Investing in the Future Africa’s 2020 economic outlook holds promise as Sino-african ties deepen
The last decade has witnessed a plethora of engagements between Africa and the rest of the world. Africa’s economic relations with the world has revolved mainly around China - the second-largest economy globally after the United States, a clear departure from the past where Africa’s relations revolved around Western countries. Today, economic relations between China and African nations have grown in leaps and bounds, arousing huge interest among economic analysts.
Proponents of the growing Sino-african ties point toward various projects that are lifting the face of development on the continent. Twenty years ago, no one would have predicted that China would be Africa’s leading trading and investment partner. So much stood in its way, including a vibrant West that held sway on virtually every aspect of the continent’s development.
China’s footprint slowly but surely began to be seen and felt in Africa, resulting in increased trade and investments from the Asian economic giant. With the surging trade volumes and investments, China has become the continent’s single largest trading partner. As a result, China has emerged as a major player and partner with whom African countries continue to foster mutually beneficial economic relations for meaningful growth and development.
Access to markets
There is consensus among experts that the increase of China’s engagement with Africa has positively contributed to the impressive growth witnessed across the continent in recent years, particularly in the infrastructural sector.
Data from the African Development Bank (AFDB) Group corroborates this view. In its
report dubbed African Economic Outlook 2019, the AFDB Group says the continent’s general economic performance will continue to grow. It points out that Africa’s GDP has been rising, reaching an estimated 3.5 percent in 2018, replicating the 2017 growth, and increasing by 2.1 percent compared to 2016. The group projected that Africa’s economic growth will accelerate to 4 percent in 2019 and 4.1 percent in 2020.
The report points out that even though the growth trajectory is positive, growth is not adequate to catapult the continent into addressing the persistent fiscal and current deficits. This implies that African countries need to double their efforts to realize a higher economic growth that will generate meaningful economic transformation, increase efficiency of growth in creating jobs for women and youth, and boost the war on poverty reduction.
As we say goodbye to 2019 and welcome the new year, it’s clear that the continent’s 2019 economic outlook placed emphasis on the fact that macroeconomic and employment outcomes are better served when industry leads growth. The year 2020 is coming at a time when most African countries are enjoying unfettered access to Chinese financing that is meant to develop the continent’s infrastructure and to promote sustainable growth and development.
Chinese President Xi Jinping, an ardent supporter of Africa’s development agenda, once stated that inadequate infrastructure is believed to be one of the bottlenecks to Africa’s development. To realize sustainable growth and development, the continent needs to collectively spend between $130 billion and $170 billion per year to meet its infrastructure development need, according to a report by AFDB. However, the bank estimates that Africa’s infrastructure expenditure deficit ranges between $68 billion and $108 billion. This is why the partnership between China and African countries is needed to bridge this infrastructural gap.
While 2019 has witnessed growth in Sinoafrican relations, particularly in trade and investments, manifested in, among others, the hosting of the first historic China-africa Economic and Trade Expo (CAETE) that attracted the participation of over 50 African countries in Changsha, the capital city of central China’s Hunan Province. The theme of the event was Win-win Cooperation for Closer China-africa Economic Partnership, and its key objective was to open up Chinese market for African goods by creating demand for African products to remedy the existing trade imbalance.
For 2020, there is optimism that Africa will greatly benefit from strengthened relations with China, more so in key initiatives such as the Belt and Road Initiative, Forum on China-africa Cooperation (FOCAC) and the China International Import Expo (CIIE). These three key initiatives are meant to develop the continent’s infrastructure to the level of middle-income countries and to open up the Chinese market to products from Africa. The twin initiatives of CAETE and CIIE offer African countries an unrivaled opportunity to tap into the Chinese import market for agricultural and manufactured goods.
According to figures from the Ministry of Commerce of China, China remains Africa’s largest trading partner with total import and export volume with Africa at $204.19 billion in 2018, marking a year-on-year increase of 19.7 percent. These statistics surpassed the aggregate growth rate of foreign trade in the same period by 7.1 percentage points, with China’s exports to and imports from Africa at $104.91 billion and $99.28 billion respectively.
Realizing Africa’s dream
From the foregoing, suffice it is to say that strengthening Sino-african relations offer the continent a great platform to engage China on ways and means of realizing Africa’s dream of science, technology and innovation-driven manufacturing/industrialization and value addition. It is not just enough for the continent to be endowed with natural resources. The time is ripe for Africa to engage China on cutting-edge technology that will help it achieve the AU’S Agenda 2063 on industrialization. This includes growing the real value of manufacturing in GDP to 50 percent plus, growing the share of labor-intensive manufacturing output to 50 percent plus, and ensuring growth of at least 20 percent of the total output of the extractive industry through value addition by locally-owned companies.
Additionally, Africa would immensely benefit from China’s experience in establishing hubs for industrialization/manufacturing linked to global value chains that are fully functional in Africa’s regional economic communities. Tagged to the benefits that would accrue to the continent as a result of the growing ties with China is the technological component that will assist in establishing and operationalizing the African Mineral Development Center - a strategic project that needs to be accomplished by 2023 in line with the AU’S Agenda 2063 first-10-year implementation plan.
Other than boosting trade, the continent is likely to see more investment in railways, roads, airports, ports, power stations and telecommunications this year - a key supplier of commodities for international trade. Xi’s pledge of offering $60 billion to Africa during the FOCAC Beijing Summit in 2018 will boost infrastructure development as we gear up for the next FOCAC conference in 2021 in Senegal.
Another area of cooperation that is expected to grow is investment in human capital and professional training for Africans. Economists expect 1,000 Africans to be trained, 50,000 workshops to be held, and 50,000 scholarships to be awarded to Africans in order to build local capacity for Africans who will be involved in implementing Chinese projects - now and in future.
The world will be watching keenly to see how the combination of Chinese capital, technology, market, enterprises, talents, and rich experience in development, and Africa’s abundant resources, huge demographic dividend and the great market potential for the demand of African imports will create a miracle of development for Africa. Only time will tell. CA