Published by the government of Zimbabwe
Christopher H. Mutsvangwa
8 October 2009
opinion
Harare — The distinguishing feature of human development activity throughout history is the use of labour to make goods so that society can improve itself and transform its habitat.
The exchange of goods in a market is the basis of the collective engagement of society. To make the goods, humankind needs resources to be converted by labour into something society has use of to improve its condition.
Money and, later, capital came about in order to enable the production and exchange of goods. The worth of money is based on the underlying value of the goods on the market. Otherwise money or capital carries no intrinsic value of its own outside of the market.
The Gun and Europe's Dominance
The advent of the Industrial Revolution as of the 18th century increased the demand for resources to new levels. Europe, starting with England, was the global epicentre of the capitalist revolution.
Europe's early mastery of the cannon and gun technology and the use of gunpowder for bullets (the Chinese had invented gunpowder centuries earlier) gave it an edge over all other humankind. It used this advantage for imperial plunder at a level unprecedented in history.
Consequently, during this epoch, the demand side of the resource and commodities that was the European metropolitan centre had absolute sway. The supply side made up of the colonial subjects of Asia, Africa, and Latin America was subservient, as imperial writ plundered at will.
Africa became the main supplier of natural resources for the hungry factories of Europe even as Africans themselves did not take part in the actual exchange of the resources.
Europe simply used force of colonial rule to pillage without any benefit to the indigenous people save for that which was incidental. Marginalisation of Africa was the order of the day. With the advent of independence, Europe resorted to covert means to mask its stranglehold on Africa's resources.
Neo-colonialism became the order of the day. The Bretton Woods institutions were established as the main agents to perpetuate the continued economic marginalisation particularly of Africa.
It is no wonder that in the more than 60 years of that, the International Monetary Fund and the World Bank and later the private sector Paris Club have held sway. All three have jointly no single example of success on the African continent.
True to their penchant to misrepresent, they have the temerity to tout the diamond mono-economy of Botswana as their model.
That was so until the sub-prime crisis cut middle-class luxury consumption and removed that gloss.
On the other hand, South Africa, the major growth economy of the continent, has avoided the embrace of the Breton Woods institutions like a plague.
The only real prospect for growth in Africa is now coming from the new demand that is driven by the rapidly growing economies of China, India and other emergent Asian markets.
It is a growth premised on exchange of real goods that change people's lives as opposed to gambling on overvalued government and commercial paper traded amongst a few Wall Street moguls.
Istanbul 2009: the Paradigm Shift
The ongoing IMF-World Bank meeting in Istanbul, Turkey, which is being held against the backdrop of economic stagnation in the West and frenetic growth elsewhere, has finally driven home the inadequacy, if not irrelevancy, of the so-termed Washington Consensus of unbridled free market economics.
Harsh realities have forced the eclipse of that pampered club of the rich, the Group of Seven (G7). The IMF-World Bank system has had to accede to a more representative form of authority, the Group of Twenty (G20).
The brutal discipline of emerging international markets is bringing about that New International Economic Order, which was for so long scoffed at by the rich.
Now there is an opportunity to escape punitive misguided excesses of the IMF-World Bank strictures that were often used to smother growth in developing economies.
The vibrant economy of Zimbabwe was one such victim in the mid-1990s when the country was forced to embark on a needless structural adjustment programme that marginalised the rural populace and collapsed the national currency in 1997.
Opec Broke the Mould
The dominance of the demand side in the resource and commodities war was first seriously challenged by the emergence of the Organisation of Petroleum Exporting Countries cartel which rode on the backlash of Arab nationalism in the wake of the 1967 Arab-Israeli War.
Opec has become one of the most successful demand side cartels of modern times notwithstanding concerted interventions by the supply side metropolitan powers; interventions that have included many inconclusive wars to date.
The Emergent Economies and a New World Order
The current rise of emergent economies of China, India, Brazil, Russia, the Far East and the Middle East are challenging this classical post-imperial order.
Along the way, it is creating an opportunity for Africa to once again enjoy the fruits of its bountiful resources as it takes advantage of global competition for its oil, coal, base metals and rich soils and rewarding climate.
Zimbabwe: Australia as the Model
Australia is one of the most resource-rich countries. At the same time it has a small population of Anglo-Saxon descent that has taken advantage of distances to carve out an economy identity that is not beholden to the metropolitan centres of Europe.
Taking advantage of the demand from initially Japan, now China and India, it has positioned itself as the resources and commodities supplier of choice in the Pacific Rim economic region.
Today, Chinese capital is flooding the Australian market, opening mines, building infrastructures and developing ports so that it can easily feed into the industrial juggernaut of the populous neighbour.
Such is the demand for commodities that most of the known resource rights have been snapped up by hungry Chinese capital.
Yet the demand is not satiated. So the creative Australians have now started selling futures contracts as time slots of the same resources.
A 10-year contract is resold as a 20-year contract and further resold for 30 years. Australians are smiling all the way to the bank. They appear to have been spared the worst of the current worldwide financial crisis.
This development is also manifesting itself in the Chinese tussle for control of major Australian resource companies like BHP and Rio Tinto and other second tier resource entities.
Africa's Chance:
Ever growing demand for resources and commodities has led to accusations and counter accusations as well as charges of price-gauging, especially between Beijing and Canberra.
At the same time geo-political concerns are increasingly taking centre stage as the major resource companies that are mostly a legacy of the Anglo-Saxon empire face a two-pronged challenge.
On one side is the downward pricing pressure of major market players like China and India. On the other side is the challenge to the control of the mining royalties by more assertive African and Latin America resource owners. This is a situation pregnant with unprecedented opportunities for Africa as the continent is in pole position as a potential supplier of the whole gamut of resources and commodities.
The only challenge to be scaled is to allow the power of the markets to freely decide on the price and worth of the mother continent resources.
Traditional players of the European Union are naturally opposed to this eventuality. New emergent powers that could not have the option of using military force to secure a foothold in Africa prefer that the markets should play the role in resource allocation. After all, they have both the markets and the money.
This situation has offered Africa a unique historical window to break out of the yoke of six centuries of depravity brought about by a lop-sided engagement with Europe.
It is noteworthy that Africa in general has witnessed a faster pace of development driven mainly by the new demand from China and other Asian powers.
Energy: Angola, Nigeria and Sudan Lead the Pack
To date, the energy-producing countries of Africa have been at the forefront of benefit as China seeks new and diversified sources of petroleum.
Capital Markets: South Africa at the Centre
With over US$2 trillion in reserves and a rapidly growing domestic capital market, China has emerged as the new banker of the world including even for the mighty USA.
The 2008 financial crisis has shaken the confidence of Chinese investors in the infallibility of the USA capital markets and they now seek to diversify their risk. African assets, which are tangible, now look lucrative as opposed to the risk paper of the likes of Lehman Brothers.
Chinese capital is, thus, seeking new African opportunities especially through the Johannesburg financial markets. Equity participation as well as private bank loans are being extended for onward lending into Africa. Standard Bank is the pioneer beneficiary.
In mid-September it managed to obtain a syndicated loan of US$1 billion from several Chinese banks. This is in addition to the US$6 billion Standard Bank equity holding already purchased by the Industrial and Commercial Bank of China.
Zimbabwe's Big Time: Out With HIPC
The Tshwane-Beijing financial diplomacy is coming at a propitious time when Zimbabwe has a biting hunger for capital after overcoming its political limbo.
The country's financial services sector has a sub-regional market to tap into as it accesses the US$2 trillion Chinese reserves through the Johannesburg capital market.
At the same time Zimbabwe should also devise ways of going direct to the Chinese capital markets as the cash-rich fund managers in Beijing, Shanghai, Shenzhen and Hong Kong open their wallets to overseas investment.
The advent of the new financial players from the East, including Bombay and Seoul, means the traditional players from New York, London, Paris, and Frankfurt have to spruce up their act in Africa.
For Zimbabwe and its African mother continent that is so rich in natural resources, this could be just what the doctor prescribed to the patient.
A country so well endowed has absolutely no need for the highly indebted poor country (HIPC) status.
It is the equivalent of voluntary judiciary management of a widow who is accoutered in diamond rings and gold earrings.
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