Monday, 22 July 2013 05:22

Newsletter 33

In this newsletter:

  • China's African investment grows 30 fold
  • China brings goods and roads, now Africa wants jobs
  • Interswitch partners UnionPay as China-Africa business increases
  • Africa: Booming China-Africa Trade, a Real Wakeup Call for U.S. to Take Africa Seriously - Expert

China's African investment grows 30 fold

China's investment in Africa has increased 30-fold since 2005, a commerce official said Thursday.

According Ministry of Commerce spokesman Yao Jian, who spoke at a press conference in Beijing Thursday, the investment was divided amongst 2,000 firms in 50 African countries.

In 2009, China replaced the United States as Africa's largest trading partner. Trade between China and Africa totaled $166 billion in 2011, while American trade totaled $95 billion, according to a Guardian report.

China's growing investment has spurred the United States to engage more competitively with Africa. The U.S. and Africa signed the African Growth and Opportunity Act in 2000, which expired at the end of last year.

During a June 26 to July 2 trip to Africa, U.S. President Barack Obama pledged to invest in a multibillion dollar power project on the continent. China announced in 2011 that it had waived tariffs for 97 percent of exports from Africa's least developed countries. Yao said China has been always the largest importer for Africa's least-developed countries, accounting for 25 percent of those countries' export volume.

It is also noteworthy that Nigerian President Goodluck Jonathan's recent visit, during which Chinese President Xi Jinping announced the finalization of a $1.1 billion loan from China to Nigeria. Nigeria has Africa's second-largest economy. It is also Africa's largest oil-producer.

"Through multi-way cooperation, [like the] China-Africa Cooperation Forum, China has facilitated Africa's participation in the global economy and increased its access to benefits of global trade,"said Yao.

He added that China has donated to the WTO since 2008 to provide trade assistance to Africa's least-developed countries, which, Yao said, allowed China to help expedite African countries' admission to the organization.


China brings goods and roads, now Africa wants jobs

DAKAR, July 21 (Reuters) - China has brought cheap consumer goods, roads and schools to many parts of Africa over the last decade but the continent's leaders are increasingly pushing for it to provide more of what many Africans want most: jobs.

From Pretoria to Abuja, governments have begun voicing frustration that China's use of Africa as a source of natural resources and a market for its goods may be hindering the continent haul its billion people out of poverty.

A recent report by the U.N. Economic Commission for Africa (UNECA) highlighted the risk that the continent's relationship with the world's second largest economy could strangle its attempts to industrialize.

China's trade with Africa ballooned from $10 billion in 2000 to an estimated $200 billion this year - four years after it overtook the United States as the continent's largest partner.

But some 85 percent of China's exports from Africa are raw materials, such as oil and minerals. According to the African Development Bank, most minerals mined in Africa are exported raw, meaning the jobs and wealth from processing them is created elsewhere.

A flood of Chinese produce, meanwhile, has accelerated the decline in industrialisation since the 1980s. Africa's textile industry alone lost 750,000 jobs over the last decade, according to the Johannesburg-based Brenthurst Foundation.

Even in the continent's manufacturing powerhouse South Africa, some 40 percent of footwear and fabrics come from China.

Expressing the concerns of many African governments, South African President Jacob Zuma bluntly warned last year that such an unbalanced pattern of trade was "unsustainable".

"The romanticized relationship surrounding China's investment in Africa has passed," said Alex Vines, head of the Africa programme at the Chatham House research institute.

"With the world's youngest and fastest-growing population, the main pressure on governments in Africa is to provide jobs. Having the Chinese take those jobs doesn't help."


It is true China's boom has brought many benefits to Africa. Beijing has won fulsome praise from many governments for its willingness to finance massive infrastructure projects without conditions relating to democracy, governance and human rights - the "strings" Africa has often criticised in aid from the West.

Chinese economic growth rates averaging 10 percent a year for almost a decade fuelled a commodities "super-cycle" which has lifted Africa's own growth to unprecedented rates.

And the cheap Chinese goods being imported help make everyday living more affordable and develop the consumer sector across the continent.

But in many countries, China's demand for ore, timber and oil is forcing African states to specialise at the bottom of the value chain in areas with low productivity gains, UNECA said.

With Africa supplying one-third of China's oil, much of it from Angola, UNECA highlighted the risk of 'Dutch Disease' whereby demand for raw materials inflates a currency, making other sectors uncompetitive against foreign competition.

Even in Senegal, an arid West African country not usually associated with the 'resource curse', domestic peanut processing factories face the threat of being driven out of business as Chinese exporters buy up the crop to ship home.

Attempts to legislate for industrialisation, such as bans on the export of unprocessed logs from Gabon and Mozambique, have often proved fruitless. In Gabon, where Beijing has broken French dominance over logging, an estimated 60 percent of timber is exported illegally to China.

Respected Nigerian Central Bank Governor Lamidu Sanusi said in March that China's extraction of resources from Africa had all the attributes of "colonialism".

In an apparent response to such criticism, Chinese President Xi Jinping took pains during a six-day African tour in March to stress his country was seeking a win-win partnership.

"The development of China will be an unprecedented opportunity for Africa, and Africa's development will be the same for my country," he told lawmakers in Congo Republic.

Beijing has provided much-needed capital to a continent starved of investment. The China Import-Export Bank is the continent's largest creditor and Beijing has promised $20 billion more in loans over the next three years.

But Beijing's money comes with its own strings: it must be spent on Chinese goods or Chinese-built infrastructure. And Chinese firms often source their supplies and workers back home.

The number of Chinese in Africa has increased 10-fold over the last 20 years to an estimated 1 million. From shopkeepers in Malawi to prostitutes in Cameroon, Africans complain that Chinese competition is making life tougher.

Unlike Western immigrants, the Chinese diaspora comes from the poorest section of society and competes directly for work with Africans, some 80 percent of whom are in "vulnerable employment" according the International Labour Organisation.

In Ghana, tensions flared into violence last month when police and residents attacked artisanal Chinese goldminers, claiming they were driving locals out of the industry. Many Chinese were brutally beaten and some 200 were deported.

Frustration has also emerged with the operating practices of some Chinese firms. In Gabon, Chinese refiner Sinopec's Addax Petroleum is embroiled in a $1 billion legal dispute over an oil licence after the government alleged it failed to pay customs duties and respect other laws.

Zambia, where Chinese mines have a record of violent labour disputes, revoked three licences for the Chinese-owned Collum coal mine, alleging non-payment of royalties taxes, and poor environmental and safety records.

"Now more countries are engaging with Africa, there are more options. Several countries are looking at Chinese investment with a more critical eye," said Razia Khan, head of Africa research at Standard Chartered Bank. "There will be more and more scrutiny of these contracts."

Responding to the criticism from Nigeria and South Africa, China's Commerce Ministry has encouraged firms to increase investment in Africa. China is launching Special Economic Zones for manufacturing companies on the continent.

Though it is Africa's largest trading partner, China has only 6 percent of the stock of foreign investment - well behind France on 18 percent - according to U.N. trade body UNCTAD.

Nigerian Finance Minister Ngozi Okonjo-Iweala has urged African countries to woo Chinese manufacturing firms into offshoring their production as their domestic labour costs rise.

"We need to prepare ourselves to provide a welcoming home for some of the industries where the Chinese will no longer be competitive," she told a conference in London last month.


Interswitch partners UnionPay as China-Africa business increases

Interswitch Transnational has announced it has completed an acceptance and acquiring third party payment processing integration with China’s UnionPay International.

The pan-African company, which has operations in Nigeria and is present in West and Central Africa, said with the integration UnionPay cardholders can now make use of their cards at more than 70,000 merchants and more than 11,000 ATMs belonging to Interswitch partners in Nigeria and Uganda, with Gambia to follow next.

Interswitch added the partnership will also serve as the electronic door linking Nigeria and China.

Akeem Lawal, managing director of Interswitch Switching and Processing, said the company is excited to have UnionPay cards on its platform.

“We are delighted to welcome UnionPay cards to the Interswitch network. The agreement is an important step for Interswitch and brings us one step closer to offering our service to cardholders from all of the major card brands,” Lawal said.

Mitchell Elegbe, group managing director and chief executive officer (CEO) at Interswitch Transnational, said: “This agreement opens a new vista of electronic payments between Nigeria and China. UnionPay cardholders now have more convenient access to their money through the Interswitch network when they visit Nigeria.

“In addition, Nigerian banks will benefit from increased transactions from UnionPay cardholders using their ATMs and POS infrastructure while merchants will benefit from increased sales from a larger pool of cardholders.”

Cai Jianbo, chief executive officer (CEO) of UnionPay, said the company decided to partner with Interswitch after it discovered more of its customers are visiting Africa on business and relaxation.

“More and more UnionPay cardholders are visiting Africa for business and pleasure,” Jianbo said.

“To meet this growing demand we have been working closely with local partners to increase acceptance of UnionPay cards across the continent. To date, UnionPay cards can be used in more than 40 countries and regions in Africa, and provide a convenient and safe payment service to cardholders and merchants.”

He added that the partnership would enable Interswitch and UnionPay to better their pan-African growth and acceptance plans.


Africa: Booming China-Africa Trade, a Real Wakeup Call for U.S. to Take Africa Seriously - Expert

Johannesburg — The visit by the U.S. President Barack Obama to Africa is not aimed at countering the Chinese influence in the continent but rather to seek a foothold, an expert on U.S.-Africa relations told Xinhua.

The United States and China need to complement each other and work together to develop Africa, said Scott Firsing, head of International Studies at Monash University in South Africa.

More China-U.S. collaboration and cooperation is crucial in help Africa develop education and skills which are vital to economic growth, Firsing said.

"Because of Africa's demographics and their need for skills, education, and training, the issue of youth leadership is absolutely vital. Both Washington and Beijing undoubtedly agree with this," Firsing said before Obama arrived in South Africa Friday evening.

"China has also sent thousands of doctors and teachers to work in Africa, and Africans have gone to study in China. This is exactly the same regarding the United States."

"This makes it clear that more collaboration and cooperation in this regard just makes common sense," Firsing said.

He said the sheer pace and magnitude of increased Chinese- Africa trade relations was a real wakeup call for the United States to take Africa more seriously. And it wouldn't make sense for Washington not to be "involved in Africa right now, both politically and economically."

According to the expert, China for the past three decades have been investing in Africa and increasing its bilateral and trade relationship with African governments, It has played a fundamental role in helping Africa achieve social betterment, economic growth and development, especially in the infrastructure sector.

According to Firsing, in 2012 China's trade with African was almost double that of America and this made the White House realize that it is missing opportunities in Africa.

"These opportunities won't last forever," he noted.

The United States are trying to ensure that the White House's new strategy for sub-Saharan Africa remains relevant, he said.

Firsing, a founder of the African NGO Young People in International Affairs, said Pretoria is expecting more from Obama' s historic visit.

South Africa will be looking for some assurances from Obama that African Growth and Opportunity Act (AGOA) will be extended, he said.

"Close to 98 percent of all South Africa exports enter the United States under the AGOA arrangement."

And there are other more specific reasons such as the U.S.- South African "strategic dialogue", which is a bilateral arrangement to discuss wide ranging issues from multilateral diplomacy and trade and investment, Firsing said.

South Africa is an important trade, investment, tourism and technology partner to the United States, with around 600 American companies operating in the country," and Pretoria will be looking for more investment from America as well as from U.S. companies," Firsing said.

He said the United States and South Africa should also make sure recent developments like a BRICS bank will in future work hand and hand with current Western led institutions like the International Monetary Fund (IMF) and World Bank for a combined force that encourages trade and assists countries in crisis.

There will be a strong business component with the tour helping to shine a positive spotlight on the continent that will hopefully be seen by American companies who are contemplating entering the African market and all it has to offer, despite the perceived risks, Firsing said.

"The United States are looking to prove that is a true partner and friend of the continent and is in the relationship for the long term. Additionally, it wants to change this negative perception of 'America the Bully' to one that supports and helps builds Africa's capabilities in order for Africa to help itself."

"I think Africa is split," Firshing said when asked about how Africans think about the U.S. renewed commitment to Africa.

"We have those that see the good work the .U.S has done in places such as South Sudan and in the health sector, amongst others.

However, Washington's work is often less visible compared to "huge Chinese projects like stadiums, roads and railways," said Firsing.

Obama's African trip runs from June 26 to July 3, covering Senegal, South Africa and Tanzania.


Last modified on Monday, 22 July 2013 06:20