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China Is Africa's Industrial Accelerator
Jan 02, 2018

Relationship is a two-way street, with each side supplying the requirements of the other to mutual satisfaction

Since the turn of the century, China has become Africa's major economic partner with, for example, bilateral economic relations rising by 16.8 percent year-on-year to $38.8 billion in the first quarter of 2015.

China's commercial transactions with Africa have surpassed the continent's economic relations with France, the United Kingdom and the United States put together.

 

As trade relations between China and Africa have expanded rapidly, investment relations have also flourished, with around 10,000 Chinese companies investing in different sectors of Africa's economy, from agriculture to industrial and manufacturing, construction to infrastructure.

Investment in the continent by Chinese companies is said to have amounted to $3.2 billion in 2016. This was noted recently by the Guinean minister of transportation, who said, "Chinese companies are involved in revitalizing Guinea's rail infrastructure." The aim is to boost both passenger and mineral transportation from Mali to the port of Conakry in Guinea.

Economic ties between China and the African continent are not just a recent occurrence. In fact, such relations go as far back as the 1950s.

It was at the April 1955 Bandung Conference in Indonesia, designed to promote economic and cultural relations between Asia and Africa, that China and the African states adopted the five principles for peace. These were mutual respect for sovereignty and territorial integrity; mutual nonaggression; noninterference in each other's internal affairs; equality and mutual benefit; and peaceful coexistence. Following the adoption of these principles, the Tanzania-Zambia railway line became the biggest Chinese transportation and infrastructure project on the continent in the 1970s, and China committed itself to projects all over Africa.

Another point to emphasize is that, given its abundance of natural resources, it is only natural that Africa exports a considerable share of its oil and mineral commodities and mostly imports goods that require a largely unskilled or semi-skilled workforce.

At the same time, China's economic expansion has resulted in a network of trade, aid and investment links with the African continent. Chinese companies are drilling for oil in Angola, Gabon and Sudan; building railroads in Ethiopia, Djibouti and Kenya; building and financing infrastructure and hydroelectric projects in Cote d'Ivoire and Guinea; developing the tourism industry in Sierra Leone; and servicing mobile phone networks in Kenya and Nigeria.

Throughout sub-Saharan Africa, Chinese companies are building vital infrastructure, including dams, ports and roads, and helping to refurbish government offices and other buildings.

With regard to Africa's industrial sector, the continent is linked to China through the Asian country's importance in determining the global prices of the raw materials with which Africa is significantly blessed.

How so? Rapid growth in China has boosted global demand for oil and minerals, given that it consumes about 20 percent of global aluminum and copper resources, 30 percent of steel and coal, about half of globally traded iron ore, and is the second-largest consumer of oil after the United States, importing a quarter to one-fifth of its oil from Africa.

As a result of China's rising demand for natural resources, oil prices peaked at almost $150 per barrel in mid-2008, and copper prices more than tripled during 2002-08. This rise in prices has greatly increased the revenues of Africa's oil and minerals exporters, and attracted large inflows of capital into resource-rich but also undeveloped regions.

China is Africa's industrial accelerator

For instance, in countries like Zambia, major infrastructure investments are linked to China's strategic interest in copper supplies. Direct investment in the Zambian resources sector by Chinese investors has further boosted the economy by creating more employment opportunities, raised the profits of companies in the resource sector, increased skill and technology transfers and increased opportunities in related industries.

It has also led to the creation of the Multi Facility Economic Zone, which is located in Zambia's mining area of Chambishi, Kalulushi, with the objective of driving industrial and economic development in the manufacturing sector for the purpose of enhancing both domestic and export-oriented business.

Furthermore, China's imports of African crude oil have increased exponentially, reaching more than 25 percent of total Chinese oil imports. The major beneficiaries of accelerated Chinese energy demands have been Angola, Nigeria, Egypt, Niger and Sudan.

Angola, which is currently Africa's second-largest oil producer after Nigeria, is China's primary supplier on the continent.

After years of civil conflicts, the Angolans have welcomed China's oil investment.

In exchange for concessions and oil contracts, the Chinese are providing financial incentives. A $2 billion line of credit (1.5 percent interest over 17 years) by the Export-Import Bank of China has helped finance vital infrastructure development projects as a means of post-conflict reconstruction. Also in Angola, Chinese workers are constructing office buildings, housing developments of up to 5,000 units, sections of railway infrastructure damaged and neglected during decades of civil war, hospitals, schools and hundreds of kilometers of roads.

Sudan accounts for only about 5 percent of China's oil imports. Nevertheless, Beijing operates its largest overseas oil projects there, including a $700 million refinery. A total of 10,000 Chinese workers have been deployed to build a 1,500-kilometer pipeline linking the Heglig oilfield in Kordofan province to the port of Port Sudan on the Red Sea.

In return, this has provided Khartoum with a transit corridor to the shipping lanes of the Middle East and made Sudan one of the fastest-growing economies in Africa.

However, it should be emphasized that there are two sides to every story. Chinese imports to Africa have challenged the textile sectors in a number of African economies, such as Botswana, Lesotho, Swaziland, Mauritius and South Africa.

I will sum up by arguing that China's trade and investment ties with Africa are imperative to both parties given that, for Africa, Beijing is a key trading partner and investor that supplies the continent with cheap consumer goods, purchases its natural resources and helps with the financing and construction of infrastructure projects.

For Beijing, the African continent is a growing source of raw materials, of which crude oil, iron ore and copper are the most important and have helped fuel China's rapid infrastructure development.

The writer is a research assistant at the Institute for Global Dialogue of the University of South Africa. The views do not necessarily reflect those of China Daily.