Africa's awakening stirs China and India
The purchase of a 20 per cent stake in South Africa's highly successful Standard Bank by Industrial and Commercial Bank of China (ICBC) is the biggest foreign direct investment in South Africa since the demise of apartheid.
This signifies a degree of engagement way beyond the 'resources grab' that many have accused Beijing of in its recent dealings with Africa. As the Financial Times reported, it 'is evidence that China is looking for a deeper relationship'. For ICBC, this is an important step in its quest to become a global bank.
Its chairman, Jiang Jianqing, said: 'We are focusing on merger and acquisition in emerging markets in Asia and Africa because these places enjoy high growth rates and have great potential.'
Last week, China Development Bank ratcheted up the tone by announcing a partnership with Nigeria's United Bank for Africa.
As Chinese and Indian investors pour into Africa, are their European and North American competitors aware that Rip Van Winkle is waking up in Africa? The fact that a top Chinese banker brackets Africa with Asia is one more sign that Asians themselves see the potential in Africa. This is about business opportunities. Already, there are over 900 mainland Chinese companies doing business in Africa.
The International Monetary Fund, in its new Regional Economic Outlook, estimates that, next year, the growth rate in sub-Saharan Africa should reach almost 7 per cent. It is happening, despite stagnant aid, because of increased private capital inflows, and rising domestic investment and productivity. The former war-riven states of Liberia, Sierra Leone and the Congo are growing at 5 per cent.
Private capital investment has tripled since 2003, although it is still far behind Asia's. At the moment, Nigeria and South Africa attract two-thirds of it. But, in a number of other countries such as Ghana, Kenya, Cameroon, Uganda and Zambia, foreign investment in the bond and equity markets is on the rise.
The upward pressure on oil prices has not yet hurt African countries. They have built up healthy reserves and have been able to draw these down to keep growth on track. However, if oil prices continue to rise, the strain will become more apparent.
If this advance continues, poverty will gradually fall, although only a handful can hope to meet the UN target of halving it by 2015. Nevertheless, as more of these countries stabilise their economies, sustain their external current accounts, build up their reserves and continue to grow, the less they have to gear their fiscal policy towards addressing macroeconomic imbalances. And, the more they can spend on improving poverty reduction through social safety nets, education and health services.
But despite the promise to double aid at the Group of Eight summit in 2005, they are not getting it. Perhaps this has something to do with the western mindset - Africa is a war-torn, aid-wasting continent. But most of it isn't any longer. Ask the Chinese and Indians.
Jonathan Power is a London-based journalist