51吃瓜

After the seizure of a port facility by the Djibouti government, questions arise about the safety of investing in Africa.听

Following a of the Doraleh Container Terminal and the abrupt termination of DP World鈥檚 contract by the Djibouti authorities at the end of February, the company鈥檚 chairman, Sultan Ahmed bin Sulayem, had harsh words for both Djibouti and other governments on the African continent. Speaking at a , Sulayem stressed that 鈥淎frica needs infrastructure investments and if countries can change their law, [to take assets then this] is going to basically make it more difficult to attract investment.鈥�

The seizure is the latest chapter in a between the government of Djibouti and DP World, a Dubai-based trade-logistics company, over a concession agreement that saw the latter design, build and operate the container terminal at the Port of Doraleh, in which DP World holds a 33% stake. Djibouti had alleged that the 30-year concession (in effect since 2006) 鈥渃ontains elements in flagrant violation of its sovereignty.鈥澨齀n 2014, it initiated legal proceedings at the London Court of International Arbitration (LCIA) accusing DP World of to the head of Djibouti’s port authority, Abdourahman Boreh, when the concession was secured.

Those allegations were categorically rejected by the LCIA last year. The court ruled the concession terms were 鈥渇air and reasonable鈥� and cleared Boreh of wrongdoing after the Djiboutian government ran into trouble for .听Coming one year after that decision, DP World claims the seizure is just another step in Djibouti鈥檚 campaign to force a renegotiation of the contract. Dubai鈥檚 government also Djibouti of arbitrarily flouting a signed agreement.

Competing Interests

But why is Djibouti so insistent on renegotiating the deal? The real reason behind this otherwise complicated legal tussle is the battle for influence over the country鈥檚 ports. In fact, the tiny country is a square in a geopolitical chessboard where world powers, particularly the United States and China, are competing for pre-eminence. The Doraleh area houses America鈥檚 largest military base in Africa, as well as China鈥檚, which inaugurated its first African base there last August.

After the port seizure, many American officials feared Djibouti鈥檚 intentions were to seize the port from DP World only to to the Chinese. The erstwhile US secretary of state, Rex Tillerson, made Djibouti one of the five stops on the African tour that turned out to be his last. peaking in Addis Ababa, Ethiopia, just before his dismissal, this oblique warning: 鈥淲e are not, in any way, attempting to keep Chinese investment dollars out of Africa. They are badly needed. However, we think it’s important that African countries carefully consider the terms of those investments.鈥�

Tillerson鈥檚 point is a valid one. Locals are increasingly worried about their countries鈥� over-reliance on Chinese money. Beijing鈥檚 investments span across almost all sectors, and there seem to be hidden strings attached. Earlier this year, that China had bugged the headquarters of the African Union. That the AU building itself was wholly financed and built by China raised eyebrows, in particular the reports that its systems sent data to Chinese servers for five years.

Large swathes of Chinese investments in the media sector have raised concerns about听media neutrality as well. In 2012, the Nigerian state of Kaduna just over $30 million to fund its shift from analogue to digital broadcasting 鈥� a brazen attempt to strengthen the state-mouthpiece model of broadcasting over local independent voices.

While the Chinese investment model is far from exemplary, some Africans focus on the potential positives. Kenyan president the question by insisting that, for China-Africa relations to get better, 鈥渏ust as Africa opens up to China, China must also open up to Africa.鈥�

Potential Positives

In reality, investment in African countries cannot be a zero-sum game between American, Chinese and other interests. The continent, as both Sulayem and Tillerson rightly pointed out, has serious infrastructural deficits that require large-scale investment.听The International Monetary Fund鈥檚 2018 Article IV indicates Nigeria could grow its GDP by three-fourths of a percent if its large infrastructure gap is narrowed.

This means attracting investment from all sides and looking to creative solutions. Many African countries are taking the lead in capital investments, telecommunications and agriculture. The continent now has substantial investments from other regions such as the Middle East. Presently, between Africa and the Persian Gulf is valued at around $24 billion 鈥� representing a 700% growth over the previous decade.

Other analysts believe alternative , such as Islamic finance, could be key to closing sub-Saharan Africa鈥檚 infrastructural investment deficit, currently at $100 billion per annum. South Africa, Nigeria, Senegal, Togo and Ivory Coast have all issued sovereign sukuk (Islamic bonds). is also preparing to hop on board that train, though the Kenyatta government has pushed back its first issuing.

Irrespective of the numerous hurdles, the simple fact for investors to keep in mind is that Africa should not be treated as a charity case. The region has produced at least half of the world鈥檚 in the last two decades. Africa is estimated to be home to 1.7 billion people by 2030. Taken together, the consumer and business spending of that population will come to $6.7 trillion a year.

In 2016, the World Economic Forum highlighted , the core of which is its continuing economic diversification and its capability to lead in sustainable development in the future. With the recent signing of the agreement 鈥� an EU-like pact to unify Africa鈥檚 economies 鈥� by 44 countries, the continent鈥檚 demographic and economic growth will come to power global trade in the decades to come.

The rest of the world should see countries like Nigeria, Ethiopia, South Africa and Kenya as engines of future growth, so long as their governments can provide political stability, good governance and the rule of law. To make sure political capriciousness does not interfere with economic progress, leaders across the continent need to make sure Djibouti鈥檚 willingness to undermine other partnerships to please China proves the exception and not the rule.

*[This piece has been updated.]

The views expressed in this article are the author鈥檚 own and do not necessarily reflect 51吃瓜鈥檚 editorial policy.

Photo Credit:听听/