets and the regional influence to anchor genuine co-ordination, provided they can address unresolved governance deficits that limit their credibility and increase their strategic vulnerability to external coercion. ‘One of Africa’s central geopolitical weaknesses is administrative. If countries can strengthen governance to function reliably, including revenue services that collect, regulators that enforce, and ports and railways that run, then they stand a better chance of building effective coalitions.’ He concludes that the the stark challenge facing Africa’s middle powers, therefore, is whether they can build the coordination that serves their citizens before it is built for them, on terms they did not negotiate and from which they cannot easily escape.

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