Africa currently represents just over 1 percent of world trade.
This share in world trade volume is much lower than what it was in
the 1960s and 1970s when most countries on the continent became
independent.
At independence, most economies in Africa were based on the
export of raw materials (such as agricultural produce, minerals and
oil) and the import of manufactured goods and services. Africa's
trading partners then were basically former colonial powers.
Foreign currencies earned through the sale of raw materials were
used to import manufactured goods and for infrastructure
construction.
The system worked relatively well until the late 1970s when
prices of export commodities from the continent tumbled on the
world markets. Despite increases in export volumes, revenues kept
decreasing. In the meantime, prices of import commodities
(manufactured goods) kept swelling, making it hard for the
continent to ensure adequate supply of machinery and other
equipment needed for building infrastructures and establish a
manufacturing industry.
With reduced import revenues and purchasing power, Africa's
share in world trade and commerce thus plummeted.
Unlike some Asian nations such as Republic of Korea, Malaysia or
Singapore, which also became independent during the same period,
African nations failed to diversify their economies relying heavily
on agriculture. Manufacturing and the services sectors have
remained as insignificant as they were 40 years ago.
Over the past few years, however, signs have emerged of the
African economy picking up. Africa is gradually consolidating its
share in world commerce albeit slowly. The emergence of China as a
major world trading power, dramatically increasing its imports from
Africa, has had a boosting effect on Africa's external trade.
Moreover, more and more Africans are turning to China for their
imports and to attract investors from China. Just over a decade
ago, invite a Chinese company to do business in Africa and you
would most likely be considered mad. Likewise, ask an African that
he can import almost everything from China and he would most
probably laugh at you.
The continent is economically backward and its economy
insignificant. Africa is gradually coming to terms with this
backwardness. Its share in world commerce is growing. Experts
believe two main reasons have contributed to the new vigor:
diversified exports and multiple sources of imports. Some would
also add the return of political stability in many countries that
have previously been in turmoil. We believe that the first two
reasons have been more instrumental as the civil wars have never
prevented the plundering of Africa's natural resources.
New oil discoveries and exploitation in countries like
Equatorial Guinea, Angola and throughout the Golf of Guinea have
significantly increased the volume of Africa's exports. Though
slowly taking shape, industrialization in Africa is becoming a
reality and this has also contributed to boosting export volumes
with high value added goods. But by far the most important factor
to this swelling trade volume is the multiplication of sources of
imports and export destinations.
African countries have been drifting away from decades-long
unproductive and unfair trade relations with their former colonial
powers. China's emergence as a major trading power has given Africa
an unprecedented opportunity to not only sell its abundant natural
resources at reasonable prices but also buy cheaper manufactured
goods.
China's economy has been expanding at an astronomical rate with
near double digit GDP growth over the past two decades. To sustain
this rapid growth, China not only needs raw materials but also
markets for its manufactured goods. Africa with its huge natural
resources can not only cater for China's need of raw materials to
power its economy but also avail of the opportunity to broaden
cooperation scope and attract more Chinese investments, especially
in mining and infrastructure development.
Gone are the days when cooperation between China and Africa was
concentrated mainly on state-to-state cooperation, political
support in international affairs and economic assistance.
Sino-African relations have evolved over the years. "The new
trend in Sino-African relations is towards strengthening economic
cooperation, expanding trade and investment" says H. Komidor
Njimoluh, Minister Counsellor at the Embassy of Cameroon in
Beijing.
In 2004, Sino-African trade volume reached US$29.5 billion
compared with US$19 billion in 2003; that is 58.9 percent growth
rate year-on-year. In the first quarter of 2005, bilateral trade
volume reached US$7.6 billion and it is estimated to exceed US$30
billion by the end of the year. A senior economist at the Chinese
Ministry of Commerce (MOFCOM) predicts that trade volume will top
the US$100 billion mark in the next five years.
Encouraged by the government to invest overseas and seek market
shares for their products and services, Chinese multinationals have
also recently made significant headways into the continent.
The phenomenal trade volume increment observed over the past few
years is set to continue as more Chinese businesses get interested
in the African market and more Africans get to discover the new
economic powerhouse that China has become. The volume of containers
leaving Chinese ports for Douala, Durban, Dar es Salaam, Mombassa
or Tripoli has grown manifold over the past few years.
There are plenty of opportunities for Chinese investors in
Africa, from low cost housing to mineral exploitation and
agricultural development. The image of Africa as a continent torn
apart by wars, plagued by diseases and its people living in abject
poverty is being gradually replaced by a more realistic image of a
safe and attractive place for investment with innumerable business
opportunities.
There are now daily flights from Beijing, Guangzhou, Shanghai
and Hong Kong to major cities in Africa. Is it the beginning of a
new era and a model of success story of South-South cooperation? We
are tempted to answer in the affirmative.
The author is the general manager of Africaccess Consulting
Company Limited, a Sino-African trade and investment consulting
company based in Beijing.
(China Daily January 13, 2006)
