Asia rivals EU, US as Africa’s partner

According to a World Bank report, exports from Africa to Asia tripled in the last five years, making Asia Africa’s third largest trading partner (27 percent) after the European Union (32 percent) and the US (29 percent).

The report’s author, Harry Broadman, told reporters that China and India both have a history of trade and investment ties with Africa.

“These two emerging economic ‘giants’ of Asia are at the centre of the explosion of African-Asian trade and investment, a striking hallmark of the new trend in South-South commercial relations,” said the study entitled “Africa’s Silk Road: China and India’s New Economic Frontier”.

Broadman surveyed 450 Chinese and Indian companies operating in four African countries and included South Africa, Tanzania, Ghana and Senegal ‘ and developed first-time business case studies in the field of 16 other Chinese and Indian firms in Africa.

“But what is new is that the rapidly growing societies of China and India, particularly the growing middle class, really does present a rare opportunity for Africa to increase its exports.”

At the same time, more and more Chinese and Indian firms are seeking to manufacture and export sophisticated components, such as those produced by the South African auto parts industry, to the global market.

More important are “behind-the-border” reforms to encourage competition, strengthen market institutions

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Asia rivals EU, US as Africa’s partner and improve governance in African nations, and ‘between-the-border’ reforms in both regions, to reduce international transactions costs.

“Part of what the Africans need to do to attract China is reduce the cost of doing business,” said the chief economist of the World Bank’s Africa region, John Page.

But Gobind Nankani, the bank’s vice-president for Africa, said that while growing trade was “an opportunity for African countries”, it would “not automatically translate into growth and poverty reduction”.

This is borne out by the fact that exports are skewed heavily in favour of extractive industries and are dominated by unbeneficiated raw materials. Manufactured goods such as machinery, vehicles, textiles and footwear accounted for only 14 percent of Africa’s total exports to Asia with oil and gas, metals and unprocessed agricultural products making up the balance.

Imports on the other hand are, in the main, manufactured goods such as textiles, processed foods and machinery.

With the recent growth in exports, Africa’s overall trade with Asia was in balance, with both imports and exports sitting at just under $40 billion (R292 billion) a year, the study showed.

But while Asia was an increasingly important part of Africa’s trading agenda, the same was not true in reverse, the report showed. Imports from Africa only made up 1.6 percent of Asia’s total.

Thirteen percent of Africa’s exports ‘ nearly half of all sales to Asia ‘ go to two countries: China and India.

In the years 1999 to 2004, exports to China grew 48 percent a year. The country now accounts for 10 percent of all exports. Sales to India grew 14 percent a year.

Five oil and mineral exporting countries account for 85 percent of all exports to China. South Africa, on its own, accounts for 68 percent of all exports to India.

Trade flows, especially in oil, have also driven a surge in foreign direct investment in both directions.

Foreign direct investment (FDI) has also grown dramatically following the increase in trade, but this is mainly in oil producing countries, with Sudan and Nigeria attracting nearly $200 million in Chinese FDI.

Amos Kimunya, the Kenyan Finance Minister in Singapore for meetings with colleagues, welcomed China’s push into the region which is home to 300 million of the world’s poorest people.

“I see this as an opportunity for the African countries, who traditionally look West, and now are looking East,” Kimunya told reporters.

Harry Broadman, the World Bank’s economic adviser for Africa, said it was possible to boost trade and investment even further, which would allow African countries to benefit even more from the rapid growth in the Chinese and Indian economies.

“The tourism industry in Africa is underdeveloped. It’s just a huge market waiting to happen. But what is needed is something Africa lacks: infrastructure-roads, airports, transit systems, and telecommunications,” Broadman added. ‘ WB-AFP-Own.

September 2006
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