The China-Africa relationship and what Africa can do to profit, 2 February 2015

23 February 2015

LSE’s Martin Namasaka reflects on the positives and negatives of the relationship between China and Africa and how African leaders can maximise Chinese investment for the continent’s good.

“We don’t look to Africa simply for its natural resources; we recognise Africa for its greatest resource, which is its people and its talents and their potential. We don’t simply want to extract minerals from the ground for our growth; we want to build genuine partnerships that create jobs and opportunity for all our peoples and that unleash the next era of African growth. That’s the kind of partnership America offers,” said Barack Obama at the recent US-Africa Leaders Summit.

This seeming reproof to China came amid the Asian giant’s commitment to double bilateral trade withAfrica to US$400 billion by 2020, meaning that US trade with Africa would have to more than quadruple over the next six years in order to accelerate its influence in Africa. Speaking at the US $200m (£127m) Chinese-built African Union headquarters in Addis Ababa, Ethiopia, the Chinese Premier Li Keqiang said, “Chinawill never pursue a colonial path like some countries did.”

Chinese Government sign outside Xiamen TradeFair Exhibition Hall in China

Is China good for Africa? Undoubtedly, its rising demand for the once-forgotten continent’s natural resources has helped re-establish Africa as a source of valuable commodities for the growing global market. However, there are caveats – China’s engagement in Africa impedes the continent’s steps towards democratic accountability as well as better governance. This means that the majority of African countries receiving Chinese aid without conditions have little incentive to improve good governance. Admittedly, this booming relationship seems to hold both positives and negatives for Africa.

First of all, since the end of the Cold War, there has been a reduced demand for Africa’s basic exports. In particular, indicators of Africa’s share in the European Union’s foreign trade shows that it has fallen from3.2% in 1989 to just 1.3% in 2009. This worrying shift is arguably a major blow to Africa. To this end, China’s phenomenal economic growth and its growing presence in Africa serves a key role in inspiring the continent to reflect on its economic future and prospects.

Notwithstanding numerous critics, China has certainly been contributing to Africa’s economic growth, both in terms of trade and infrastructure. A notable example is the rehabilitated 840-mile Benguela railway line, which now connects Angola’s Atlantic coast with Democratic Republic of Congo and Zambia as well as the much-famed Thika road super highway in Kenya. Chinese-financed roads have also cut journey times from Ethiopia’s hinterland to the strategic port of Djibouti, facilitating livestock exports and promoting regional integration to expand internal markets.

November 2009 World Bank Report states that “the poor state of infrastructure in sub-Saharan Africa – its electricity, water, roads and information and communications technology (ICT) – lags national economic growth by two percentage points every year and shrinks productivity by as much as 40%.” Closing the infrastructure gap calls for an annual spending of US$93 billion which makes Chinese investment in Africa’s infrastructure most welcome.

Second, there is mounting opposition to Chinese expanding forays in Africa with claims such as: “It is a scramble for resources rather than poverty reduction”, “It lacks transparency and accountability due to the non-interference principle on aid and dubious contract deals”, “Exchange is unequal”, “It has no environmental or social safeguards”, “It limits employment creation for Africans” and “It neglects democracy, good governance as well as indirectly promoting a model of capitalism combined with authoritarianism”. Recent statistics on migration indicates that there are a growing number of Chinese nationals living in Africa; 350,000 in South Africa (2009), 259,000 in Angola (2012), 100,000 in Zambia (2013), 20,000 in Nigeria (2012), and 7,000 in Kenya (2013).

The influx of cheap Chinese products in Africa devastates indigenous markets as well as local industries such as the textile industries because Chinese synthetic fabrics replace cotton prints in street markets across Africa. But even more troubling, the relationship slows steps towards democratic accountability. For instance, in 2003, when IMF suspended US$2 billion in aid to Angola, citing rampant corruption, China came to its questionable rescue with a US$2 billion oil deal. This begs the question whether this is some form of what is commonly referred to as chopsticks mercantilism, a term coined by Ghanaian economist George Ayittey.

In this regard, Africa should do much more in order to experience growth and convergence as well as to profit from the relationship with China. First, African countries should leverage the opportunity presented to industrialise and promote the indigenous markets. With an estimated 12% of the world’s oil reserves, 42% of gold, 85% of chromium and platinum, 60% of arable land (Africa Progress Report, 2013), African economies may possibly ride the crest of a global commodity wave that stands to reap the continent a natural resource windfall, if managed effectively and equitably. As an exporter of unprocessed or lightly processed commodities, Africa urgently needs to climb the value-added chain of mineral processing and manufacturing in order to unlock the full economic potential of its natural resources.

Second, noting that the continent has cross-cutting challenges, the African Union should step up its mandate by formulating policies that will tackle challenges at the macro level and offer hybrid solutions. An example could be a policy which will enforce presidential term limits in every member state to tackle the problem of dictatorship.

The China-Africa relationship should be a serious consideration for Africa leaders tasked with the responsibility of shaping the continent’s future. Undoubtedly it has opened up new economic, diplomatic and strategic avenues for African states. However, it is ultimately down to Africans, the people in power, to leverage the opportunities it is presented by having clear objectives of what they want to gain from the Chinese upfront – not jumping blindly, but rather negotiating on its own terms to further the continent’s own interest, while at the same time strategically engaging the US, UK and France which, as of 2012, have held the biggest share of Africa’s investments totaling US$178.2 billion according to an in depth survey compiled by the African Development Bank, the United Nations Development Program and the Organisation for Economic Cooperation and Development.