• Caught in the debt trap?

    Help us help you by taking our second annual Debt survey and you could win R3 000.

  • Rich man, poor man

    Culture change from below is the only way to overcome poverty, says Leopold Scholtz.

  • Tech bubble talk

    After the tech euphoria of 2013, the fast-moving sector has hit a speed bump.

Data provided by McGregor BFA
All data is delayed
Loading...
See More

No sinister aims in Africa, says China

Jul 18 2012 13:06 Reuters

Related Articles

China's economic growth slows

Angola wins loan from China

Premier warns of economic slowdown

SA turns to China for Coega refinery

IDC in talks with China over loan

China not always cheaper

 

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.

 
africa  |  china
NEXT ON FIN24X

PPI quickens to 8.2%

55 minutes ago

 
 
 

Read Fin24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
10 comments
Add your comment
Comment 0 characters remaining
 

Company Snapshot

We're Talking About: Small Business

Standard Bank is looking for 12 entrepreneurs to participate in a 10-part TV series. They could win a R1m investment into their dream.
 
 

SAPS waited too long to complain about ad - DA

The DA has told a public hearing that the SA Police Service was "hopelessly out of time" to lodge a complaint against its election advert.

 
 

Latest elections multimedia

13 days to elections - news you need to know
11 Julius Malema quotes you'll never forget
DA won't get 30% - Zille
The EFF's ad was banned, see why

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...
Loading...