Brazil, Russia, India Join Africa Resources Grab
14 December 2006Dow Jones International News
By Antoine Roger Lokongo
LONDON (Dow Jones)--It's not just China that is actively working to tap into Africa's natural resources; so too are rapidly expanding Brazil, India and Russia, according to commodities analysts.
Like China, these countries are working to offer Africa much-needed basic technology, infrastructure and investment in return for access to its minerals and energy.
Although other western investors have brought technology to Africa, it's often been of a level too sophisticated for its recipients to use alone. Not so for the BRIC countries, as Brazil, Russia, India and China are known.
"Unlike that which Africa's western partners bring in - a sophisticated technology, basically - the BRICs offer a technology that does not require a specialist's care," said Gary Busch, a London-based political and economic consultant who focuses on Africa.
Together, the BRICs accounted for 11% of Africa's total trade in 2004, up from 5% in 1995, while that of Africa's traditional trading partners declined to 33% in 2004, from a level of 36% attained in 1995, according to a report published by the African Export-Import Bank.
"Although the level of trade between Africa and its traditional partners - the United Kingdom, France, Germany and the U.S.- is still high, the rate of growth in volume of trade with the BRICs far exceeds that of Africa's traditional partners," the report concluded.
The BRICs' economies are already forecast to be collectively larger in U.S. dollar terms than the current six largest world economies within 40 years, according to a recent study by U.S. investment bank Goldman Sachs.
"By 2025, the BRICs could account for over half the size of the G6," Goldman Sachs said, referring to the U.S., U.K., Japan, Canada, Germany and France. Of them, only the U.S. and Japan may be left as the largest economies in dollar terms by 2050.
Trade among the BRIC nations has accelerated, now accounting for nearly 8% of their total trade compared with 5% in 2000, and analysts attribute this growth to billions of new consumers, institutional stability, falling trade barriers and the adoption of open-market economies.
And growth in the BRICs is expected to benefit Africa. A recent report by the Organization for Economic Cooperation and Development said that because resource-hungry Chinese and Indian firms are increasingly looking for commodities beyond their borders, there are many opportunities opening up for African governments.
China is still seen by some African industry participants, as well as by Africa's traditional partners in the west, as the most aggressive of the BRICs in its quest for Africa's energy and other natural resources.
"This can in turn be used by African nations asa source of technology, skill formation and world market access, apart from foreign finance that comes with the investment," the OECD report said.
"African entrepreneurs will benefit from transfer of technology that is affordable to developing countries and other skills required, especially by small, medium and micro enterprises," the report added.
Russia's Renova - which has shareholdings in metals, oil and coal assets - has a 49% stake in United Manganese of Kalahari, which is exploring a manganese deposit in western South Africa.
And Russia's metals giant Russian Aluminum owns Friguia in Guinea, which produces about 600,000 metric tons of alumina per year and is on track to expand to 1 million tons by 2008. It's also exploring at the Dian Dian bauxite deposit nearby.
Although Brazil, Russia and India aren't unified in their approach to Africa, and enter markets in different countries in varying ways, each country pursuing a somewhat different path, there have been some recent examples of cooperation between the countries.
"(The BRICs) use different incentives, such as interest-free loans, accordingly," said Nathalie Wlodarczyk, head of the African department at strategic risk analysiscompany Exclusive Analysis.
Wlodarczyk noted that the recently launched "Triangle Trade" under the India, Brazil and South Africa Forum, or IBSA, represents an initiative to promote the interests of their rapidly-growing economies.
India's trade with South Africa grew from $2.4 billion in 2003-04, to $4 billion in 2005-06.
Meanwhile Brazil's trade with South Africa doubled in 2005-06. In 2005, trade between the two countries was estimated at $1.5 billion.
Brazilian trade with Africa as a whole is already around $5 billion annually, or about 5% of Brazil's total, according to a recent report by the country's Trade and Investment Promotion Agency, and there's scope for expansion.
India is a relatively small player in the natural resource grab, dwarfed by China. But recently, it has shown some aggression in its hunt for African commodities, analysts said.
"For every state-owned African mine that China invests in, India is usually the next-highest bidder, and Indian firms have agreed to nearly $11 billion in investments, with more than $320 million worth of foreign direct investment already in place," said Harry Broadman, Africa-region economic adviser for the World Bank, in a recent report called 'Africa's Silk Road.'
The Indian cabinet recently approved a decision by ONGC Videsh Ltd., the overseas arm of the public-sector oil exploration major Oil and Natural Gas Corp. Ltd. (500312.BY), to invest $750 million in the Greater Nile Petroleum Operating Co. of Sudan in June.
And joint ventures with China are also starting to be created. India and China have recently agreed in principle to form a joint venture for the acquisition of oil resources in Africa and South America, following the recent visit of the Chinese President Hu Jintao to India.