Tunis conference puts Sino-Africa trade ties under microscope

The fast rising Sino-Africa ties are expected to face a major test in March when Tunis plays host to a rare meeting to scrutinise China’s engagement with the continent.

The Sino-Africa trade and investment pacts have grown significantly over the last 10 years driven by a quest by China to find resources to support its vibrant economic and industrial growth. Africa has proven a perfect match for China because consumers on the poor continent prefer the cheap goods and equipment from the Asian economic tiger.

2008 statistics showed that total trade between the two blocs was valued at $106.8 billion, up 45.1 per cent in 2007. According to Prime Minister Wen Jiabao, China invested $875 million in Africa in the first nine months of 2009, marking a 77.5 per cent year- on-year growth. China in November 2009, further pledged $10 billion in fresh low-cost loans to Africa over the next three years during the Forum on China-Africa Co-operation(FOCAC) in Egypt.

A new report by Standard Bank economists said while trade volumes inevitably suffered in the first half of 2009, Chinese enterprises still managed to sign $22.45 billion of new labour service contracts in Africa, climbing by 25 per cent year- on- year, and completed $11.53 billion of business volume, representing a 61.1 per cent year- on- year growth.

But despite this firm run in the trade and investment front, the ties have not been spared criticism with some analysts saying that the expansion of China’s trade and investment interests in Africa presented ‘a mixed-grill’ kind of scenario in that on one side it poses challenges for some countries while on the other opened additional development opportunities. A two-day forum under the auspices of the African Development Bank (AfDB) and funded by the UK’s Department for International Development (DfID) is expected to present a candid reflection of the Sino-Africa ties, extending beyond the past trade and investment deals to focusing on future economic and political governance. The forum is scheduled for March 24-26.

A brief by the forum organisers said although China’s involvement in Africa has generally been perceived as handy in helping provide new opportunities for investment, trade and market access, it has also been seen in some quarters as one solely driven by an urge to secure resources and commodities for the expansion of its manufacturing sector.

‘Moreover, the increased commercial activities of Chinese companies have led to a wide range of effects such as labour migration and have triggered a broad debate on the governance framework and the international aid architecture. Also, China’s demand for primary products has been combined with a commercial policy that discourages the import of manufacturing products,’ the organisers stated.

While Sub-Saharan African (SSA) exports of fuels and minerals have increased dramatically in the last decade, they observed, exports of manufacturing products have not been able to keep pace and have only experienced a slight increase.

‘The academic literature on China-Africa is often dominated by aggregate analysis, which is constrained by limited data. While traditional China-Africa research highlighted past trade and investment relations, this seminar will focus on the future China-Africa prospective and emerging challenges,’ the organisers further said.

A preview of the seminar’s agenda showed that analysts would train their focus on China’s impact on international aid architecture, African integration, growth of Chinese Small and Medium Enterprises (SMEs) in Africa, labour relations in Chinese owned companies in Africa, Chinese investment in Africa’s agriculture and infrastructure sectors, China’s impact on governance and political economy and Chinese investment in Africa’s banking sector.

The organisers also stated discussions would also focus on the ‘consequences of China’s investment and trade strategies in Africa for development policy, especially with regard to economic diversification and technological upgrading and sophistication of exports and challenges to Africa’s competitiveness under a Chinese-dominated global market for labour-intensive manufacturing.’

SIMMERING RIVALRY

Structural imbalance of trade between the two blocs has been floated repeatedly as a hitch to the Sino-Africa ties with statistics showing that as at 2008 Africa ran on an overall trade surplus with China estimated at about $10 billion.

This is due almost entirely to the natural resource exports from countries such as Angola, Republic of Congo, Zambia and Sudan, which provide nourishment for China’s own domestic economic transformation. Beyond these major resource exporters to China, 32 African countries run sizeable trade deficits with China owing to the volume of goods, largely low-cost consumer products, flowing into Africa from China’s coastal factories.

Some analysts however pointed out that the objectives of the Tunis talks and the role of the UK’s DfID in the talks was a reflection of the simmering rivalry between the East and West over alliances with Africa even though the seminar organisers are quick to deflect such fears. ‘The seminar is aimed at generating policy-oriented research on the impact of the rising strategic and economic role of China on Africa’s development prospects and its economic and political governance,’ the organisers said.

Once dominant western countries have lost grip on Africa with most lucrative contract deals and other trade and investment ventures going to China and other nations from the eastern bloc perceived to be more friendly and receptive.

‘The UK’s involvement in the seminar to appraise China’s involvement only helps to point at western nations trying to make a come back. That may not be the case as per the seminar but that is the message likely to go out there,’ an official at the Foreign Affairs ministry in Nairobi told Business Daily.

A recent study whose findings were published by the John Hopkins University, confirmed the renewed rivalry between China and the West over alliances with Africa but termed them misplaced, citing the huge difference in interests held by both sides. The Paper was titled; ‘China in Africa: European Responses and Challenges to the Chinese Challenge.’

‘The Chinese factor has renewed European interest in Africa. But it is far from obvious that Europeans have a clear sense about their interests and objectives in Africa and how relations between the two regions should look in future,’ said Mr Denis Tull who authored the report. ‘The unexpected Chinese-Africa alliance unveils a blind spot of the West’s relation with Africa. The West has always tended to make Africa only the subject of its own aspirations, initially its economic ones, later also its political ones.’

He added: ‘China by contrast takes the continent seriously to the extent it involves Africa in exchanges determined by interest. In the long run, Europe will probably follow the Chinese in building relations with Africa based on interest.’

Away from the trade and investment ties, though China has been lauded for its cheap and unconditional loans unlike the western countries leading super powers such as the US and the UK have criticised its leadership for being insensitive to governance issues.

The Darfur crisis on the Sudan/Chad border has often been cited as an attestation of China’s warped side of pushing for trade and investment ties even in instances when the beneficiaries were suspected of engaging in atrocities like in the case of the Khartoum government that is accused of fanning killings in Darfur. China has extensive oil interests in South Sudan but has been dealing with the President Omar al-Bashir who is wanted by the International Criminal Court (ICC) over alleged war crimes in Darfur. The south is expected to vote to secede from the Arab-led north in a referendum next year. China has also been accused of engagement with a host of other African nations that pay little regard to the rule of law and the fight against corruption.

Only three weeks ago, US President Barack Obama barred Guinea, Madagascar and Niger from enjoying trade and investment opportunities for 2010 under the African Growth and Opportunity Act (Agoa) citing concerns over governance.

‘Each of these countries has experienced an undemocratic transfer of power, which is incompatible with making progress toward establishing the rule of law or political pluralism,’ the White House said underlining the radical conditions that the US and other Western nations continued to attach to such partnerships.

‘These circumstances also make it extremely difficult to achieve the progress necessary to satisfy the other Agoa eligibility criteria,’
Records of Agoa decisions that US Presidents have made since 2000 show an emphasis on the rule of law and political pluralism, protection of human rights and workers’ rights and the fight against corruption.

Similar benchmarks were applicable last year when the decision was made to lock out eight countries including Zimbabwe, Somalia, Sudan, Cote d’Ivoire, Equitorial Guinea, Eritrea, Mauritania and the Central African Republic, from the Agoa initiative in 2009.

MUTUAL RESPECT

‘If the President determines that a beneficiary sub-Saharan country is not making continual progress in meeting the eligibility requirements, he must terminate the designation of that country as a beneficiary,’ the Agoa Act states. Most Western nations agitate for such measures to be applied in all co-operation ties across the globe by supporting countries including China that is perceived to provide a lee-way for impunity through loose ties.

Chinese ambassador to Kenya, Mr Deng Hongbo, however, defended his country against the allegations of selective interest towards trade and investment while ignoring governance issues. ‘We strongly believe that every country we deal with always has a capacity to self develop. We believe in the basic principle of mutual respect to sovereignty, and mutual respect is two way,’ he told a news briefing in Nairobi on the eve of Christmas last year.

But even as the envoy defended his country, an analysis of recent deals showed that the China-Africa trade flows are gradually being dominated by private investors as the Asian nation ostensibly seeks to ‘polish its image.’

‘What elevates the relevance of these recent deals is their largely private nature. The Chinese government is increasingly keen on removing itself from the deal flow in Africa. There remains a common assumption throughout Africa that all Chinese deals are state-led and orchestrated,’ Standard Bank said in a report. The bank cites an instance in which the Chinese government was quick to distance itself from the rumoured $7 billion resource deal between Guinea’s military government and China International Fund.

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*This article first appeared in Business Daily Africa
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