July 12, from FINANCIAL TIMES.com & NEW ERA NEWSPAPER

by William Wallis

A new aphorism has emerged in Addis Ababa to describe Africa's rapidly shifting relations with the outside world.

Washington, so it goes, is in charge of corralling the western donors. Europe provides the money. The Chinese walk off with all the business.

It may not be quite that simple. But China's purposeful march across Africa over the past decade is challenging western assumptions about the continent in multiple ways.

When members of the Group of Eight industrialised nations met last week in Italy there was no doubt be handwringing about the number of Africans falling back into poverty this year.

Aid campaigners have their new mantra well honed. Africa had no part in creating the conditions for global financial turmoil but it has suffered severe collateral damage. Rich nations have a responsibility to help.

In what has become an annual ritual, traditional donors will duly reiterate pledges to increase aid.

However, the pace at which China's economy rebounds, and to a lesser extent that of Brazil, Russia and India, will almost certainly be more significant in determining how quickly African economies re-emerge from the downturn.

Recovery in demand and prices for the raw materials Africa has in abundance will be driven in large part by these emerging Bric (Brazil, India and China) economies. Once prices are moving up again, investment in Africa will look more attractive.

European trade with Africa is still more than twice that of China's and European Union foreign direct investment is far greater too. Bric country trade is developing much faster however, moving from US$16bn in 2000 to US$157bn in 2008.

Moreover, Europe still sees Africa as a burden. The Chinese, Brazilians, Indians and others see it as an opportunity.

"We have a competitive advantage," says Chinese ambassador to Ethiopia, with a certain amount of glee.

"My own experience is that they [African governments] are uncomfortable dealing with developed countries. They think they [Europeans] want to impose their own ideas and they have a long [mutual] history that is violent and bitter."

In Ethiopia the Chinese are building roads and hydroelectric dams and are financing a US$1.5bn expansion of the state-owned mobile telephone network through credit lines.

That makes ZTE, the Chinese telecommunications company, the de facto monopoly supplier - the kind of deal that western companies such as Siemens had in Nigeria in the past but rail at now.

In total, according to Gu, Chinese banks and companies are providing more than $4bn in credit lines and tied aid to Ethiopia, a figure that places Beijing among the country's foremost partners and which explains the aphorism.

Inevitably, that level of interest and engagement has considerably weakened western leverage over the Ethiopian government.

It has allowed Addis Ababa to play off competing interests against each other and strengthened the government's ability to brush off criticism of its human rights record and chart an independent course on economic policy.

Other African governments, however, have been less successful at this game. The Democratic Republic of Congo has been embroiled in a stand-off between the International Monetary Fund and Beijing over a planned $9bn Chinese mines-for-infrastructure project.

The deal has threatened to scupper Congo's eligibility for debt relief under the highly indebted poor country initiative. Western creditors stood firm, the Congolese buckled, agreeing to reduce the deal by US$3bn, and the Chinese are now showing willingness to discuss adapting the contract to address IMF concerns.

Some African governments, including Congo's, are becoming distinctly schizophrenic as a result of the competing influences at their door.

Senegal has effectively divided government duties. The finance minister handles relations with western donors, but the president's son attends to projects, contracts and loans in which Arab and Asian countries are involved and which tend to be more opaque.

It was all much easier for western governments in Africa when they could call the shots. Was it healthier though? - FT.Com & New Era Newspaper