Fin24

No sinister aims in Africa, says China

2012-07-18 13:06

Beijing - Beijing is eager to rewrite negative perceptions of its growing ties with Africa at a summit this week, citing expanding private investment and a push to shift low-end manufacturing to the continent long seen as a commodities and energy cache for China.

Chinese state-owned firms in Africa face criticism for using imported labour to build government-financed projects like roads and hospitals, while pumping out resources and leaving little for local economies, an image Beijing wants to change at the Forum on China-Africa Cooperation beginning on Thursday.

“As China's economy transitions, shifting labour intensive industry to regions outside of China offers production opportunities,” Zhong Jianhua, China’s special envoy to Africa, told Reuters this week.

“African countries should seize this opportunity,” he added. “They can step into a track that China has taken in the past to develop their own industry.”

Chinese President Hu Jintao will speak at the summit’s opening day and is expected to announce a new set of loans for the continent. At the last meeting held three years ago, China pledged $10bn.

Frontier markets

China's economic trade with Africa reached $166.3bn in 2011, according to Chinese statistics. In the past decade, African exports to China rose to $93.2bn from $5.6bn.

Industrial and Commercial Bank of China, for example, the world's most valuable lender, has invested more than $7bn in various projects across the continent. 

The China Non-Ferrous Metals Mining Corporation  however became the maligned face of Chinese investment during a bitter election campaign last year in Zambia, where it owns several lucrative copper deposits.

Along with the state-run firms, a growing number of smaller private Chinese businesses are looking to frontier markets like Africa to sell consumer goods and join in on promising growth prospects.

"A lot of African growth is no longer just commodity growth. It is growth in telecoms, services, and consumer products,” said Diana Layfield, Standard Chartered Bank’s CEO for Africa.

An official with Africa’s multilateral lender however said concern remains that countries will just shovel resources out and not look to diversify.

“They (African nations) are thinking about the immediate resources that could get them billions” of dollars, said Anthony Nyong, manager of the compliance and safeguard division at the African Development Bank. “We need to gradually work at building the capacities of African countries to see how they can negotiate good deals and know what is important for them.”

China has also found it difficult to navigate tricky political and conflict problems in Africa, particularly as the main oil investor in both Sudan and South Sudan.

Major hurdles

China still faces a struggle to encourage companies to invest and shift production to Africa even if labour costs are lower. Smaller firms in particular are overwhelmed by the world’s second largest continent with more than 50 UN member states that have diverse languages, cultures and income levels.

“The idea that it will happen quickly, except in selected circumstances, is probably far-fetched,” said Layfield, with Standard Chartered, adding that one factor accelerating some trade now is a sharp drop in container transport costs following the 2008 financial crisis.

Jeremy Stevens, a Beijing-based China economist at Standard Bank, said even if Chinese firms move to Africa they face competition from other low-cost producers such as India, Bangladesh, Vietnam, Mexico and Turkey - and inland China.

“It is more costly to make something in Africa because of bottlenecks in infrastructure, human capital and access to finance, which have been exacerbated by poor governance and mismanagement,” he said.

 

Comments
  • nketso.kgwadi - 2012-07-18 14:31

    Like we believe you,he is right about poor governance bottleneck infrastructure and mismanagement of funds this guys steal our money but I guess africa needs to improve on its own and fast

  • Felix Njewa Kankhukwa - 2012-07-18 14:45

    who can be a real friend for africa? who can africa trust?

      arthur.hugh - 2012-07-18 15:20

      Africa needs to get over it's socioeconomic issues and start using its resources wisely. Right now they're being squandered by an inept and corrupt government.

      rontheogre - 2012-07-18 17:30

      Felix, who is the only person that you can truly trust? Yourself, right? The same goes for Africa. We have the most amazing people that are highly trained(of all colours and creeds) and our backyard is filled with raw materials, including people, that is just waiting to be mined and converted into an economic powerhouse. Why do you think the East West and North are manipulating, bribing and cajoling to get their hands on any little piece of Africa they can find. To enrich themselves because we are not doing it for ourselves, and because they realise that if we should ever wake up to the fact as to what potential we have their economic dominance would be something of the past.

      arthur.hugh - 2012-07-18 22:06

      Ronald I could not agree more with you if I tried. There is no forward thinking from government because it's like an orphan who had his first Christmas - can't see the present for the tree, let alone the forest it came from.

  • kayley.segal - 2012-07-18 15:14

    Oh...OK. I guess that settles it.

  • arthur.hugh - 2012-07-18 15:19

    "No sinister aims" Bwaaahahahahahahaha! Trade deficits paid off with cheap Chinese components after a little "extra" in someones pocket. Whatever.

  • gieljam.gomtor - 2012-07-18 15:19

    They might not have a sinister plan and maybe by the time they enter the new areas south africa has bought up all the inferior "cheap products " the markets are flooded with.

  • gcj.wood - 2012-07-18 15:41

    No sinister aims in Africa, says China (2012) No sinister aims in Africa, says Great Britain (1806) And those big wheels keep on turning........

  • tommo.too - 2012-07-18 20:38

    No, they're just in Africa because they love Africans....

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