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Africa starting to rise in partnership with China
2006-01-13
China Daily
Africa currently represents just over 1 per cent of world trade. This share in world trade volume is much lower than what it was in the 1960s and 1970s when most countries on the continent became independent.
At independence, most economies in Africa were based on the export of raw materials (such as agricultural produce, minerals and oil) and the import of manufactured goods and services. Africa's trading partners then were basically former colonial powers. Foreign currencies earned through the sale of raw materials were used to import manufactured goods and for infrastructure construction.
The system worked relatively well until the late 1970s when prices of export commodities from the continent tumbled on the world markets. Despite increases in export volumes, revenues kept decreasing. In the meantime, prices of import commodities (manufactured goods) kept swelling, making it hard for the continent to ensure adequate supply of machinery and other equipment needed for building infrastructures and establish a manufacturing industry.
With reduced import revenues and purchasing power, Africa's share in world trade and commerce thus plummeted.
Unlike some Asian nations such as Republic of Korea, Malaysia or Singapore, which also became independent during the same period, African nations failed to diversify their economies relying heavily on agriculture. Manufacturing and the services sectors have remained as insignificant as they were 40 years ago.
Over the past few years, however, signs have emerged of the African economy picking up. Africa is gradually consolidating its share in world commerce albeit slowly. The emergence of China as a major world trading power, dramatically increasing its imports from Africa, has had a boosting effect on Africa's external trade.
Moreover, more and more Africans are turning to China for their imports and to attract investors from China. Just over a decade ago, invite a Chinese company to do business in Africa and you would most likely be considered mad. Likewise, ask an African that he can import almost everything from China and he would most probably laugh at you.
The continent is economically backward and its economy insignificant. Africa is gradually coming to terms with this backwardness. Its share in world commerce is growing. Experts believe two main reasons have contributed to the new vigour: diversified exports and multiple sources of imports. Some would also add the return of political stability in many countries that have previously been in turmoil. We believe that the first two reasons have been more instrumental as the civil wars have never prevented the plundering of Africa's natural resources.
New oil discoveries and exploitation in countries like Equatorial Guinea, Angola and throughout the Golf of Guinea have significantly increased the volume of Africa's exports. Though slowly taking shape, industrialization in Africa is becoming a reality and this has also contributed to boosting export volumes with high value added goods. But by far the most important factor to this swelling trade volume is the multiplication of sources of imports and export destinations.
African countries have been drifting away from decades-long unproductive and unfair trade relations with their former colonial powers. China's emergence as a major trading power has given Africa an unprecedented opportunity to not only sell its abundant natural resources at reasonable prices but also buy cheaper manufactured goods.
China's economy has been expanding at an astronomical rate with near double digit GDP growth over the past two decades. To sustain this rapid growth, China not only needs raw materials but also markets for its manufactured goods. Africa with its huge natural resources can not only cater for China's need of raw materials to power its economy but also avail of the opportunity to broaden co-operation scope and attract more Chinese investments, especially in mining and infrastructure development.
Gone are the days when co-operation between China and Africa was concentrated mainly on state-to-state co-operation, political support in international affairs and economic assistance.
Sino-African relations have evolved over the years. "The new trend in Sino-African relations is towards strengthening economic co-operation, expanding trade and investment" says H. Komidor Njimoluh, Minister Counsellor at the Embassy of Cameroon in Beijing.
In 2004, Sino-African trade volume reached US$29.5 billion compared with US$19 billion in 2003; that is 58.9 per cent growth rate year-on-year. In the first quarter of 2005, bilateral trade volume reached US$7.6 billion and it is estimated to exceed US$30 billion by the end of the year. A senior economist at the Chinese Ministry of Commerce (MOFCOM) predicts that trade volume will top the US$100 billion mark in the next five years.
Encouraged by the government to invest overseas and seek market shares for their products and services, Chinese multinationals have also recently made significant headways into the continent.
The phenomenal trade volume increment observed over the past few years is set to continue as more Chinese businesses get interested in the African market and more Africans get to discover the new economic powerhouse that China has become. The volume of containers leaving Chinese ports for Douala, Durban, Dar es Salaam, Mombassa or Tripoli has grown manifold over the past few years.
There are plenty of opportunities for Chinese investors in Africa, from low cost housing to mineral exploitation and agricultural development. The image of Africa as a continent torn apart by wars, plagued by diseases and its people living in abject poverty is being gradually replaced by a more realistic image of a safe and attractive place for investment with innumerable business opportunities.
There are now daily flights from Beijing, Guangzhou, Shanghai and Hong Kong to major cities in Africa. Is it the beginning of a new era and a model of success story of South-South co-operation? We are tempted to answer in the affirmative.
The author Mahamat Adam is the general manager of Africaccess Consulting Company Limited, a Sino-African trade and investment consulting company based in Beijing.
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