Sino-Africa relations: Who is benefiting!

African countries have been failing to take full advantage of the opportunities offered by the relationship with the world's next superpower.

Is Southern Africa benefitting developmentally from its increasingly close ties with China?

According to the World Bank, an institution that fronts for Western governments that live in mortal fear of Beijing's growing international muscle, Chinese investments in Africa are now above US$115 billion dollars.

Most of these billions have gone into extractive industries, though much has also been poured into development of transport and communications infrastructure.

But, is Africa in general - and the Southern Africa region in particular - benefitting in terms of value addition to its industries, sustainable development and poverty eradication?

Very few processed goods from the African continent find their way into Chinese markets, something that has resulted in a multibillion dollar trade deficit.

Chinese trade with South Africa alone has grown by 20 percent in the last six months, amounting to R29 billion as compared to last year when the value of trade between the two countries stood at slightly above R34 billion.

According to the African Development Bank, while trade with China has been growing, exchange with other regions has remained flat or actually declined.

This is reflective of the strong political ties that have traditionally existed with China as well as Beijing's much-lauded policy of non-intervention in its trade partners' internal affairs.

Sino-Africa trade represents more than 10 percent of the continent's trade.

In value terms, it represents US$114b-US $52b in exports and US$62b in imports, reflecting a trade deficit of about US$10b for Africa according to a 2010 AfDB report titled "Chinese Trade and Investment Activities in Africa".

Europe remains Africa's largest export market, but its share has slumped from more than 50 percent in the early 1990s to just over 30 percent at present.

Chinese investments have increased yearly by an average of 46 percent over the last decade, mainly in water, transport, electricity and information and communication technologies.

This growth is representative of a deliberate Chinese policy to secure strategic minerals for its booming economy.

On the other hand, most of Africa's exports to China are in raw form with minimum to no value addition.

China has created firm roots in the retail markets of most Sadc countries, particularly Botswana, the DRC, Namibia, South Africa, Zambia and Zimbabwe.

By late 2010, China had penned 45 bilateral agreements with African countries and poured US$9.3b in different economic sectors, making it the continent's largest single investor.

However, most investments are in the mining sector, with most minerals being exported to China with little or no processing.

In the DRC and Zambia, where China has secured about 20 percent of extracted cobalt for its vast cellular phone manufacturing industries, there has been very little value addition.

These countries are yet to see any establishment of cellphone manufacturing plants but are instead importing these technologies after exporting cobalt.

South Africa, the regional economic powerhouse, is hoping to change the nature of the trade relationship with China.

"South Africa is increasingly becoming China's investment focus and China wants to diversify its investments in South Africa to other sectors of the economy such as information technology, biotechnology, human resources and other industry services," China Industrial Overseas Development and Planning vice president and secretary-general Fan Chunyong was qouted as saying during the recent China-Sadc Investment

Conference in Johannesburg.
In Namibia and Botswana, China is the biggest investor in the multimillion dollar construction industry, scooping many lucrative public contracts.

At the same time, Namibia and Botswana are exporting very little processed goods to China. In 2010, Namibia's Chamber of Commerce and Industry castigated what it called China's protectionist import laws.

NCCI chief executive officer Tara Shaanika told The Southern Times that local business community felt there was not enough skills transfer from China to Namibia and Beijing should invest in more value addition in Africa.

This skewed relationship was under the microscope at the recent China-Africa Youth Summit in Namibia.

Swapo Youth League chairperson, Dr Elija Ngurare, told state television that the ties should evolve so that Africa starts benefitting more instead of just exporting raw materials and providing an easy market for Chinese processed goods.

"We must now have a relationship where the Chinese will partner and improve skills development in Africa.

Chinese companies should also be willing to share the skills with their African counterparts to cover up for the future when they leave," said Dr Ngurare.

The situation is the same in Zimbabwe. China has pledged US$10b in investment in various sectors of Zimbabwe's economy in recent years.

However, most of this money invariably finds its way into mining and a Chinese miner has poured millions into a diamond project in eastern Zimbabwe.

A significant amount of money has also found its way into agriculture, with tobacco and cotton - key products for the Chinese economy - particularly benefiting.

But despite this heavy investment in the Zimbabwean economy over the years, very few local businesspeople have managed to break into Chinese markets and not much by way of processed goods have found their way to the Far East.

The story is largely the same in the DRC, a country whose mineral resources are sufficient to make it a global economic power if well-beneficiated. China has pumped US$9b in the revamping that country's transport and industrial infrastructure with at least US$3b finding its way into mining activities.

Even then, the DRC is still exporting large tonnages of raw materials to China and there has been little by way of establishment of value additive industries.

The DRC, for all its wealth, is still a net importer of some of the most basic of processed goods.

Apart from cobalt, large amounts of raw copper - through an arrangement with DRC state mining giant Gecamines - are exported annually.

Few DR Congolese businesspersons have been able to penetrate Chinese markets and have to contend themselves with entering into mining deals.

China has vast petroleum interests in Angola and it remains to be seen if officials in Luanda can elevate this relationship so that the OPEC country can eventually become a net exporter of refined oil.

There have been moves to at least facilitate skills transfer from China to Africa.

The recent China-Africa Summit in Ethiopia saw Beijing making a firm pledge to increase the number of state-backed scholarships offered to people from the continent to 15 000 in the near future.

If Africa's political and business elite do not improve their negotiation and engagement skills, they may very well allow China - apparently unwillingly - to simply become a replacement exploiter for the West. Africa should not have anyone to blame but itself if it fails to take full advantage of the development opportunities offered by the interest China is showing.

With China, Africa has the opportunity to enter into a relationship with a superpower that is not based on unfair exploitation but all this will depend heavily on how seriously the continent takes itself.