‘Need to re-focus Sino-Africa trade’
Windhoek – Africa has remained a passive recipient of Chinese manufactured goods and a net exporter of mineral commodities to the Asian economy, letting the world’s second-largest economy dictate the pace and terms of trade and commercial ties.
Analysts say Africa and China’s trade is flourishing and both have developed a symbiotic economic relationship, cemented by political ties dating back to Africa’s decolonisation struggles.
China’s trade with Africa has expanded faster than it has with any other markets across the globe.
Luckily for the Asian economy, it has been able to be the sole driver of its agenda in Africa, as trade and commercial ties remain structured according to terms dictated by China, economic analysts at Standard Bank say.
“It is clear that Africa matters more to China than ever before, and vice versa. However, it is worth stressing that the integration of trade ties has been driven by China, on China’s terms,” Standard Bank economic analysts Simon Freemantle and Jeremy Stevens say.
“Chinese firms, confronting subdued activity in mature markets and tasked with shifting up the value chain, have recognised the importance of selling goods to the large emerging economies – especially the highly-populated and increasingly wealthy ones in Africa,” the analysts say.
“That means selling to Africa, not outsourcing production to Africa.”
Africa has become China’s fastest-growing export destination, doubling its deals with Latin America.
China’s trade with Africa also eclipses that of Europe and North America.
Standard Bank analysts say that even China’s trade with its neighbours in the Asian region has been “lacklustre, wallowing in Africa’s shade”.
China’s exports to Africa are estimated at around US$80 billion, having slowed down to 22 percent in 2011 from 25.6 percent in 2010.
Since 2008, China has on a monthly basis been exporting goods to Africa worth around US$1b, rising to US$6b a month in 2011 and lately US$7b.
Standard Bank estimates that 18 percent of Africa’s imports were sourced from China this year, edging up from 16.8 percent in 2011 and 4.5 percent a decade ago.
Trade between Africa and China will top US$200b this year, from US$166b in 2011. Bilateral trade has expanded by an average 22 percent year-on-year each month in 2012.
But while trade is blossoming, China is selling – not outsourcing – to Africa at a pace five percentage points faster than to any other region this year, the analysts point out.
The analysts say China could be Africa’s perfect development partner, particularly in the manufacturing sector.
“China is actually Africa’s perfect partner for supporting the quest, but (that) will need constructive engagement. Partnerships must therefore aim to entrench commercial ties amongst African economies.”
Developing the continent’s manufacturing sector could help buffer African economies against commodity price fluctuations on the international market.
Commodities have been driving revenue for most African countries.
While China’s exports to Africa have risen tremendously, China’s imports from Africa, mainly mineral commodities and crude oil, have surged astronomically in recent years.
In 2012, China’s imports from Africa have risen by 26 percent, twice the speed of China’s imports from other markets.
Imports are expected to surge to around US$117b by the end of this year. China’s imports of crude oil from Africa in the first ten months of 2012 rose by 17 percent (US$45b).
Standard Bank analysts argue that African economies are “mono-focused”, that is, over reliant on selling commodities which raise the continent’s economies’ sensitivity to China when growth slows in the Asian economy.
So far there are worrying signs that China’s uptake of mineral commodities from the continent has slowed down.
China’s imports of iron ore and concentrates have fallen by 13.5 percent to US$74b in 2012. South Africa’s exports to China have fallen by nine percent in 2012. China’s imports of steel from Africa have fallen by 54 percent, copper by 29 percent and imports of aluminium have by 60 percent.
The analysts say Chinese demand for African commodities has become more important than ever before to the continent.
“Most African nations are still mono-focused: selling commodities. Worryingly, China’s internal dynamics suggest that incremental demand for African resources is going to grow slower and slower with each passing year,” the analysts say.