How Africa is trading away its long-term financial security
A lot is said about China’s growing investment in Africa – particularly from Western media outlets which like to paint the Asian powerhouse as taking advantage of African nations. It’s an interesting narrative given the history Western powers have with Africa but hardly surprising in a geopolitical environment rife with ulterior motives.
Political point-scoring aside, there are genuine reasons for concern with the nature of Chinese investment in Africa, as well as other nations. However, the debate over foreign countries advantage of Africa suggests the continent’s leaders have no say in the trade deals and projects being signed.
At a time when Africa needs to improve trade between its own countries, the continent is more reliant on external imports than ever – something that needs to change if it wants to secure long-term financial security.
Africa’s overdependence on imports
Out of China’s 15 fastest-growing export markets, ten of them are in Africa: Djibouti, Kenya, Ethiopia and Tanzania in East Africa; Senegal, Ivory Coast, Guinea, Ghana and Cameroon in West Africa; and Mozambique in Southern Africa. At the same time, only five African nations have a trade surplus with China, which represents a severe imbalance.
To put this into numbers, Kenya imported $5bn worth of goods from China in 2017, – including steel and other equipment for its Chinese-built railway – but only shipped out $166m worth of goods in return.
Of course, these trade agreements have a number of benefits for African nations, which can be seen by the various construction projects and infrastructural development taking place, a large proportion of which is being paid for with loans from Chinese companies.
There are important downsides that can’t be played down, though. Such as the interest rates added into these loans and the conditions to buy materials from the same country African nations are lending from. However, in the case of imports specifically, the long-term impact of Africa’s stuttering manufacturing sector is a real cause for concern.
What happened to ‘Made in Africa’?
Central to Africa’s ongoing development is the concept of “Made in Africa”, which highlights the importance of Africa establishing a strong manufacturing sector. It’s widely accepted that the continent has a huge opportunity to establish itself as a global manufacturing powerhouse in the same way China has done in recent decades.
An Africa that manufactures products for the world would be an Africa with a resilient economy reinforced by large volumes of exports – a key driver it lacks now. While the impact on intra-African trade would also be huge if countries are able to produce their own products and secure trade agreements.
According to the World Economic Forum, this is crucial to Africa’s long-term financial security.
However, the line of products in Africa brandishing “Made in China” print continues to grow. Africa’s imports are increasing at the expense of building the African manufacturing sector that was supposed to become a key economic driving factor for the continent. This hasn’t happened yet and progress with developing the manufacturing sectors has been slow across most African countries, which won’t change while Africa is importing so many products from outside the continent.
Featured image: Public domain