Africa urged to make better China deals

Apr 12 2013 22:00
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Johannesburg - For more than a decade African governments have rolled out the red carpet for Chinese investors, trading oil, coal, iron ore and other resources for badly needed ports, roads and railways.

But policymakers and executives, worried the flood of cheap Chinese imports is sapping Africa's own manufacturing potential, say the continent must drive harder bargains with China.

The time has come, some say, to jettison the view of Beijing as Africa's benevolent partner, bound by a common resistance to the meddling West.

"The sad reality is that they are not comrades. Their companies are there to make profits like everyone else," Zimbabwean Finance Minister Tendai Biti told the Reuters Africa Investment Summit this week.

"The African textile industry has basically collapsed because of cheap Chinese imports ... Africa needs China but let's create an equitable relationship."

China's trade with Africa has surged from about $10bn in 2000 to $166bn in 2011, with much of that an exchange of African minerals for Chinese manufactured goods.

Nigerian Central Bank Governor Lamido Sanusi warned last month it was time for Africans to wake up to the realities of their relationship with China.

"It is a significant contributor to Africa's deindustrialisation and underdevelopment," he said in an opinion piece in the Financial Times that ruffled feathers in Beijing.

In South Africa manufacturing accounts for just 15% of GDP. It is even lower elsewhere, under 11% in Kenya and 10% in Nigeria.

Africa to blame?

Part of the fault may lie with African policymakers, for not demanding enough from their Chinese counterparts at the bargaining table.

"If you allow the Chinese to come and rape you and take whatever they do because you're just looking at the money they bring, and if you're looking on a short-term basis, the country will suffer, there's no two ways about it," said Sipho Nkosi, CEO of South African mining company Exxaro Resources [JSE:EXX].

Africa must demand that China transfer skills and technology to the continent instead of allowing it to simply export raw materials, he said.

For some African politicians, part of China's attraction lies in its unwillingness to criticise local governments over human rights or corruption, unlike the West.

"You can't blame the donor only. You need to blame the receiving government as well," said Elias Masilela, the chief executive of South Africa's government pension fund.

African governments also needed to do more to put in place the infrastructure - including power and transport - that can support a domestic manufacturing industry, speakers said.

Sensitive to the criticism, China has been careful to frame its role in Africa as one that is mutually beneficial.

"Africa had a long colonial history and should know the nature of colonialism," foreign ministry spokesperson Hua Chunying said last month in response to Sanusi's comments.

"Comparing China-Africa cooperation to the old colonial Western powers lacks any sense of logic."

Loan-backed charm offensive

Beijing has also responded with a charm offensive to ease concerns about its role on the world's poorest continent, including lobbying for South Africa's addition to the group of developing countries now called Brics.

President Xi Jinping last month visited Africa on his first trip abroad as president.

While Xi outlined his Africa policy as a partnership among equals, China clearly holds the cash: it is offering $20bn of loans to the continent between 2013 and 2015.

China's strength in low-cost, large-volume manufacturing has also helped some local industries, most notably telecoms, where handsets and equipment from the likes of Huawei and ZTE have made mobile phones affordable for millions of Africans.

"It probably has been more beneficial if one looks at it from our industry," said Sifiso Dabengwa, chief executive of South African telecommunications company MTN Group [JSE:MTN], told the Summit.

"They have driven prices down quite significantly." 

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