China’s investment into Africa has sparked a number of debates around the world. Some have viewed it positively while others have been more suspicious, criticising it as the new colonisation of Africa. However, Hannah Edinger, head of the research and strategy division at Frontier Advisory, argues that China’s investment in Africa has made the rest of the world aware of the commercial opportunities existing on the continent.
“The renewed sort of interest of players, such as China, in Africa has driven, I would argue, new commercial interest by other players as well,” said Edinger in a panel discussion last week at the Africa Frontiers Forum in Cape Town.
The establishment of the Forum on China-Africa Cooperation (FOCAC) Summit in 2000 marked a significant turning point in China’s relations with the continent where the BRICS powerhouse started to take a long term investment approach in Africa in order to fuel its own economy. Debt cancellation and preferential loans were granted, with Chinese President Hu Jintao promising, last year, US$20 billion in loans to African countries over the next three years.
“China’s inroads into Africa have almost rebranded the continent to a certain extent and yes, a lot of it is resource extraction and extractive industries. A lot of Africa’s growth, in various markets, is still being driven by that industry, but a partner such as China has also illustrated the opportunities and interests in other sectors,” said Edinger.
“For example, if we look at Africa’s growth trajectory, diversification really is a problem in terms of moving out of the sort of primary industries and adding more value, be that in terms of services in the financial sector or be that in terms of manufacturing or even agri-processing. I would argue that there are interests particularly from players such as China in those industries in adding value to, for example, the agricultural sector – in looking at almost offshore hubs for production as China matures, as input costs in China move up over time, and [they] look at new production bases, new markets and incentives to operate in.”
Since 2009, China has been Africa’s largest trading partner. In 2011, trade between China and Africa reached US$146 billion, roughly 14 times the amount it was in 2000, according to Tralac researcher, Taku Fundira, and the Global Trade Atlas.
Edinger said that African countries, and indeed African cities, need to consider how to position themselves with this commercial re-orientation of new partners and interest that is coming in from China and the BRICS. “Or be it other players, such as Turkey or perhaps renewed interest even from the Obama administration with their doing business in Africa initiative.”