The Libyan crisis has affected many on the African continent through the loss of remittances from the estimated two million African workers in Libya and through the freezing of Libyan assets under UN Security Council Resolution 1970 of February 26, 2011.
The fall of Libyan leader Colonel Muammar Qaddafi raises the question: What will happen to the massive Libyan investments in Africa? Will the new regime in Tripoli continue along the same path? If not, who will fill the void?
While members of the African Union continue to be divided on whether to recognize the National Transitional Council (NTC), in the medium term the new Tripoli regime is more likely to turn towards the countries of the Mediterranean basin and the more supportive 22-nation Arab League.
The new regime will also likely not follow Qaddafi’s campaign to “help Africa out of the West’s economic dependence” and become a continental hegemonic power.
The change in regime in Tripoli may present a unique opportunity for emerging powers to further diversify their African investments in productive industries and the service sector, as many non-profitable Qaddafi investments on the continent will be abandoned. Turkey, which has been very active throughout the Libyan crisis, could show the way.
In the short term, the imperative of rebuilding bombed-out infrastructure will likely lead the NTC to change the way that oil and gas revenues are managed while still honoring the oil contracts granted during the Qaddafi era.
The NTC has been pushing for the lifting of the freeze on Libyan government assets. While resources are needed for humanitarian relief and for restarting basic public services, they may exacerbate divisions among rebels and feed corruption.
Qaddafi was long associated mainly with the Middle East. But when he was elected chairman of the 53-nation African Union (AU) for one year in February 2009, he called himself Africa’s “King of Kings” and promoted a vision of a future United States of Africa. That moment seemed to complete Libya’s foreign policy shift from the Arab world towards the African continent, a move that had started in the 1990s. (Of course, the Qaddafi regime, after seizing power in 1969, had intervened both militarily and diplomatically in various African conflicts–notably in Uganda, Chad, and Liberia–but without much success.)
The turning point was the 1988 Lockerbie bombing. Libya’s resulting international isolation and the sanctions imposed on the country, as well as Qaddafi’s disappointment at the lack of Arab support, prompted him to turn to Africa. And the path he chose was an economic and commercial one. Libya took a leadership role in the promotion of regional economic integration through the creation in 1998 of the Community of Saharan and Sahelian States (CEN-SAD). He established the organization’s headquarters in Tripoli, paid most of the organization’s functioning budget, and provided direct access to the Mediterranean through the Misurata free zone and opened up Libya’s borders to many African workers.
In 2004, Libya gave up its nuclear ambitions and emerged from international isolation. Two years later, Qaddafi set up a $70 billion sovereign wealth fund called Libyan Investment Authority (LIA) to manage Libya’s oil revenues. The money was invested through subsidiaries like the Libyan Africa Portfolio (LAP), the Libyan Arab Foreign Investment Company (LAFICO), and the Libyan Arab African Investment Company (LAAICO), and these in turn invested in telecom, luxury hotels, real estate, banking, agriculture, and mining. In addition, Libya granted over $2 billion in mostly interest-free loans to Sudan, Mozambique, Ethiopia, and Niger. Qaddafi’s Libya also financed smaller “development” projects such as the building of hospitals, schools, universities, and mosques.
Libyan economic weight on the continent is not limited to investments. Libya, together with Algeria, Egypt, Nigeria, and South Africa, pays 75 percent of the African Union’s budget. In addition, it has paid the dues of members in arrears. Libya has also been a major contributor to the African Development Bank, where it holds 4 percent of the voting power.
Qaddafi’s investments and largesse, particularly in West Africa during the last decade, bought Libya respectability and influence across the continent. It contributed to the sense of solidarity that some African leaders–and many ordinary Africans–felt for Libya, a feeling that was reinforced by the strong negative reactions many felt towards the Western NATO bombing campaign.
This trend seems to be bound to change. The new regime will not likely follow Qaddafi’s campaign to “help Africa out of the West’s economic dependence” and become a continental hegemonic power. The latest move by the NTC has been to appoint a new director at the head of the Libyan Investment Authority (LIA). The new regime may also try to progressively replace African migrant workers with domestic labor and may be pressed to privatize the hotels and other Libyan investments on the continent, possibly selling them to interested foreign partners.
The change in regime in Tripoli may also present a unique opportunity for emerging powers to further diversify their African investments in productive industries and the service sector, as many non-profitable Qaddafi investments on the continent will be abandoned. China is already a main presence in Africa. But, Turkey, which opened 14 new embassies in Africa in the last two years and has been very active throughout the Libyan crisis, could become a significant player.