Here is a six-part series straight from the Globe and Mail. Good research and piece by Geoffrey York.
From The Globe and Mail:
AFRICA NEXT: A SIX-PART SERIES
NOW: What is gained and lost as investment outpaces aid
PART 2: Russians building luxury homes in Congo? Get used to it
PART 3: The hotel magnate who used to hide from rebels
PART 4: Weary of handouts, Africans try enterprise
PART 5: The impact of the new land grab
PART 6: How the boom can transform Africa
In this first of a six-part series, Globe and Mail Africa correspondent Geoffrey York investigates how Africa’s growth is changing its future.
In the dusty streets of the tiny village of Romaro, a building boom is under way. Crumbling mud shacks are being replaced by new tin-roofed houses. Almost overnight, the village’s ancient way of life has vanished. Most of its farmland has been swallowed up by a Swiss multinational, Addax Bioenergy, which has leased more than 14,000 hectares of Sierra Leone for a $330-million sugar-cane plantation to produce ethanol for the European market.
Centuries of subsistence farming have been replaced by wage labour as the 200 villagers are propelled into the globalized economy. Most families in Romaro now have at least one person employed by the Swiss company, which pays leases and helps to plow the remaining farmland. The money has allowed the villagers to build 13 new houses.
“We get a wage every month,” says Mohamed Kamara, a security guard at the sugar-cane plantation. “Now, I have job security, and I can get credit from a bank. It’s far better than before.”
It’s the unexpected message of today’s Africa. Every week, another bank or investment fund is touting it as the next big thing, an emerging lion to follow the Asian tigers. Resource exports are soaring, and growth is climbing to unprecedented heights – second only to Asia, and fast catching up. And for the first time in generations, Africa is receiving more investment than foreign aid.
But people tell a different story just a few kilometres away from Romaro, in Lungi Acre. The 700 villagers there have been boxed in by the Swiss project, their huts surrounded by the vast plantation. Rice and cassava fields were bulldozed, and people were left with so little water and farmland that they say they must buy imported rice in the markets. Just outside the village, a water reservoir is fenced off with razor wire, and guards patrol to chase villagers away from the sugar cane.
“Addax is making the situation much worse,” says Abdullah Serry, an elder. “There’s no water for the little land we have left. We were dependent on those lands for all these years. We depended on them for survival. Now, we rely on Addax for everything.”
The dynamic of the two Sierra Leonean villages is the tale of the new African boom.
As investors and traders pour in, some of the poorest corners of the continent are being transformed. “Tomorrow’s Africa is going to be an economic force,” says a report from Goldman Sachs. KPMG trumpets the Africa story as “the rise of the phoenix.”
Many factors have made this possible. After decades of stagnation, in recent years most African countries began to reform their economies. Wars, coups, political instability and disease have declined since the late 1990s. And rising commodity prices have lured investment in African resources.
Mobile technology is leapfrogging ahead (Africa has become one of the fastest-growing markets for Canadian firm Research in Motion’s BlackBerry) and a new consumer class has been born. Multinational retailers are leaping in, and even Wal-Mart recently acquired a chain with nearly 300 stores in 14 African countries.
The prosperity of China has been a particular spark, with about 2,000 Chinese companies investing $32-billion in Africa by the end of 2010. Beijing’s trade with Africa has soared from $2-billion to an incredible $166-billion in the past dozen years.
But what is the truth behind the hype? The Globe and Mail has spent months investigating the African boom, journeying from Congo and Burkina Faso to Liberia and Botswana, talking to everyone from miners and farmers to factory owners and chief executives.
The rise of Africa is an issue with huge ramifications for Canada, since it could affect how we tailor our foreign aid, how our mining and energy companies choose their next targets and where our manufacturers will find their future markets. Yet the realities are obscured by lingering clichés about Africa and an unwillingness to consider the social costs.
As foreign investment mounts, it often brings with it traumatic social dislocation and a distorted economy. The money often disappears into the pockets of a corrupt elite, while ordinary Africans see fewer benefits. Oil-rich countries such as Nigeria and Angola are the most extreme examples, where billions of dollars in oil revenue have gone into the foreign bank accounts of top officials, leaving most of their citizens poorer than ever.
It does not have to be this way. A few African countries, such as Botswana and Ghana, have carefully managed their resource revenue and transformed themselves into middle-income countries. Botswana has capitalized on its diamond mines by creating a fledgling industry in diamond sorting and processing, and it is increasingly seen as a model for the continent.
The small West African nation of Sierra Leone is seeing both the best and worst of the trend. Just a decade removed from an era of brutal warlords and blood diamonds, it is seeing its hopes rise dramatically. But, as in even the best-performing African countries, the boom threatens to create two solitudes, between the Sierra Leoneans who will be on the winning side and those who risk losing hold of what little security they already had.
Sierra Leone is one of the poorest countries on Earth. Most of its six million people survive on less than a dollar a day. Founded by British traders and freed colonial slaves in the 18th century, its capital, Freetown, is filled with vast slums built on the edge of huge smouldering garbage dumps. Children dodge among the smoke and flash fires to collect metal and plastic scraps for recycling.
Visitors to Freetown’s beach restaurants are mobbed by war amputees who beg for a living. The city is plagued by power shortages. To reach it from the airport, visitors must take a rickety speedboat or an overcrowded ferry across an estuary. (Politicians keep promising a bridge and a new airport; nobody knows when they will be built.)
Yet Sierra Leone is also one of the world’s fastest-rising economies. Its growth rate is projected to be a world-leading 34 per cent this year, according to the International Monetary Fund.
The speedboats from the airport these days are filled with jovial young mining executives and agribusiness investors, eagerly discussing the profits to be made from oil, minerals and palm-oil plantations.
Sierra Leone’s government is luring agricultural investors by promoting its cheap farm labour (usually just $2 or $3 a day) and its cheap land – leasing for just $5 to $20 a hectare annually, compared with $100 in Brazil or $450 in Indonesia.
In total, nearly a million hectares – almost a fifth of Sierra Leone’s arable land – has been leased by foreigners or is being negotiated with investors from nations such as China, India, Portugal, Belgium and Switzerland.
Meanwhile, oil companies are investing more than $100-million in offshore oil discoveries here. The mining sector is booming. Chinese construction workers are rapidly expanding the roads. And the country’s biggest diamond miner is supplying gems to the famed U.S. jeweller Tiffany & Co.
The president, Ernest Bai Koroma, predicts that Sierra Leone will become a middle-income country within 25 years and a donor country within 50 years. He proudly tells investors that the capital will get its first five-star hotels this year, a Hilton and a Radisson Blu. (The Radisson is emerging from the ruins of a former United Nations military base, an apt symbol for the country’s revival.)
But the President also admits that all the business activity so far has failed to provide much improvement in the lives of ordinary people. Sierra Leone’s foreign investors generally enjoy favourable tax rates and other incentives from the government, but most profits are exported to their overseas owners, and the local benefits are poorly distributed.
For example, mining accounts for almost 60 per cent of Sierra Leone’s exports, but provides only 8 per cent of government revenue, according to a recent report by DanWatch, a corporate-ethics watchdog.
Commercial land deals often have provoked protests. Dozens of people were arrested for blockading roads in protest against a Belgian company’s lease of 12,500 hectares for palm-oil plantations, at the bargain price of just $5 a hectare annually for 50 years.
Addax, the Swiss company operating in Romaro and Lungi Acre, insists that it consulted local communities before proceeding with its plantation. It says it is creating more than 2,000 jobs at double the minimum wage, and plowing and sowing more than 1,500 hectares of farmland for the villages. All the dissent is being stirred up by “wicked” groups of foreign activists, it says.
But many of the villagers, according to local activists and independent think tanks such as the U.S.-based Oakland Institute, were unaware of how the land deal would work when their chiefs agreed to it.
“Most of the time, it was induced consent, because they’d heard that the government was behind it,” says Lansana Hassan Sowa, a project officer at the Sierra Leone Network on the Right to Food, a civil-society group that works with the villagers. “It has totally altered their former way of life. They’re concentrated in a much smaller area now. They can never do anything except on the timetable of Addax. Everything is measured by the company. It means total dependency.”
While the plantation may have created jobs, it has also created unemployment, he says: Where for generations the villagers shared the planting, plowing and harvest of their rice and cassava fields, that way of life is gone. “You can see people sitting idle in the villages now. You never saw that before.”
Is life better or worse? Some talk about the jobs, new roads and new houses. But many say life is harsher and more insecure.
“We’re afraid for tomorrow,” says Alusine Koroma, a 51-year-old villager. “There’s not enough land to feed us in the future. Now, we depend on a salary. Now, there’s no time for us to sit together to discuss the way forward.”
On a continent with a long history of foreign domination and colonial exploitation, this wave of external investment has the potential to repeat some of the errors of the past. There is still a power imbalance between huge multinational investors and weak governments, with officials tempted by quick payoffs and sometimes willing to sell out the people who live on the land.
Mining and oil companies can generate big sums of money for governments while employing less than 1 per cent of the African work force.
The greatest share of Sierra Leone’s economic boom is due to its iron-ore deposits, among the richest in the world, and its other mineral assets, including diamonds, titanium and bauxite. Two British-based mining companies, African Minerals and London Mining, are now making the first iron exports from the country in more than two decades.
African Minerals, whose magnetite iron-ore mine in Sierra Leone is said to be the biggest in the world, has sold 25 per cent of the project to a top Chinese steelmaker for $1.5-billion.
It has rebuilt a port and a 270-kilometre railway line, promising more than 7,000 jobs and $1.5-billion in revenue for the country over the next four years. It would be a massive injection of money for a government whose entire budget is barely $500-million this year.
But the arrival of the big miners has also brought conflict. Employees and local residents have often complained that African Minerals is not doing enough to help them, and the protests have sometimes turned violent.
A pay dispute led to rioting and gunfire this year in the town of Bumbana, near the African Minerals mine. Hundreds of workers had gone on strike at the mine, saying they were being discriminated against and paid lower wages than foreign employees. Police arrested dozens and opened fire, leaving at least one person dead and six injured.
Survivors say the gunfire was reminiscent of the civil war. “It was like a town under attack by rebels,” says Kadie Kalma, a 24-year-old mobile-phone saleswoman in Bumbana who says she was mistaken for a mine worker, beaten and kicked by the police, and later wounded by two bullets when the police opened fire on the striking workers.
The town has become a place of strife, not hope, she says. “I don’t see a lot of people being employed. I don’t think anywhere there is conflict is a good place.”
The other big mining concern, London Mining, has a $2-billion project to redevelop an abandoned iron-ore mine in the same region. But villagers accuse it of blocking a water channel, causing the flooding of rice fields in the village of Manonkoh for the past two years.
“You can see all the destruction,” says Umaro Koroma, a 35-year-old teacher, walking by rice fields choked under a metre of water. “We have no place to cultivate rice. If we can’t cultivate, we will have no food. And if we have no food, we will die.”
The company denies responsibility for the floods, blaming instead a fish trap in a local stream. It says it is trying to remove the trap, and that it has provided 300 kilograms of rice to every house in the village “to assist with any current hardship.”
Villagers claim they haven’t received those benefits, and question the value of foreign investment. “Maybe it’s good for the government, but it’s not good for us,” Mr. Koroma says. “We need foreign investors, but we want investors who care for us.”
A major problem is that many African governments (with a handful of exceptions, such as Botswana) do not have the business experience or legal resources to negotiate fair deals with large multinational companies. As they face the next wave of foreign investors, the interests of their people could be swept aside.
Hendrik Malan, the Africa director at the U.S. research firm Frost & Sullivan, says Africa stands where China stood 30 years ago and where India stood 20 years ago. But he also questions whether the African boom is sustainable if it fails to tackle corruption, logistical chaos and structural weaknesses: Trade among African states is only a tiny fraction of the continental total, barely a third the internal-trade rate in Asia. And many African nations are vulnerable to “Dutch disease” – the destructive effects of resource-dependent economies.
For example, Mozambique, one of the poorest and most war-damaged countries in Africa, is grappling with a flood of billions of foreign dollars into developing its coal deposits and natural-gas reserves. It will create thousands of jobs, but many of them will be filled by foreigners. Meanwhile, the boom is already causing the prices of food, electricity and transport to rise sharply.
Some countries are finding more sustainable ways to build growth.
In the “Silicon Savannah” of Kenya, a burgeoning high-tech sector and a fast-growing cellphone-based mobile-money industry have nurtured thousands of entrepreneurs. In mountainous Lesotho, thousands are employed in textile factories that take advantage of a U.S. duty-free policy, making Lesotho the continent’s biggest apparel exporter to the United States.
In Sierra Leone, one of the biggest hopes for sustainable job potential is the nascent tourist industry. Sierra Leone is trying to lure tourists by branding itself as “a diamond in the rough.”
Just outside Freetown, a new four-lane highway is beginning to stretch toward the idyllic palm-fringed sandy beaches of the Atlantic coast. The beaches are largely empty, but they represent an asset that could generate thousands of jobs.
So far, potential tourists’ impressions are still clouded by memories of televised war and bloodshed. But entrepreneurs are persisting. At a resort called Tokeh, the owners are planning a $5-million renovation, with several dozen rooms and villas to be opened by 2014.
“It’s a frontier now, but this place is going to explode in the next 10 years,” says Joe Pearce, a British consultant who is helping with the rehabilitation.
He recalls how the resort was looted during the war years. “Generator by generator, floorboard by floorboard, tile by tile, it was dismantled.”
Now, the Sierra Leonean family that owns it are repairing a helipad, buying a new boat and planning a marina for their future visitors.
“You just have to stand on the beach to see it,” Mr. Pearce says. “You have everything here: mountains, wildlife, rain forest, deep-sea fishing, amazing beaches. The potential here is fantastic.”
By the numbers
7 of 10: The proportion of the fastest-growing economies from 2011 to 2015 that are projected to be in sub-Saharan Africa. Ghana, with a 13-per-cent growth rate, boasted the world’s fastest expansion last year. In eight of the past 10 years, sub-Saharan Africa has grown faster than Asia.
5.4: Percentage by which Africa’s gross domestic product is expected to rise this year, well above the global growth rate of 3.5 per cent. Analysts predict that Africa will continue expanding at 6 per cent annually for the next decade – approaching or exceeding Asia’s growth rate.
4: The number of major African wars today, down from 12 in the mid-1990s. The number of coups has dropped by half from the average of 20 per decade from 1960 to 2000.
48: Percentage by which secondary-school enrolment in Africa rose from 2000 to 2008. Child mortality has declined by more than 5 per cent annually in at least 10 African countries since 2005. Malaria deaths have dropped dramatically, falling by more than 30 per cent in countries such as Zambia and Tanzania since 2004.
100,000: The number of Portuguese living in Angola last year, up from 21,000 in 2003. That is more than triple the number of Angolans living in Portugal. Migration flows are beginning to reverse, with thousands of construction workers from Europe flocking to Africa to find jobs in the boom.
$554-billion: Cumulative foreign direct investment in Africa by the end of 2010 – up from a total of just $110-billion in 1998. Annual investment flows into Africa are expected to double over the next three years.
$1.4-trillion: The level that annual consumer spending in Africa is projected to reach by 2020, nearly double the $860-billion in 2008. By 2050, a projected 63 per cent of Africa’s population will be urban dwellers. Africa’s middle class is the fastest-growing in the world, and by some measures has doubled in less than 20 years.
1,400: The number of KFC outlets that Yum Brands plans to have in Africa by 2014, twice as many as in 2010. IBM has opened offices in more than 20 African countries. Wal-Mart spent $2.4-billion to acquire a department-store chain with nearly 300 outlets across Africa.
20 per cent: The annual growth in cellphone sales in Africa in each of the past five years, making the continent the world’s fastest-growing market for cellphones. In the late 1990s, Ghana had only 50,000 functioning phone lines for its 20 million people. Today, three-quarters of its population has access to cellphones.
$900-billion: The projected level of Africa’s annual agricultural output two decades from now, up from $280-billion today. Africa has 60 per cent of the world’s uncultivated arable land.