Resource Rents: China & Africa

This week the International Growth Centre held a three day conference at the London School of Economics and africapractice was there to hear the latest debates and discussions surrounding economic growth in Africa.

China’s presence in Africa has been a ‘hot topic’ for some time now, with questions surrounding the legitimacy of resource rents generating considerable controversy. However, with African countries weathering the tides of global recession better than their western counterparts the potential and future in Africa for business and development has once again been highlighted. As the continent begins to experience accelerating growth, with Nigeria predicting GDP figures of around 10% by the end of 2011/early 2012, it is increasingly important that international actors understand what impact China is having on the business environment in Africa, and get to grips with the implications of Chinese involvement for their own investment prospects. As Chinese investments appear to be overshadowing those of the West and the African Union looks to the East for economic partnership, such considerations cannot wait.

It was not surprising, then, to see that the nature and impact of China and Africa’s relationship was debated by experts such as Paul Collier, director of the Centre for the Study of African Economies, Oxford University, and academic co-director of the International Growth Centre, and Christopher Alden, a reader in the Department of International Relations at LSE at the IGC conference.

The talk itself covered various points of interest, considering to what degree Chinese investments, and in particular resource rents (which involve exchanging infrastructure commitments for resource rights), are producing positive results for Africa. There is certainly no denying the scale of Chinese investment, with Chinese FDI into Africa at more than US$5.4billion in 2008 and new projects and agreements being announced on an almost daily basis, or indeed their importance.

One especially interesting area of deliberation was sparked by the question of whether infrastructure is the key to Africa’s future economic development. As Chinese investment has focused on infrastructure in particular this question is central in establishing the potential for China’s investments to help Africans reap economic rewards in the future.

Although China has signed some contracts to build schools and health care centres the deals have more often been more narrowly focused round transportation networks and resource extraction technologies, which of course enable the Chinese to obtain and export their share of the minerals extracted as well as providing security of investments. Concerns regarding the importation of Chinese labour to complete these projects and the lack of integration of these workers in to African communities have limited the positive impact of these opportunities for the continent, although more recently some countries, such as Angola, have been able to negotiate awarding a percentage of subcontracts for each project to national companies. Nevertheless, some of China’s actions have raised more serious questions concerning human rights issues, for example concerning weapon sales to Sudan.

International reaction to China and Africa’s ‘relationship’ has been somewhat confused and mixed. Paranoia, however, has been central, with fears that Chinese investments in Africa might mean there will be no room left for other international investors to pursue economic opportunities and contracts in the region. Western actors also seem concerned China will act as a barrier, with African governments and companies preferring to work outside their colonial networks free from the conditions often imposed by financiers in the West. However, the continent has potential beyond acting as a base for resource extraction, which is something China has yet to fully appreciate. Thousands of entrepreneurs and innovators await the education, access to communication networks and financial backing necessary to get their business ideas started and enable the diversification of their economies.

Within many industries, including resource based ones, there will increasingly be more room for investors who pursue infrastructure development in its widest sense, who recognise the role of Africans in the continent’s development and who focus on building the trust that comes from being culturally aware and involved. These things will be essential to nurturing positive economic interactions across borders, and the key to Africa’s economic development in the next decade.


Kathryn Brooks

South Africa's Entrepreneurs

I went along to a book launch at GIBS last night, for “South Africa’s Greatest Entrepreneurs”, published by Nigerian author Moky Mokura.

The book profiles “22 of the most successful and dynamic business visionaries” who have changed the shape of South Africa in their time. The entrepreneurs featured are: Sol Kerzner, Alan Knott-Craig, Koos Bekker, Herman Mashaba, Mark Lamberti, Adrian Gore, Raymond Ackerman, Pam Golding, Nkhensani Nkosi, Jenna Clifford, Whitey Basson, Mark Shuttleworth, Donald Gordon, Eric Ellerine, Natie Kirsh, GT Ferreira, Robbie Brozin, Carrol Boyes, Brian Joffe, Gary Morolo, Ndaba Ntsele and Anant Singh.

GIBS clearly has entrepreneurialism at the centre of its foundation, being the brainchild of Professor Nick Binedell’s entrepreneurial spirit. Working in the technology space in particular, how to find, fund and facilitate entrepreneurs is an ongoing discussion. I don’t think everyone is cut out to be an entrepreneur, (which is a good thing, in my opinion), but I do agree it’s an essential part of driving a developing economy, building new foundations for future businesses.

On Thursday night it was mostly a collection of white, middle aged men who took to the podium to describe their experience of being an entrepreneur in South Africa, and with limited time, the insights were also a bit limited unfortunately. Aside from the usual rhetoric about working 24x7, the high chances of failure etc., it was sometimes hard to tell the difference between a successful entrepreneur and a successful business leader.

What was great to see was that Moky had persuaded the profiled entrepreneurs who attended the book launch to donate an hour of their time to mentor an aspiring entrepreneur. That’s the real resource – the direct and dedicated insight, which will be incredible for anyone who bids and wins for that time. I guess even the genuine entrepreneur can still do with advice and direction from experience!

With that in mind, what was missing for me was the younger generation of entrepreneurs, the up and coming. I know the book is a reference tool to those who have succeeded over the years, but I also think that their stories have been told before, albeit not in this form in a single place. For me it’s about trying to find the entrepreneur that you haven’t heard of yet, who may have a new experience, different advice, given the environment that today’s entrepreneurs are working in is completely different.

Having said that, a book dedicated to South African entrepreneurs does at least show (to the outside world, the doubters), that the country is producing top-class talent, has the history of success and a foundation of knowledge to build on.

I think we all still have something to learn from these entrepreneurial titans, but I’d be intrigued to see what a different collection of people and experiences the same book might produce in five years time.

Paywalls – are they the future to the survival of electronic IP?

Our content is valuable and good quality information, you should start paying for it!

The Times of London recently put up a pay wall on all information produced for their website; you will now have to subscribe to access its contents online. It cost you £1 to access the website for one day and £3 per week.

Blogger Jon Rodoff, wrote a brief history of paywalls (http://radoff.com/blog/2009/11/30/a-brief-history-of-paywalls/):

This article shows that the history of paywalls, although chequered, has produced some success stories. In 2002, Financial Times started charging readers for their online content, yet still managed to increase subscription rates – in fact, the FT achieved a 30 percent increase amongst online subscribers in 2009. While it is easy to take FT’s success as a great case study, it’s important to note that they focus mainly on corporate businesses rather than individuals and they hold a specific position in the market.

Wall Street Journal is another company that implemented a paywall for some of its online content. The paywall itself is only effective when you access the website directly, however one can still access content behind the paywall by going through Google links. So begs the question, has it generated expected revenues for the newspaper?

New York Times earlier this year also announced that starting January 2011, they would place some of its content behind a paywall. Some articles would be available for free, then to read further, subscribers would be required to pay a flat fee to access it.

This begs the question: with so much content on the internet would you want to pay to access information that is readily available on another website?

Early figures, and a study by Nielson Net Ratings (http://www.boingboing.net/2009/11/30/notes-from-a-news-si.html) shows that there has been a significant drop in the newspaper’s online readership since the introduction of paywalls. Like any other website’s success, traffic is essential, it determines the number of advertisers vying for space on a website. Sharing networks affect trends. A story gets shared, and generates a lot of traffic – but if a fraction of those new readers don’t keep coming back for more, will advertisers want to?

The first company to support Murdoch - owner and founder of News Corp, was Apple with the iPad, when it launched a paid iPad application that will support The Times. The Times is now selling full-page display campaigns in to its iPad app, for which readers pay £9.99 per month. This application offers specially designed Monday to Saturday editions of The Times to users, including most sections of the paper - which can be downloaded and read offline. With so much content on the internet will this new business model work? Rupert Murdoch certainly thinks so. He says the introduction of paywalls is vital for the future of journalism and the sharing of information online. Murdoch believes that more and more publications will follow this model to ensure the survival of their businesses.

Is this the future? The next months will definitely tell an interesting story!