Thursday, December 16, 2010

Africa: Why It Pays to Look East

Why it pays to look East

By Garikai Chengu
Reprinted from the Zimbabwe Herald

AS the global economic balance of power shifts from the West to the East, it is becoming increasingly evident that we are living through the tail end of half a millennium of Western supremacy.

Consequently, Zimbabwe must perfect the art of benefiting from India, one of Asia’s emerging giants and a country that may become its most important trading partner.

A few years ago, the United States, with only 5percent of the world’s population, accounted for about a quarter of the world’s economic output. The US was responsible for nearly half of global military expenditures and had the most extensive educational and cultural soft power.

However, as it stands, the American Empire is crumbling fast. Much like the Roman Empire, America’s Empire is decaying from the inside rather than from barbarians or despicable terrorists at the gates.

Watching America’s unipolar moment end is rather like watching a drunken giant begin to lose its footing. A sobering reckoning of some sort seems inevitable; and it is difficult to see how the US can regain its footing.

Five current trends have triggered this decay and the apparent crash: imperial overreach; domestic battles over culture and foreign protracted battles; economic stagnation and unsustainable reliance on debt.

Five hundred years ago, what had given the West the edge over the East were five key features: the capitalist enterprise, the scientific method, global imperialism, the "Protestant" ethic of work and finally, the consumer society and capital accumulation as ends in themselves.

India has clearly replicated the first and the second and may be in the process of adopting others with some alterations (consumption and the work ethic). Only the third — imperialism — shows little sign of emerging in India towards Africa.

In fact, quite the contrary, India does a great deal of good in Africa: Thanks to the trade winds that gust across their common ocean. Africa and India have enjoyed close relations since time immemorial. India has helped out many UN missions across the continent, with some 9 000 Blue Helmets now in the field. Over the past five years India has invested heavily in African infrastructure and technology.

In part, large domestic investments in innovation and technology have led most economists to believe that India will grow faster than any other large country over the next 25 years.

Rapid growth in a country of 1,2 billion people is exciting, to put it mildly. According to Goldman Sachs, India will become the second largest economy in the world, ahead of the US, by 2050.

Despite these protracted time-frames, Zimbabwe must waste no time in perfecting the art of benefiting from India’s colossal rise. Zimbabwe must recognise and expand mutually beneficial areas of political, economic and social cooperation between the two nations.

Firstly, India and Zimbabwe already have a long history of close and cordial relations. During the era of the Munhumutapa Kingdom, Indian merchants established strong links with Zimbabwe, trading in textiles, minerals and metals. India also supported Zimbabwe’s liberation struggle.

In fact, former prime minister Indira Gandhi, who attended Zimbabwean independence celebrations in 1980, provided Zimbabwe’s guerillas with training, logistical and material support to wage the liberation struggle.

Indian authorities’ associations with the Second Chimurenga, and subsequent cordial political relations, have resulted in the crucial formation of an ideological alliance with an increasingly influential member of the international community and a probable permanent member of the UN Security Council.

Pretty much everyone agrees that the Security Council’s permanent, veto-wielding membership reflects a bygone age, when what mattered was who won the Second World War. An increasingly unrepresentative, anachronistic Security Council speaks with diminishing authority.

Another nation at the UN Security Council siding with the people of Zimbabwe on illegal sanctions will be invaluable, given the likely outcome of upcoming elections, and given some quarters’ penchant to cry foul when democracy doesn’t go their way.

Secondly, India has a great deal to offer Zimbabwe on the economic front. India tends to provide no-strings-attached soft loans for investment in infrastructure including schools, clinics and transport routes, a far cry from IMF and World Bank "reforms" which require a reduction in spending on the aforementioned infrastructure.

Over the past five years, India has offered lines of concessionary credit to Africa worth US$2,5 billion. Currently, it is mulling a US$10 billion investment fund for the continent and Zimbabwe is high up on its list of target nations.

Why then should Zimbabwe look West and agree to voluntarily lower its people’s living standards on the back of high interest loans, when it can secure soft loans and improve people’s lives, by simply looking East?

Finally, and perhaps most importantly, diamonds will become Zimbabwe’s most important resource and the nation is set to produce one in four of the world’s rough diamonds.

The Indian diamond manufacturing industry accounts for 14 out of every 15 rough diamond stones cut and polished in the world. Therefore, the importance of India to Zimbabwe and indeed vice-versa is crystal clear.

Currently, total bilateral trade between the two countries is a paltry US$60 million while Indian investments into Zimbabwe are worth less than US$50 million.

However, the Zimbabwe Diamond Consortium has signed a US$1,2 billion annual rough diamond supply commitment with its India counterparts. The value of the deal is almost 50 percent of Zimbabwe’s annual budget.

However, where Zimbabwe can benefit the most from India is learning how to cut and polish diamonds locally.

Such fundamental differences in knowledge as well as the labour, capital and resource endowments of Zimbabwe and India make them complementary business partners — meaning that the trend of increased trade is likely to be sustained.

This is good news, because India’s boom is a potentially pivotal opportunity for Zimbabwe to move beyond its traditional over-reliance on commodity exports and move up from the bottom of the international production chain.

Especially if growth-enhancing opportunities for trade and investment with the West continue to be stifled due to sanctions.

The shift of economic power eastward may have taken all of 500 years, but the Zimbabwe Government must waste no time in perfecting the art of benefiting from India, by focusing on strengthening Zimbabwe-India relations on all fronts. — African Executive

--Garikai Chengu is a scholar at Harvard University's Faculty of Arts and Sciences. He can be contacted at The views expressed herein are solely those of Garikai Chengu.

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