Fin24

China moves beyond resources in SA

2010-11-24 15:19

Beijing - Energy deals took centre stage during a southern African tour by China's leader-in-waiting, but the growing ties between China and Africa are quickly moving beyond the traditional sectors of energy and infrastructure.

Vice-President Xi Jinping this week wrapped up a visit to South Africa, Angola and Botswana.

Xi, who is expected to succeed Hu Jintao as head of the ruling Communist Party in 2012, witnessed the signing of deals worth millions of dollars to build a power plant and solar panel factory and to increase South African exports to China.

Less visible during state visits but increasingly important is trade in sectors besides resources. Chinese consumer goods are making huge inroads in African markets, and more and more Chinese firms are exploring manufacturing deals.

"The key trend going forward here is that we're seeing hundreds of thousands, literally, of micro Chinese entrepreneurs, procuring from China and selling at the grassroots to African consumers," said Martyn Davies, chief executive of Frontier Advisory in Johannesburg.

"At the higher end, in more formalised retail... maybe three-quarters of their procurement, non-food, is from China," he said.

While China sees Africa as a prime source for the oil and minerals its hungry economy needs, the continent is also a promising market for everything from tiny hair decorations to automobiles churned out by China's fiercely competitive manufacturers.

"There are a lot of complementarities between the Chinese and African economies," said Xue Lan, dean of public policy at Tsinghua University in Beijing.

Better infrastructure in Africa can help move ore and oil out, and let more consumer goods in. Textiles already make up 16% of African purchases from China; footwear and clothing account for another 14%.

Craig Bond, China head for Standard Bank, South Africa's biggest bank, said China's prime objective in Africa is obviously to obtain access to natural resources, but there is another longer-term objective.

"The second one is looking at the long game of those markets becoming consumer markets for Chinese goods," Bond said.

Growth ties

China has traditionally encouraged its state-owned companies tendering for African contracts to team up with one of its policy banks, such as ExIm Bank, whose remit is to support government goals.

But as China's engagement with Africa deepens, the financing needs could be a stretch even for deep-pocketed policy lenders: the World Bank has identified a $31bn shortfall in the continent's infrastructure funding requirements.

Industrial and Commercial Bank of China, the world's largest bank, is one of the banks Beijing is coaxing to broaden its footprint in Africa. It owns 20% of Standard.

As living standards rise, other opportunities beckon. Africa in 2008 had about 80 million households with income above $5 000 a year - roughly the population of China's four largest cities.

By 2020, that number could grow to about 130 million.

"There's a lot to be said: the telecoms sector is booming, infrastructure is booming, services are booming," said Ngozi Okonjo-Iweala, the World Bank's managing director.

With a population of 800 million and growing, sub-Saharan Africa will soon approach the size of China or India, two members of the Bric grouping. The others are Brazil and Russia.

"We're talking about Africa now as another Bric," Okonjo-Iweala said. "So this is a vast market for all kinds of goods, both consumer goods as well as industrial goods."

Comments
  • Dave - 2010-11-24 15:53

    Mmmm lets hope we still have jobs so as we can purchase all these lovely imports from China! Or Dare I say that the Chinese invest so our people can have jobs, paid atleast to the legal levels. Sometimes you need to open your eyes to the bigger picture here people. China also specializes in exporting Chinese people, I believe we have in the region of half a million Chines here already.

  • Geyser - 2010-11-24 16:07

    We got rid of European colonialists and now the Chinese colonialists are coming. Why do we always welcome colonialists at all? One way to rid this problem of foreign occupation of our countries is to get out of the WTO agreement and impose stiff import duties and strict immigration rules. If the motor car industry gets protection why not other industries which have the potential to create greater number of jobs?

  • Norman - 2010-11-24 16:08

    The Chinese are definatly going to teach these ANC fools who the real baas really is,personally i cant wait.The unions and those fat lardass slobs from the youth league are going to learn about human rights abuses first hand,he,he,he.

  • Kevin - 2010-11-24 16:35

    A Napoleon quotation on China: "Let her sleep, for when she wakes, she will shake the world" - the new colonization of Africa has begun and before African leaders have wiped the sleep out of their eyes, the yellow colonizer will have replaced the white colonizer. Just travel around Southern and Central Africa and observe the extent and speed at which it is already happening. Where once there were white foremen/managers on construction sites, they're now yellow. During the late 1950s my father used to say, "Once it is free of white colonialism, but if looked at in terms of historical time, black Africa will only govern itself for milliseconds, and then the Chinese will take over" It looks like we're getting there - our doomed rhino are feeling it already.

  • Expected - 2010-11-24 16:46

    impose stiff import duties ? Do you really want to pay 100% more for goods, And yes of a lower quality? Do you know what would happen to the man on the street if this was to happen? Do you really think we in SA have the Infrastructure to manufacture goods in SA as it is done in china? On many of the products we dont. You cannot protect unproductive industries, if we cant meet the price on production here in SA we need to look at other industries, and if we cant do that then there is something wrong with us. What a Geyser!

  • John - 2010-11-24 17:02

    It is strange how we let the foreigners like the chinese into our country. At grass roots level they can open upo a small trading company with less than R2000. They then defy tax laws, hardly employ South Africans and if they do it is under horrific working conditions for well under mininum wages. The money theses small chinese businessmen are making steals from our own South Africans. If I want to open a company in China, I have to invest a mininum of USD200 000-00 to even get registered. No woner there is such a thing as Sinophobia.

  • worried mzansi - 2010-11-24 17:07

    DUMPING OF GOODS AND PEOPLE ARE THESE INVESTMENTS?ONLY WAYS OUT OF SLAVERY ARE TO INTRODUCE CAPITAL CONTROLS,REGULATIONS AND PROTECTIONISM TO LEVEL THE PLAYING FIELDS AND RECLAIM OUR SOVEREIGNTY INSTEAD OF EXPLOITATION IN THE NAME OF INVESTMENT!!

  • Mart - 2010-11-25 08:02

    Everyone is bleating about "colonialism" by the Chinese ??!?! Have the Chinese introduced national legislation to dispossess Africans of land. Have the Chinese forcibly removed Africans far away from the centres of commerce and into under-serviced and squalid ghettos ? Have the Chinese forced Africans to undergo inferior education ? Have the Chinese made Africans foreigners in their own country by forcing them to carry a 'dompas' ? Have the Chinese used military and police force to imprison the African leadership for decades ? If the answer to any of that is no, then stop sperading this false myht that the Chinese are the new "colonisers".

  • Come again? - 2010-11-25 08:19

    As far as I'm aware, the definition of "colonialism" is not 'purchase enormous amounts of raw materials from Africa at a market-related price in return for trade in other sectors of the economy'. That's what we in the economy call "free trade". Now, if China kidnapped the man in the street and forced him to work in cotton plantations on another continent, and dug up all the minerals and precious metals and shared none of the profits whatsoever with the Africans, that would be another story altogether...

  • LAKHAN7 - 2010-11-26 23:59

    ...LOOK AT WHAT CHINA HAS DONE TO TIBET. 1ST THEY MUST HAVE STARTED TRADING NICELY, THEN SLOWLY THE CHINA GOV. STARTED WINNING POPULARITY. ...AND ITS SAFE TO SAY THAT CHINA OWNS THE TIBETANT PEOPLE. ( WE DONT WONT THAT IN AFRICA? )

  • Harbin - 2011-02-05 02:05

    Better with Chinese investments to built up the Infrastructure, then France Oppression with Foreign Legions to still Uranium, Gold and everything from African Colonies. http://walkinafrica.com/2010/09/20/imagine-if-we-all-spoke-french/

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