No to One Sided Sino-Africa Ties

African countries must use mineral resources at their disposal as “leverage card”, insisting on “increasing local beneficiation” to create a more sustainable and favourable relationship with China.

Otherwise, the Sino-African relationship would remain shaky as long as it is purely one-sided and underpinned by resources in Africa, says Frontier Advisory, South Africa’s leading research and capital advisory firm specialising on emerging markets.

“We need to understand the impact aspect of competitiveness and gear up to compete,” says Hannah Edinger, head of research at Frontier Advisory, on the importance of African mineral resources to China and the rest of the world.

Edinger says only very few African countries that align their development needs to China’s strategic interest in Africa would reap long term benefits from the current Sino-Africa ties.

These would be countries embarking on a much defined trade relationship that goes beyond exporting raw minerals into setting up value addition sectors to create employment and diversification of economy.

Also of importance are the right negotiations of deals, where negotiations are not modelled on the “aid dependency model” currently so much prevalent Africa.

While much is discussed on the Sino-African relationship, African states have so far been passive participants in the discussions, and the suggestion is for the countries to start defining own individual relationship with China looking at their developmental needs.

Over the last 10 years, growth trajectory has been increasingly intertwined, with China driving demand for resources and China’s economic growth dependent on Africa’s ability to provide resources.

“We need to understand how we hinge our growth to China’s however with mixed result,” states Edinger. There are various key areas of opportunity created by spill over effects from China’s engagement with Africa which countries need to take advantage of in addressing the sustainability of the relationship.

On the question whether Africa can trust China, Edinger says: “I think we have come long enough as a continent with China for us to trust China. It is almost a brotherly bond.”

It is a union dating back nearly centuries, where the bond was based more on ideology as opposed to commerce, which strengthened in the last 15 years as China searched for resources. Interestingly though, the profile of trade that Africa has is not different from that of the rest of the world. Africa ranks seventh compared to other trade markets, lower than Asia and Latin America who are the top two trading markets for China. But the bond is strengthened by the availability of resources in Africa, as seen in the components making up tradable goods to China.

Driving force of trade is resource gain particularly oil which made up the main share of exports to China between 1995 and 2007.

Further, African exports are highly concentrated not only in terms of products but of the countries trading with China.

Angola, South Africa, Sudan, and Nigeria made up more than 50 percent of Africa’s trade with China. Angola has huge surplus with China because of oil export but does not import a lot from China.

Also, foreign direct investment stock from China into Africa goes mainly into extraction industry, with only about 20 percent of that going into the manufacturing sector.

Edinger says such facts position the continent on a very unique place where African countries have the opportunities to grow their economies on the back of China’s growth, especially given the special bond.