China Struggling to Adapt in a More Competitive Africa
During one of my first visits to Lagos in the Seventies, the only Chinese imports were to be found among the egg rolls at a popular food stand. But when I visited earlier this year, the city’s ports swelled with stacks of containers packed with bargain-priced TVs, radios, electronics, clothing and assorted low-quality plastic wares.
According to the Financial Times, Chinese exports to Africa jumped by 22 per cent last year to hit $73 billion, which is double the GDP of Kenya, while the two-way volume of trade reached $166.3 billion. Meanwhile, the low prices have made it impossible for African industry to take off.
Another problem is that China’s largesse in Africa is often misdirected and does little to contribute to development. A $3.5 billion ‘ghost town’ was built on oil credit outside Luanda, Angola. The new headquarters of the African Union in Ethiopia were completed using Chinese labour, instead of training local workers. During my recent visit to Johannesburg, residents were furious over a new report showing that many anti-malarial drugs sent from China to Africa were counterfeit. Brand China is quickly gaining a poor reputation among many frustrated African consumers.
But the biggest challenge China is facing in Africa isn’t about politics or reputation, rather competition from other emerging markets. For the past two years, Africa’s exports to China as a percentage of total global trade have remained steady, revealing a new class of trade partners from Brazil to Turkey competing for access. India’s trade with Africa grew to $57 billion in 2011, while even South Korea is now at $22.2 billion.
These new competitors are combined with a new cold war as Washington seeks to block Chinese influence in Africa through questionable ‘anti-corruption campaigns’. In the next decade it will surely prove more difficult for Beijing to remain on top.
But that doesn’t mean that China is going to stop trying. Despite President Zuma’s bold diplomacy in July, the summit concluded with an agreement to extend $20 billion of loans to Africa, which is double those agreed three years ago. The staggering figure is China’s way of drawing a line in the sand: we’re in Africa, and we have no plans to leave.China is clearly betting on Africa as its number one strategic interest, the outcome of which is going to have ramifications far and wide across regional markets. We’ll see if the competitors among the other BRIC nations are up to the challenge.
This is only an excerpt of my new column in Spear’s. Read the full article here.