Beijing, China (CNN)Chinese President Xi Jinping heads to Africa this week as Beijing moves to further cement its role as one of the continent's closest economic and diplomatic allies.
After a brief stop in the Persian Gulf Thursday, Xi's itinerary -- his first overseas trip since beginning his second term as leader -- takes him to Senegal, Rwanda, South Africa and Mauritius, spanning almost every corner of Sub-Saharan Africa, where China's economic clout, and strategic ambitions, are growing by the year.
China is Africa's largest trading partner, overtaking the United States nearly a decade ago. Bilateral trade reached a record-high of $220 billion in 2014, official statistics show.
Chinese leaders have always made a point of visiting African nations regularly and early during their time in power. When he assumed the presidency in 2013, Xi also chose Africa as part of his maiden journey abroad and went on to visit the continent two more times during his first term.
China's interest in Africa isn't just about trade, the continent also provides a large amount of raw materials which China couldn't get otherwise, while also acting as a pro-China political bloc at the United Nations.
Ian Taylor, an Africa expert at the University of St. Andrews, said the US is increasingly losing its influence on the continent because it "took Africa for granted."
"The Americans seem to look at Africa through this security lens ... which is completely different from the Chinese perspective," he said. "They look at it from an economic perspective -- the Americans are lagging big time."
'Spreading the love'
Xi's exact itinerary has yet to be released, but he will return to South Africa on July 25 to take part in the BRICS summit, alongside Russian leader Vladimir Putin.
At first look, Rwanda and Senegal appear unusual choices given they don't receive a large amount of investment from China nor are they large countries in terms of population.
But Taylor, the St. Andrews professor, points to Rwanda's key position in the Belt and Road plan, Xi's ambitious global trade and investment scheme which aims to enhance economic connectivity between Asia, Europe and East Africa.
"Rwanda is hoping to integrate itself into the burgeoning railway networks in East Africa, as part of the Belt and Road initiative," he said. "Kigali is moving towards diversifying its relationship away from the US, away from the European Union, and China sees a good opportunity to develop ties."
China's new President Xi Jinping (L) and Congo's Denis Sassou Nguesso President cut the ribbon on March 30, 2013, during Xi's first foreign trip.
For Senegal, there have been suggestions the Chinese government might be interested in the possibility of building ports on the Atlantic Ocean.
Gordon G. Chang, an American political commentator best known for his book "The Coming Collapse of China," said the selection of Senegal and Mauritius, respectively, is consistent with China's attempts to establish a presence on Africa's Atlantic coast and to dominate the Indian Ocean.
"It's amazing how well the Chinese do (in Africa) -- because they are unopposed," he said.
Taylor said the diverse itinerary shows the Chinese leadership is "spreading the (diplomatic) love" across African nations, to boost Beijing's influence in the region.
"This is massively appreciated in most African countries, especially by the political elites, the way in which China quite uniquely in some respects treats all countries at an equal level ... at least rhetorically and in the diplomatic process," he said.
Neo-colonialism?
Chinese analysts view the ever-closer bilateral ties with African nations as a natural result of the Beijing leadership's decades-long cultivation of relations with the continent, dating back to the early days of the Communist government in the 1950s.
"The importance of Africa in China's diplomacy has been consistent," said He Wenping, an Africa expert at the Chinese Academy of Social Sciences (CASS), a state-run think tank. "The Belt and Road initiative has only accentuated the role of Africa even more."
Already, Chinese-built infrastructure -- railways, roads, dams, telecommunication networks and power stations -- is rapidly changing the physical appearance of Africa.
Chinese-owned mines and factories churning out everything ranging from minerals to shoes -- combined with an influx of big-spending Chinese tourists -- are redefining the continent's economic landscape, while Chinese-funded educational programs and media outlets have grown in size and increased their influence over young Africans.
China is also bolstering its diplomatic and military presence on the continent, becoming more active in UN peacekeeping missions and even opening its first overseas naval base in Djibouti last year -- with the latter move triggering alarm in Washington and other Western capitals.
Problems and controversies have emerged along with China's expanding footprint in Africa, with critics labeling the country a "neo-colonialist" only interested in exploiting the continent's rich resources and cheap labor. Activists have highlighted cases of human rights abuse that include ill treatment and poor pay of local workers.
He, the CASS expert, acknowledges "growing pains" in bilateral ties but said there were tangible economic rewards for both sides.
"If African nations feel colonized, why would they keep cooperating with China?" she said. "It would be an insult to the African people's wisdom -- they clearly know how to maximize their benefits in cooperating with China."
One thing analysts did agree on, however, is Beijing's commitment to Africa -- which even critic Chang described as "deep and widespread" -- as reflected by Chinese leaders' frequent visits, in contrast to Washington's relative lack of attention to much of the continent.
"The US needs to do so much more -- you don't have American presidents going to Africa that often, which is a shame," Chang added.
"Africa is not on the US agenda," He said, before taking a swipe at the US president's reported off-the-cuff remarks early this year when discussing immigration policy with lawmakers. "And when Trump mentions Africa, he calls them 'shithole countries'."
Steven Jiang reported from Beijing, China. Ben Westcott reported from Hong Kong.
Throughout the 2000s, Chinese demand for primary goods like oil, iron, copper, and zinc helped Africa reduce poverty more than it had in decades. Even so, China’s total investment in the continent’s natural resources has been smaller than many imagine, and, with growth moving away from manufacturing and toward consumption, China’s appetite for raw materials will continue to diminish. China’s shifting economic growth model aligns with Sub-Saharan Africa’s imminent labor force boom, presenting a significant opportunity for both sides. Maximizing mutual gain will depend on China and Africa cooperating to address a host of challenges: Can African countries limit the flow of Chinese migrants and foster domestic industries? Will Chinese investors adopt global norms of social and environmental responsibility? Where does the West fit in?
This study aims to objectively assess China’s economic engagement on the African continent, the extent to which African economies are benefiting, prospects for the future, and ways to make this relationship more productive. David Dollar marshals evidence about the scale of trade, investment, infrastructure cooperation, and migration between China and Africa, all of which are relatively recent phenomena. In addition, Dollar addresses the question of whether and how China’s involvement differs from that of Africa’s other economic partners. The concluding chapter provides some tentative recommendations for African countries, China, and the West.
reGina Jane Jere is a Zambian-born London-based journalist and founding Editor of the New African Woman magazine the sister-publication of the New African magazine of which she was the Deputy Editor for over a decade. The mother of two juggles a wide-range of editorial and managerial duties, but she has particular passion on women’s health, education, rights and empowerment. She is also a former Zambian correspondent for Agence France Presse, and a former Africa Researcher at Index on Censorship. She writes extensively on a wide range of issues, from politics to women’s rights, media and free speech to beauty and fashion.
Jul 4, 2018 - As Africa's largest trading partner China shifts to consumption-led growth, Africa's oil and ferrous metal exporters are set to suffer, but tourism and investment will benefit, according to a new report by Moody’s Investors Services.
A Moody’s report – Sovereigns: Africa, Closer trade and investment ties with China released 3 June, says China’s new shift to consumption-led growth will have mixed credit implications for African sovereigns, flattening the trade volumes of oil and ferrous metal exporters, while benefitting some exporters and tourist destinations.
“China is now Africa’s largest trading partner, with trade totalling $114 billion in 2016 that accounted for around 14% of the continent’s total exports,” said Colin Ellis, Moody’s Chief Credit Officer EMEA and co-author of the report.
“But as commodity demand softens and international competition increases, Africa’s oil and ferrous metal exporters are likely to see trade volumes level off. That said, growing Chinese investment in Africa is likely to narrow the continent’s infrastructure gap and help to boost potential growth in some cases,” he added.
China is now Africa’s largest trading partner, with trade totalling $114 billion in 2016 that accounted for around 14% of the continent’s total exports
Economic growth of around 6.5% forecast in China over the next two years should support a modest resurgence in demand for some commodities. However, the Chinese economy is shifting from investment towards consumption which will partially mitigate the upside.
In addition, competition from other international commodity producers like the United States, shale oil producers and mining companies from Australia and Brazil is likely to intensify and erode market shares for African exporters.
Although the recovery in oil prices lately could lead to strong growth in value terms this year, the price effect would likely diminish based on Moody’s medium term oil price estimates. As a result, Angola, Republic of Congo and Nigeria are likely to face slower demand for their exports to China than in the past decade.
By contrast, Moody’s expects Chinese demand for commodities like copper, cobalt and aluminium to remain strong. These non-ferrous metals are widely used to produce cars, home electronics and transport that are likely to benefit from rising Chinese incomes.
The Democratic Republic of the Congo and Zambia are likely to benefit most given that their copper exports to China account for more than half of their Chinese exports. Rising food exports to China will benefit agricultural exporting countries such as Senegal and Ethiopia.
China’s rising income levels could also lead to a rise in tourism to Africa. Although the share of Chinese tourists to Africa remains small – 1.5% of total outbound Chinese tourists – they have risen 30% annually since 2012, the fastest rate globally.
Chinese investment has grown to 5% of Africa’s total foreign direct investment in 2016 from just 2% in 2010, and if investment growth persists at half of current rates, China’s investment position would reach $100 billion by 2020.
South Africa, Mauritius, Morocco, Egypt, Kenya, Namibia, Cape Verde, Botswana, Tunisia and Tanzania are Africa’s most competitive tourist destinations and are most likely to benefit from increased numbers of visitors from China.
Chinese investment has grown to 5% of Africa’s total foreign direct investment in 2016 from just 2% in 2010, and if investment growth persists at half of current rates, China’s investment position would reach $100 billion by 2020.
As 70% of Chinese investment between 2000 and 2015 was focused on infrastructure, this could help to address the continent’s growing infrastructure deficit, especially in energy and transport, and boost potential growth in some circumstances.
Since 2000, at least half of the world’s fastest-growing economies have been in Africa. And by 2030, Africa will be home to 1.7 billion people, whose combined consumer and business spending will total $6.7 trillion.
In fact, between 2014 and 2016, Seven years ago, the Harvard Business Review pointed out that Africa is also home to many of the world’s biggest opportunities. And yet, despite its tremendous business potential, Africa has not risen to the top of Western business leaders’ agendas.
Western countries are quickly losing ground to China, which increased its exports to Africa more than sevenfold—to $103 billion—from 2005 to 2015. If Western businesses hope to keep up, they will need to tap into the African countries and sectors with the highest potential for growth.
By 2030, more than half of Africa’s population will reside in seven countries: Nigeria, Ethiopia, the Democratic Republic of Congo, Egypt, Tanzania, Kenya, and South Africa. But, more important, 43 percent of Africans will belong to the middle or upper classes, up from 39.6 percent in 2013, implying considerably higher demand for goods and services. By 2030, household consumption is expected to reach $2.5 trillion, up from $1.1 trillion in 2015.
Nearly half of that $2.5 trillion will be spent in three countries: Nigeria (20 percent), Egypt (17 percent), and South Africa (11 percent). But there will also be lucrative opportunities in Algeria, Angola, Ethiopia, Ghana, Kenya, Morocco, Sudan, and Tunisia. Any one of these countries would be a good bet for companies seeking to enter new markets.
By 2030, the sectors generating the most value in Africa will be food and beverages ($740 billion), education and transportation ($397 billion), and housing ($390 billion). But there will also be strong growth in consumer goods ($370 billion), hospitality and recreation ($260 billion), health care ($175 billion), financial services ($85 billion), and telecommunications ($65 billion).
Of course, much of this growth will depend on the African Union properly implementing its new Continental Free Trade Area, which would create a single market for goods and services, offering corporations many points of entry. Moreover, the CFTA will increase the need for connectivity, so there will be new opportunities to invest in infrastructure and sectors ranging from transportation and energy to information and communications technology (ICT) and water supplies. For its part, the African Development Bank can help investors find promising projects through its Program for Infrastructure Development in Africa.
Another major growth area between now and 2030 will be in African business-to-business spending, which will reach $4.2 trillion, up from $1.6 trillion in 2015. Here, the largest sectors will be agriculture and agricultural processing ($915 billion), manufacturing ($666 billion), and construction, utilities, and transportation ($784 billion), followed by wholesale and retail ($665 billion), resources ($357 billion), banking and insurance ($249 billion), and telecommunications and ICT ($79.5 billion).
The expected growth in agriculture and agricultural processing reflects the fact that food and beverages will constitute the largest share of total household spending. Moreover, 60 percent of the world’s unused arable land is in Africa, which still contributes a meager share of worldwide agricultural exports. That means there is a lot of room for growth. And, because severe hunger still affects many African countries, investors can even contribute to the public good by investing in fertilizers, machinery, water and irrigation systems, and other areas of the agriculture sector.
As of 2012, the African countries with the highest agricultural value-added in terms of annual growth included Burkina Faso, Ethiopia, Nigeria, Mali, Mozambique, Rwanda, and Tanzania. In addition, Angola, Morocco, and South Africa now all have sizable markets, and have committed to expanding their agricultural sectors.
This helps to explain why manufacturing will be the second-largest sector in terms of business-to-business spending. Another reason is that many of the manufacturing opportunities in Africa happen to be in globally competitive sectors such as automobiles and transport equipment, refined petroleum, computers, and office and industrial machinery. South Africa, Egypt, and Nigeria are already becoming promising places to invest in these areas. And investors will also be able to find high returns and favorable business environments in Ethiopia, Morocco, and Rwanda.
Africa is the world’s last frontier market, and Western businesses need to start taking advantage of its tremendous potential, as Chinese firms already are. Doing business in Africa will also create sustainable jobs and advance the United Nations Sustainable Development Goals to eliminate poverty and hunger. And that, too, will be good for the bottom line. As the Business and Sustainable Development Commission has shown, pursuing the SDGs “could raise trillions in new market opportunities in ways that extend prosperity to all.”
