The defining aspect of Africa’s past decade has been the overwhelming presence of the dragon across the continent. While China’s dominance on the Dark Continent is likely to go unchallenged in the near future, the chaebol-driven economy of South Korea is slowly, but steadily making business investment inroads into countries ranging from South Africa to Nigeria. The African success story, it appears, will be scripted by these emerging Asian economies in the years ahead.
Indeed the last decade has seen some dramatic changes. South Korea’s foreign direct investment in Africa jumped to $287 million in 2010, compared to a meager $24.3 million a decade back. Bilateral trade between Africa and South Korea amounted to $25 billion in 2011, while it was just about $6 billion in 2000, according to OECD data cited in This is Africa, a Financial Times report. Still, it should be noted that both countries’ bilateral trade represents just a little above 2% of their global trade, according to the FT report.
Seoul mostly imports natural resources, predominantly crude oil from countries such as South Africa, Equatorial Guinea, and Nigeria. But in turn, South Korea exports electronic items, electrical appliances, mobile phones, transport equipment and the like to African nations, as consumers with increasing purchasing power begin to loosen their purse strings for desirable gadgets.
It is widely acknowledged that diplomatic ties between the two countries have been central to the flowering of bilateral foreign trade. The Korea Africa Economic Co-operation Conference (Koafec) is a joint initiative of the governments of South Korea and African nations. In the latest Koafec meeting held in October 2012, the South Korean government announced its decision to provide $590 million in aid and loans to several African countries. Though the amount did not hold a candle to the $20 billion offered by China, it was a clear sign that South Korea has big plans lined up for Africa.
Nevertheless, it is often private businesses and their investments that really make a big difference in free markets, not the long arm of the state. In a journey reminiscent of their European shopping safari in the recent past, South Korean conglomerates are now at the forefront of big-ticket investments in Africa. Samsung Electronics, which pumped $150 million into several African countries during 2010-2012, has set a revenue target from its African businesses at $10 billion by the year 2015. Samsung, which operates in segments ranging from smart phone manufacturing to production of white goods such as washing machines and refrigerators, also has plans to expand its footprint in Africa this year. Here, though, Samsung faces tough headwinds not only from China’s Huawei Technologies, but also from its native cousin LG Electronics.
Continuing the Korean “invasion”, South Korea’s number two mobile operator KT inked a $19 million contract with the government of Rwanda to construct information security architecture. KT also has its eyes set on purchasing a 53% stake in Morocco’s biggest telecom company, which is currently held by French media goup Vivendi.
Besides investments in the African telecoms sector, Korean chaebols have also ventured into developing infrastructure on the continent, something which comes naturally to them, having done a good job on home soil a few decades back. For instance, Daewoo International forged a deal with the Kenyan Electricity Generating Company to construct a power plant in November 2012. Samsung C&T, the construction arm of Samsung, has entered into an agreement with the Gabonese government to build a refinery project, according to a news report. In absolute terms, South Korean construction firms have bagged contracts worth about $2.2 billion in 2011, compared to $1.5 billion in 2008. Drawn by Africa’s resources wealth, the government-owned Korea Gas, along with its Italian partner have discovered oil fields in Mozambique.
Though China may be outspending its Asian neighbor on the Dark Continent, South Korea does enjoy one slight advantage—trust. Many African countries are still leary of Chinese intervention, and South Korea seems to enjoy a better standing among its African friends, perhaps because South Korea’s population size equals that of many African countries. The South Korean model of development, which was not based on resource exports, also seems to have struck a chord with African economies such as Ghana, inspiring them to emulate the example.
Western aid, Chinese mining firms, and UN peacekeepers have all helped transform the face of the African continent in the past decade or so. Now, it appears it is South Korea’s turn to enter a page in Africa’s success story.
Postcards from Around the World
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