Obama in Africa: Can US rival China's new clout?

President Obama arrives in Ghana this weekend, but China's booming Africa presence may mean that he'll have less leverage to advance US interests than his predecessors.

When President Obama lands in Ghana's capital, Accra, this weekend for his first presidential trip to sub-Saharan Africa, thousands of cheering fans will welcome him with pro-Obama banners, flags, and road signs, many of them homemade.

But most of the landmarks his motorcade is likely to pass – Accra's national theater, the Defense Ministry, the presidential palace, and a presidential mausoleum – were built with Chinese money, more often than not by Chinese contractors.

Mr. Obama commands popular adoration in Africa that no world leader can match. But analysts say that he may have less leverage than his predecessors when it comes to advancing US interests – increasing US business involvement in Africa and promoting democracy – in large part due to China's booming Africa presence.

"America needs to know that Africa has options," says Adama Gaye, economist and editor for West Africa magazine. "We are no longer in the unipolar moment [right after] the cold war. Today, America is a bankrupt country, and China appears as a rising power with financial muscle and a properly defined strategy."

Boom in China-Africa trade

China is buying up Africa's resources, breaking into industries that the West has dominated, and others it hasn't, and is complicating Western aid efforts by undertaking development projects with some of Africa's most reviled regimes.

And they are defying some of the economic downturn's gravity: In Ghana, the Chinese are carrying on with commitments like roads, telecommunication lines, and a 400-megawatt hydrodam.

During George W. Bush's presidency, trade between Africa and China jumped tenfold from $10 billion in 2001 to $107 billion in 2008. That commerce has provided a lifeline for internationally ostracized regimes like Sudan's or Zimbabwe's.

China's Exim Bank rises as alternative to World Bank

For many African governments, China's state-operated Exim Bank, now the world's third largest credit agency, has become a compelling alternative to the World Bank, one that doesn't dwell on humanitarian concerns.

The World Bank, US presidential administrations, and other Western powers have long used foreign assistance as a means to prod governments into political reforms.

Across Africa, they are discovering that their soft, conditional loans aren't as coveted as they once were. African governments are increasingly going to Exim Bank instead.

"We spoke to senior aid figures in Accra who said that the World Bank is very worried now because Exim has the resources to outgun the World Bank on major infrastructure projects," said Giles Mohan, a China-Africa relations researcher for Britain's Economic and Social Research Council.

Exim Bank's loans typically come with gentle 1 to 2 percent interest rates and only one major catch: that the governments contract China's state-owned companies to complete the project.

This works well for reform-reluctant leaders, and for China's government, which in many cases directly pays state-owned contractors from state-owned banks, bypassing the host nation altogether. A token amount of the loan reaches the local workforce, or is used to purchase local materials.

"But the rest of it will be money that goes from one Chinese bank to another," says former US Ambassador to Ethiopia David Shinn. "And this has been the pattern across Africa. How can a Western company compete with it?"

Obama's plans to ramp up US business in Africa

In the run-up to Obama's Ghana visit, his administration has expressed its desire to ramp up American business activity in democratic places like Ghana, both to forward US interests, and to encourage good governance on the continent.

Obama's administration is particularly focused on agriculture, which many economists predict will be Africa's major growth economy in coming decades. In April, the president doubled agricultural investment earmarked in the Food Security Act, much of which will be spent on African states like Zambia, Malawi, and Uganda.

But beyond agriculture, health, and humanitarian aid, when it comes to the most conspicuous monuments of Africa's development – the power plants, cloverleaf highways, mines, railways, and stadiums that make parliamentarians popular – the United States finds itself on the sidelines, watching Chinese banks write loans for Chinese companies to build up Africa.

"US companies don't build stadiums, don't build roads, don't build dams, don't do energy infrastructure," said Witney Schneidman, a top Africa adviser for Obama's presidential transition team. "If you look at the sector where they do compete, principally the extractive sectors" – oil, gas, minerals – "US companies are well represented."

A back door to Africa's mines

Increasingly, however, Chinese firms are using construction projects as a back door into Africa's mines. In Gabon, Exim Bank is financing an $800 million infrastructure undertaking – railways, dams, ports – in return for a quarter century's access to an iron ore deposit.

Chinese companies are building hydrodrams in exchange for Sudanese oil, Guinean bauxite, and Ghanaian cocoa. In the Democratic Republic of Congo, the Chinese government agreed to loan $9 billion for schools, clinics, and roads in return for cobalt and copper mining privileges.

Such minerals have powered China's industrial revolution – and return to the continent as components in affordable Chinese-made radios, phones, and batteries.

As it is for many African agricultural nations, China's interest in Ghana lies less in what Ghana sends China – roughly $50 million in exports annually – than in what it buys back. That may soon change: An American and British partnership discovered oil off Ghana's shore in 2007 and China's state oil company intends to buy access.

But beyond oil, analysts say American companies are shirking opportunities in Africa.

"Except for oil, where investment money goes in no matter what, there hasn't been much Western investment in Africa in recent years," said Mr. Shinn, the ambassador.  "This is an area where the United States really needs to make a push, particularly as we start coming out of the economic funk we're in."

For the short term, analysts expect Obama to promote democratic countries like Ghana to American business leaders.

"To most Americans, Africa is still a continent of crisis, as opposed to a continent of opportunity," said Mr. Schneidman, the Obama advisor. "To those of us who pay close enough attention, it is definitely a continent of vast opportunity. Now, I think part of the administration's challenge is getting that message out, and getting that awareness to American companies."

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