EDITORIAL: Up to Africa to move itself up the value chain
LAST week, at the Fifth Forum on China-Africa Co-operation, President Jacob Zuma described the trade relationship between China and Africa as "unsustainable". In some ways, this is an odd statement. Far from being unsustainable, the trade between Africa and China has blossomed.
The two-way volume of trade between China and Africa reached a record high of $166,3bn last year, triple the 2006 figure, International Monetary Fund figures show.
From South Africa's point of view, the comment was particularly strange. South Africa's trade relationship with China is one of the few with a major power that is currently net positive for South Africa. This is critical at a time when South Africa is broadly running a trade deficit. It is not surprising, as each side is currently operating according to its own competitive advantage, with Africa generally supplying many of the commodities required for Chinese manufacturing success.
Obviously, what Zuma was referring to was the desire on the part of African leaders to push this trade up the value chain into more job-intensive areas. Both sides recognise the need to ensure the relationship remains dynamic. This was partly demonstrated by Chinese President Hu Jintao's pledge of $20bn in loans to Africa over the next three years.
Where does this money go? Essentially, it helps Chinese business establish itself in Africa. Over the past decade, Chinese commercial investment in Africa has reached $15bn, roughly the same as the investment support provided by the Chinese government.
This generally flourishing relationship is impressive over the medium term, but the Financial Times reports an interesting trend: African exports to China increased hugely, off a base of practically nothing in 2000 to about $40bn in 2008. They dipped heavily during the global downturn but bounced back strongly and have continued to rise steadily, reaching $65bn.
Yet, interestingly, as a proportion of trade with the world, African exports to China grew quickly until 2010, then flattened out over the past two years. Consequently, while China has been a major factor in African export growth, it has not been the only show in town.
This trend explains something of a Chinese change of heart. Until this forum, China seemed broadly happy to let trade find its own patterns. This time, however, there is something of a new sensitivity about the nature of the relationship, and the Chinese are doubtless aware of the anti-Chinese sentiments that are growing on the continent.
In his opening speech, Hu specified practically all types of investment possibilities, including infrastructure, agriculture, manufacturing, small and medium-sized enterprises, medical centres and educational exchanges. He didn't mention resources at all.
Yet, it's not only the sector into which investment is flowing that is a problem, but the geography too. Its investment efforts have landed China in some very difficult countries, including Libya, Sudan and Zimbabwe. Chinese officials keep stressing that it is for African countries to choose their own development path. But this is a little adolescent. All investment requires a stable commercial and legal environment, and that is ultimately a political question. By fraternising with Africa's despots, China may consider itself to be avoiding being patronising to African leaders. But the problem is that its reputation, not to mention its investments, could end up at risk.
It's a healthy sign that both sides are attentive to the dynamics of this formative relationship. Yet African leaders need to be aware that pushing themselves up the commercial hierarchy towards manufacturing is far more their responsibility than it is that of Chinese investors. It's primarily their job to create an investment climate that will allow manufacturing to flourish, and this is an art few in Africa have mastered.
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