How does Africa respond to China’s increased incursion into the continent in form of trade and investment inflows? This was one of the questions that dominated discussions in a morning session of the last day of the Africa 2017 forum.
China’s increased presence in Africa has long been the subject of controversy mainly around whether it is beneficial for the continent or harmful to the continent’s long term interests. Critics of the increased Chinese presence on the continent have emphasized the need for an Africa strategy towards China to counter what they see as a Chinese strategy for the continent.
But this call for an Africa strategy towards China is based on the wrong assumption that Africa is a country rather than a continent of 54 different territories and governments with diverse interest and policies and in most cases work at cross purposes with each other. Just 13 percent of international trade takes place between African countries. African governments have still not been able to agree a common policy on the free movement of goods and people within the continent despite years of talking about it even though it must be admitted that some countries are beginning to make commendable moves in that direction.
But still it is far-fetched to ask Benin Republic, Nigeria’s small neighbour, to have a common trade strategy towards China as that of Nigeria. So the issue of an Africa strategy towards China sounds like a good rhetoric with little substance.
Nonetheless, there is a need for some sought of a strategy towards Africa. But whether that strategy will be decided at country level or at the level of the Africa Union, will have to be determined in the long run. For as one of the panellists at the early morning panel session explained, China’s increasing interest in Africa is not purely unselfish.
The Chinese government has been expanding loans to the continent and if the loans are going to be repaid someday, then the countries taking on these loans have to witness some level of development. China is now the largest source of external loans on the continent with loans from the China Export-Import Bank given to the continent rising to a cumulative US$63 billion in 2015 compared to just US$1.7 billion from the US within the same period. This has helped deliver some critical infrastructure in some African countries but these are loans that have to be paid back some day.
But there are also other selfish interests driving China’s Africa push. Africa’s middle class presents a potential market for Chinese goods. As the Chinese economy boom and transforms, it needs a ready market for its manufacturing sector and Africa with its 1.2 billion people and growing middle class and low competition from both local and foreign companies could serve as that market. So basically for the Chinese, the idea is to empower the African middle class to be able to demand Chinese goods.
China therefore has an Africa strategy which has resulted in its emergence as Africa’s leading trading partner and source of investment inflows into the continent. But as another of the panellists, Carlos Lopes, former Executive Secretary UNECA noted, there is really nothing special about China becoming the leading trading partner to Africa.
China is also the leading partner to the US, China and Brazil. As the world’s manufacturing power house, China has become the source of goods to almost all parts of the world. But China also has a challenge as improving efficiencies is beginning to result in having excess capacity in its home market. And that is where Africa comes in, as a destination of exports of Chinese excess capacity considering the continent’s acute deficiency in almost everything. Besides China has also moved from basic manufacturing to more advanced manufacturing and Africa has become a good testing ground for these skills and knowledge.
China’s investment inflow into the continent is mainly driven by the need to export excess capacity in and also preserve Chinese jobs at home. This is where the China Eximbank has come in handy, advancing the loans that is required to help China to export its excess capacity to the Africa continent in the name of helping the continent build its infrastructure. Sadly, this is not necessarily leading to the transfer of skills as Africans are mainly retained as low level manpower in Chinse sites in Africa while the they keep the middle level and senior manpower and the knowledge that comes with it.
Without senior level management positions in the Chinese financed projects running in Africa, there is no hope that Africans will gain the necessary knowledge transfer that they need to become “technologically independent.” They will be destined to keep the low level jobs. But as Lope also noted, that there is even no guarantee that Africa would be able to keep the low level jobs in future due to the increasing advances in technology which would mean that in the long run, even the low level jobs that are currently reserved for Africans could easily be automated which could leave millions stranded without marketable skills.
So how does Africa get out of what is increasingly looking like the Chinese trap. Lope argues that that Africa or rather African countries must re-shape their strategy towards China on the basis of the need to drive the industrialisation of the continent. This would mean attracting Chinese investment based on an industrialisation policy.
Currently, while China exports almost all sorts of goods into Africa, Africa exports to China are overwhelmingly commodity based driven by oil. Africa must evolve an industrialisation policy that reduces the commodity exports of the continent to China and encourages non-commodity exports based on each country’s competitive advantage.
China’s huge population and fast rising middle class can also become a source of demand for Africa’s goods. While China seeks to win the Africa middle class market, African countries must also see themselves as capable of winning the Chinese middle class market. This strategy can only be driven by an industrialisation policy that takes advantage of the Chinese investment inflow to build the industrial base of the continent. Ethiopia is one country that seems to be getting its own China strategy right. Other African countries may need to take a cue.