Trade Spike: China Estimated to Become Africa’s Largest Export Destination

Africa China trade relationsTrade relations between China and Africa continue to strengthen, and according to South African-based Standard Bank, China is set to become Africa’s largest export destination in 2012. China is currently the Continent’s biggest trading partner.?

The Standard Bank research found that bilateral trade volumes is more than $160 billion annually. This is equal to about one fifth of Africa’s total trade and points to? a 28 percent jump from 2011. The growth has been a steady trend. In 2011, imports from China were $73 billion in 2011. This was an increase of more than 23 percent from 2010. On the other end, 3.8 percent of Africa exports go to China, a boost from 2 percent in 2002.

And this increased business has come under scrutiny, with critics saying China could countermine human rights and governance in its dealings with African governments. ?China has spoken of building a long-term relationship, but some have stated that the Chinese don?t view any type of business relationship as long-term due to cultural and historical factors. This is a debatable notion, but one that Africa should be aware of. Having said that, I?d venture to say that if a better deal comes along, or once China gets all it needs from Africa, then this relationship could diminish–and if Africa is unable to find a replacement partner, their economy could be negatively affected,? explains Andrew Schrage, co-owner of Money Crashers Personal Finance, an online guide to money management and global finance. ?Also, China?s focus on natural resources should? raise some eyebrows within Africa. This trend could put Africa in quite a vulnerable position if these materials ever run low in supply, especially in areas like gold and silver.?

In Zambia, for example, China invested in Zambia’s copper industry. And there have been allegations of mistreatment of Zambian workers by Chinese foremen. This situation has resulted in several deaths. ?Once trading increased with China, Zambia saw an influx of Chinese firms sprouting up in their country. The fear here is that local businesses could be negatively affected, and despite the trade increase, the region has seen little impact on the standard of living. In some instances, Chinese employees were used instead of Zambians, and working conditions were poor,? notes Schrage. ?I think Africa would be well-advised to delve further into the situation in Zambia and keep this in mind as they move forward. There are many signs indicating that China?s interests are one-sided.??

Adds Liberian-born Dr. Naboth Zondo, head of the non-profit group the African Center for Growth and Development and author of The Rebirth of Africa: Rise of the Last Great Empire (to be published May 2012). ?China?s approach has been very different from Europe and America. The Chinese are using soft power, focusing more on making friends with African states, staying out of their local political disputes, sometimes, and promoting key African institutions like the African Union, African Banks, and building colleges and hospitals that can grow and sustain themselves. This is something Africans are not used to. They have been abused for so long that they welcome the Chinese without taking a closer look at some of the hidden agendas of China,? he explains.

And the Chinese aren’t just doing business from afar. According to some estimates, more than one million Chinese citizens live in Africa. All of this has the United States and the EU worried. ?China?s willingness to sponsor and fund initiatives in Africa is an obvious benefit as it can help develop Africa. However, the real political motivations behind this move are not known,? says Schrage. ?As this relationship continues to flourish, you can expect the U.S. and European countries to become more competitive in an attempt to regain what they?ve recently lost. I wouldn?t expect this competition to begin in the near future, however, considering the internal economic woes of both regions.?

Why aren’t other countries taking a lead in Africa? It boils down to money, says Schrage. ?One reason is high unit labor costs in Africa–wages divided by individual worker output. These costs are radically higher than those in China and India, subsequently leading to higher prices,? he says. ?Also, initiating trade with Africa usually also requires establishing diplomatic and political ties with the country. Africa needs to see that the partner country has a valid interest in their future. Apparently, China has been able to meet this threshold. Lastly, Nigeria’s government has a high level of corruption.?

Zondo points out that history has also played a part in the lack of partnerships between Africa and the U.S. and Europe. ?The European’s and American?s relationship with Africa was based on greed, abuse of human rights, violence, force, imperialism, total disrespect for the African people, their race, color, cultures, traditions, and civilizations. In addition, memories of the Trans-Atlantic slave trade, colonialism and its lingering effects makes it difficult for Africans to trust Europeans and Americans no matter how generous and good their gestures may be in recent times to partner with Africa. I must address the status of Africa at the end of the colonial era, the demarcation of Africa and its peoples, natural resources and the total neglect by Europe and the United States who are responsible directly and indirectly for establishing many failed states, bad and corrupt government practices, assassinations, sponsoring civil wars and sufferings that defined Africa from the 1960s until the later part of the 1990s,? he explains.

He continues, ?The beginning of 2000 to present marks many big political, economic and technological developments – continental and worldwide – that are redefining Africa. At the end of the 1990s and the beginning of the 2000s we saw a drastic global economic shift as the Euro was introduced to the world, the dollar fell as Old Europe regrouped, threatening the U.S. currency and economic dominance. What was even more striking was the economic shifts in the U.S. in early 2000 when too many regulations were added with the government overstepping its bounds, the fall of the dollar all while the 9/11 terrorist attacks sent a wave of fear around the world making investors fear that it would take a long time before economies recovered?China was taking advantage of the economic fall of the U.S., the crash of the newly formed European Union (Euros) and countless bail outs of its member states. China forged strong ties with African states by making development a priority and this looked attractive.? In the process of these many great changes, political, economic and technological transitions, China took great interest in Africa, a continent which is often ignored by the West, or worse, demonized, exploited and abused.?

Additionally, the lack of strong intra-Africa trading on the Continent has left a void for China to fill.? ?The level of intra-African trade is among the lowest in the world, lagging far behind that of the United States and Europe,? Schrage points out. ?This is due largely because of cost. The expense of transporting goods between African states is virtually equal to shipping them to Asia. There are many reasons for this, including the lack of infrastructure for transportation within the continent, outdated customs procedures, and troubles at border crossings. Political instability has also played a role, especially between countries. And with some uprisings in certain countries, there are safety issues as well.?

China saw an opportunity and seized it, says Zondo. ?China?s aid to Africa is a bold move the world has not seen in recent times. It is not a charitable move or a mere donation to help poor Black Africans. It is a move and opportunity Europe and America missed a long time ago, and the Chinese learned from that mistake. It is simple. Do not overlook the African? Africa presents the best opportunity to boost China’s revenue. It opens new doors to a market of One Billion Africans living on the continent. That is besides the millions of Black Africans in the diaspora, the African-American community, etc. Chinese products are much more affordable and easy to use, easy to repair and even more, China has limited immigration restrictions, making it very easy for anyone to travel to China, buy goods, return to their village and open a shop selling Chinese products. Whereas America and Europe have tough immigration policies, deporting honest hard workers back home, U.S. companies shift manufacturing jobs to so-called third world countries for cheap labor, and many around the world have lost interest in traveling to America or Europe because they can stay in their respective countries, start a small business, attend any college of their choice online, travel to China and enjoy the world without going through the headaches that come with trying to visit America or Europe, where people are struggling economically.?

So as long as China can handle the volume, trade between the two will most likely continue to grow, according to experts.? ?China has the means to handle this trade. First of all, they have a $7-trillion economy, currently second in the world,? says Schrage. ?Furthermore, along with increasing imports from Africa, they?ve concurrently increased their exports to Africa. African imports from China increased in 2011 by almost 24 percent. Also, a variety of state-owned Chinese companies have established business footholds within Africa.?

Adds Zondo, ?The key is that the Chinese need Africa in many more and different ways than Africa needs China. China has come to the conclusion that it is not just enough to be the number one manufacturer of products in the world, but you need people to purchase what you make or produce. You cannot only depend on American and European economies to sustain your growth when one billion Africans can be potential buyers of Chinese products and services, making China a global economic power on whose shoulders nation?s economies lie and without it, the world economy could collapse. China’s strategy to increase trade with Africa is the most brilliant move ever taken by a super power or would-be super power.? But such dependence on one region can have major drawbacks–globally. ?This can also be a very dangerous turn for the world, as the unforeseen circumstances may cause global economic depression should China collapse or, with China and Africa combined, the new global economy may lead to many opportunities for all. What we know today may not be what we see tomorrow,? says Zondo. ?It is good that nearly half of the world?s population stands the chance of becoming the wealthiest and most powerful area of the world, at the same time, it is sad that the U.S. may not be able to redeem herself from her own self-inflicted economic wounds to participate.?