Monday, 22 April 2013 07:16

Newsletter 30

In this newsletter:

  • China-Africa cooperation contributes to African growth: FM spokeswoman
  • Developed world ‘invests far more in Africa than China’
  • Africa: how to respond to China’s shifting growth model

 China-Africa cooperation contributes to African growth: FM spokeswoman

BEIJING, April 19 (Xinhua) -- Economic cooperation between China and Africa has contributed more than 20 percent to African countries' growth over the past 13 years, a Foreign Ministry spokeswoman said on Friday.

"Africa's economy has grown by 5 percent annually in the new century with the help of China's aid and investment," spokeswoman Hua Chunying said at a daily news briefing.

Media reports have stated that Zimbabwe's Deputy Prime Minister Arthur Mutambara said it is time for Africa to stop taking a "romantic view" of China, as the Asian country has grown from a "comrade in poverty" to a global economic giant.

Hua said China-Africa cooperation is based on a realistic viewpoint.

Chinese demand has allowed Africa to recover from the international financial crisis ahead of other regions, she added.

Cooperation between China and Africa is reciprocal, as well as based on equality and mutual respect, Hua said.

China's foreign direct investment in Africa approached 20 billion U.S. dollars by the end of 2012, with 3 billion U.S. dollars added to the total last year, according to the Ministry of Commerce.


Developed world ‘invests far more in Africa than China’

AFRICA’s annual trade with China has doubled to $199bn since 2008, but Chinese foreign direct investment into the continent, which is just 3%, is miniscule compared with the developed world, a senior Chinese banker told the China-Africa Business Summit in Sandton this week.

China’s increasing presence in Africa comes amid perceptions in the European Union (EU) that South Africa’s relationships with Brazil, Russia, India and China, as part of the Brics group of nations, are meant to replace that of its biggest trading partner. This despite the EU accounting for R382bn in trade with South Africa last year, according to widely published data, compared with R328bn for China and the US combined.

While China would aim to turn foreign direct investment flows into Africa around, its $3.4-trillion in foreign exchange (forex) reserves were not a panacea for the country’s further growth, said state-run Export-Import Bank of China chief economist Wang Jianye. He said this was because much of the world’s largest forex reserves were held in both US and German debt instruments, and not as equity. "China will have to increase the share of equity in foreign assets ."

Mr Wang also said double-digit wage increases in the world’s second-largest economy, and the rampant rise of land prices, would mean Chinese manufacturers would have to automate, move out of the country, or shift to higher-value production. To this end, the biggest challenge facing China was the rising domestic cost of production. This would likely shift significant manufacturing to Africa, he said.

However, Mr Wang said this would be increasingly on a "commercial" basis, in the context of global value chains and ongoing increases in world trade, rather than building infrastructure in Africa in exchange for minerals and other commodities. "This relationship (with Africa) will be determined business to business, people to people — it will increasingly be a commercial relationship," he said.

The China-Africa summit, held at the Industrial Development Corporation, followed on the heels of last week’s Development Bank of Southern Africa forum in Midrand, Gauteng, which dissected the recent Brics summit in Durban.

Mr Wang said investment in emerging markets had soared 70% since the onset of the global recession, while investment in developed nations was down 10% on 2007 levels. However, the picture was not all rosy. Last month, Nigerian central bank governor Lamido Sanusi said at the beginning of a visit to Africa by Chinese President Xi Jinping that Africans should "wake" up to the realities of their "romance with China".

"So China takes our primary goods and sells us manufactured ones. This was also the essence of colonialism," Mr Sanusi wrote in London’s Financial Times. "Africa is now willingly opening itself up to a new form of imperialism … We must see China for what it is: a competitor," he said.

This mirrors statements made at Wednesday’s summit by another keynote speaker, Zimbabwean Deputy Prime Minister Arthur Mutambara, who said that Africa needed to respond to China’s "shifting growth model", and also to perceptions of a "new colonialism" spreading across the continent.

Citing the "winds of change" that had blown across Africa since Ghana’s independence from Britain in 1957, Mr Mutambara said Africans needed to "take responsibility" for their own problems. "There are no excuses, don’t blame the Chinese, blame yourselves, Africans."

Meanwhile, despite South Africa concluding an agreement with the EU on trade, development and cooperation in 2004, the relationship between Africa’s largest economy and its top trade partner stumbled in September last year after the Department of Trade and Industry abruptly told the bloc it would be discontinuing 13 bilateral investment treaties signed after 1994.

One such treaty with Belgium and Luxembourg lapsed in March. Most of the others can be cancelled with six months notice on either side, Axel Pougin de la Maisonneuve, head of the political, economic and trade section of the EU delegation to South Africa in Pretoria, said. "Diversification of (South Africa’s) economy is fine, but should not be at the detriment of the EU."

He said that trading with Brics countries should not "discredit the solid trade and investment relationship" it has with the EU. "If people do not feel welcome, they will consider other destinations (for trade and investment)," he said.

Mr Pougin de la Maisonneuve also said South Africa’s image as a "rainbow nation" has suffered since the police killing of miners at Marikana.

Its relations with the EU now need to put on a more "positive" footing, and focus on South Africa’s "liberation" dividends.


Africa: how to respond to China’s shifting growth model

IT IS important for us to understand what we mean by saying China’s growth model is shifting. Over the last couple of years, the model has become less resource-intensive as the economy moves into middle income status. As its economy grows and prosperity spreads, it has become more consumer and services driven.

The growth trajectory has been slowing down and a mid-April 2013 report shows a growth rate of 7.7% down from the projected rate of 7.9%. The traditional above 10% growth rates are now history. All these changes require strategic positioning of Africa’s relations with China.

What is Africa’s optimum response vis-à-vis this new reality? Furthermore there is a new government in China led by President Xi Jinping and Premier Li Keqiang with a particular emphasis on the social and personal aspects of economic success encapsulated in the notion of the China Dream which seeks to reimagine prosperity and reshape consumerism in China. The goal is to catalyse a new aspirational lifestyle that is innately sustainable for the emergent middle class in China. These new developments have implications for China’s commercial relations with Africa.

However, as we discuss how African countries need to respond to China’s shifting growth model, it must be acknowledged that African countries have not effectively engaged the Chinese, even before the model started to change. Hence we need to pick up lessons on what has characterised the Africa-China relationships so far, and then use that as basis to explore future partnerships as the Chinese economy changes.

There have been two types or classes of critiques of the Africa-China economic relations. The first category is what can be termed Western-inspired criticisms and the second set consists of genuine grievances leveled by the Africans themselves. Before we delve into a detailed assessment of these challenges, the key theme and central message in this treatise must be laid out up-front.

African countries must NOT BLAME China or any other foreign power or institution for their problems. We must assume responsibility for our own circumstances, take charge of our economies and create sustainable solutions to impediments that confront us.


Last modified on Monday, 22 April 2013 08:34