Built to last

Windhoek – China is in Africa, and it’s not going anywhere.

And now it has been fortified by the BRICS alliance (Brazil-Russia-India-China-South Africa) in getting a greater stranglehold over whom the continent primarily trades with.

In 2009, China became Africa’s biggest trade partner, and now the levels of exchange between the two have reached nearly US$200 billion, which is in line with earlier expert projections.

Africa’s trade with BRICS surpassed US$300b in 2012, and expectations are that these are figures that are only going to continue to grow.

The Information Office of China's Cabinet recently published a white paper on “China-Africa Economic and Trade Co-operation” in which it said: “…the scale of China-Africa trade expanded rapidly. In 2012, the total volume of China-Africa trade reached US$198.49 billion, a year-on-year growth of 19.3 percent.

“Of this, US$85.319 billion consisted of China's exports to Africa, up 16.7 percent, and US$113.171 billion was contributed by China's imports from Africa, up 21.4 percent. Total China-Africa trade volume, China's export volume to Africa and China's import volume from Africa all reached new highs.”

By any measure, it seems Sino-Africa ties, much like the nascent BRICS-Africa relationship, have been built to last.

Not all experts agree on the pace of growth in trade relations from 2011 to 2012, though.

Research by Standard Bank revises downwards early estimates that Sino-Africa trade would reach the US$200b mark in 2012.

While acknowledging there has been rapid strengthening of ties, the bank says trade rose by a marginal 1.8 percent to US$169.2b in 2012 (US$166 billion in 2011).

That is a variance of more than US$30b with figures provided by the Information Office of China’s Cabinet.

Standard Bank says during the first six months of 2013, Africa-China trade reached US$105.5b, representing an increase from the first six months in 2012 (US$98.5b) and the first half of 2011 (US$78.9b).

The analysts project 2013 volumes lifting slightly on 2012 figures, though “for now, the unprecedented ascent in China-Africa trade, which marked the 2005-2011 periods, seems to have slowed”.

Further, says Standard Bank, China’s appetite for minerals from Africa, particularly base metals, cooled down in 2012 largely mirroring the slowdown in demand for commodities from the key emerging markets of Brazil, India and Russia.

Chinese imports of iron ore from Africa dipped by three percent, manganese by 17 percent and chromium by 35 percent in the period under review.

However, the Chinese government is optimistic that there is only one direction in which relations with Africa will go up.

The Information Office of China’s Cabinet says, “By the end of 2012, China had signed bilateral investment treaties with 32 African countries, and established joint economic commission mechanisms with 45 African countries.

“The China-Africa Development Fund … had by the end of 2012 agreed to invest US$2.385 billion in 61 projects in 30 African countries, and had already invested US$1.806 billion for 53 projects.

“According to preliminary statistics, the agreed upon investment projects will bring US$10 billion worth of investment to Africa, increase local exports by about US$2 billion annually, and benefit more than 700 000 people.

“China's financial institutions have actively expanded financing support for Africa.”

Beijing is keen on boosting the continent’s manufacturing capacity.

“Manufacturing is China's key investment field in Africa. From 2009 to 2012, Chinese enterprises' direct investment volume in Africa's manufacturing sector totalled US$1.33 billion. By the end of 2012, China's investment in Africa's manufacturing industry had reached US$3.43 billion.

“Mali, Ethiopia and other resource-poor countries have also attracted a large amount of Chinese investment.

“Chinese enterprises have invested in sugar refineries in Mali, set up glass, fur, medical capsule and automobile factories in Ethiopia, and invested in textile and steel pipe manufacturing projects in Uganda.

“All of these investments have compensated for these countries' unfavourable natural conditions and resources, increased their tax revenues and employment, and extended the value adding chain of ‘made in Africa’ products.

“Chinese enterprises' investments have brought about changes to all dimensions of Africa's social development.

“For example, those that invest in cash crop cultivation in Zimbabwe have provided interest-free loans to local farmer households, improved production infrastructure, offered technical guidance for the whole production process, organised local employees to visit China, and funded local schools and orphanages.

“These have promoted the positive interaction and common development of Chinese enterprises and local society.”

On the food security front, the Chinese government says, “From 2009 to 2012, China's direct investment in African agriculture grew from US$30 million to US$82.47 million, a 175 percent increase.

“Investment by Chinese enterprises in African agriculture has increased grain supplies in the countries concerned and enhanced the comprehensive agricultural productivity of those countries.

“In Mozambique, for example, 300 hectares of experimental paddy fields supported by Chinese investment yielded nine-10 tonnes per hectare for three successive years. With the help of Chinese rice experts, local farmers see their paddy fields yield five tons per hectare, two tons more than previous yields.

“In Malawi, Mozambique and Zambia, Chinese enterprises and the China-Africa Development Fund jointly invested in a cotton planting and processing project modelled on having enterprises work with farming households. The project was able to involve tens of thousands of local growers, effectively enhancing local capabilities in cotton processing.”

On infrastructure, in 2012 Chinese companies completed construction contracts worth US$40.83 billion in Africa (a 45 percent from 2009), “accounting for 35.02 percent of China's overseas contract work completed”. 

 

 

The BRICS Picture

 

Africa trade with BRICS in 2012, according to Standard Bank, grew to US$301b from US$290b in 2011.

“While still impressive, seen in the context of the general rise in BRICS-Africa trade since 2003, last year’s lift of just 3.8 percent is fairly modest. And, with the exception of the generalised trade retreat in 2009, is the lowest annual increase in BRICS-Africa trade since 2000,” the researchers say.

Trade between Africa and the 27-member European Union rose by 10 percent to US$430b, eclipsing its 2008 peak of US$395b. This is the first time since 2000 that EU trade with Africa has outstripped BRICS-Africa annual trade growth.

Notable within BRICS is the rise in trade between Africa and India, which in 2012 increased by 11 percent to US$70.3b.

India’s imports from Africa rose to US$43b in 2012 from US$39.8b the prior year while exports rose to US$27.3b from US$23.3b in 2011.

As with the rest of BRICS, imports of crude oil now dominate the list of merchandise that India is shopping for on the continent.

While Brazil’s exports to Africa remained at a steady US$12.2b, the Latin American economic giant’s imports from the continent Africa fell marginally to US$14.3 billion from US$15.4 billion in 2011.

Trade between Russia and Africa also fell to US$9.4b in 2012 from US$10.9b in 2011, while Russian exports to the continent from to US$7.2b from US$8.2b the previous year.

“While African demand for products from the BRICS has mostly held firm in 2012, and in the first half of this year, the demand in some of the larger BRICS economies for African commodities exports (largely base metals) does appear to have cooled,” Standard Bank analysts say.

South Africa’s trade with Africa registered 15 percent growth to US$25.7b in 2012, with exports growing to US$16b from US$14.7b in 2011.

If trade between South Africa and its Southern Africa Customs Union (SACU) partners is factored in, trade in 2012 rose to US$35b in 2012.

South Africa’s exports of machinery into the rest of Africa rose by 25 percent to US$2.5b, vehicle exports rose 35 percent to US$2b, and exports of electrical and electronic equipment rose by 15 percent to US$1b.

Zambia emerged as South Africa’s largest non-SACU export market in 2012, absorbing US$2.7b worth of that country’s products.

“South Africa has been most successful over the course of the past 18 months in sustaining the broad pace of its trade relations with Africa, in so doing offering critical commercial nutrition in light of still weak external demand in core advanced economies,” the analysts say.

October 2013
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