Shape Shifting Economy
2015 economic review and 2016 outlook
Last year served as an important year to deepen China’s relationship with Africa. Politically, the relations are at their highest level ever. So are the commercial ones, spurred by continued financing commitments, diversifying investment portfolios and bilateral merchandise trade, which is expected to climb to a new high of nearly $300 billion. Perhaps 2015 has also been a cornerstone in aiding to chart a more symbiotic course in the Sino-african commercial corridor.
The year kicked off with what is now a longstanding tradition - a multi-african-country visit by China’s Foreign Minister Wang Yi as the first visit abroad each year. With Wang’s stopover in Kenya, Sudan, Cameroon, Equatorial Guinea and the Democratic Republic of the Congo, where he followed up on the commitments made to these countries, China continued to signal the importance of Africa in its foreign commercial policy.
However, the African landscape had already undergone a transformation at the time of Wang’s visit. A number of resource-producing economies were feeling the pinch of a declining commodity price environment. Oil prices had effectively halved by January 2015 from June 2014 levels. After trading at $100 per barrel, oil in 2015 averaged around $50 per barrel, given the global glut in the market.
Other commodity prices followed suit, linked to slower Chinese growth, depressed commodity demand, and an oversupply in the market. To date, this has had serious implications for African commodity exporters, given their structural over-reliability on earnings from oil to copper, iron ore and coal. More than three quarters of African economies depended on natural resources (fossil fuels, metals, minerals etc.) for over 90 percent of their export revenues in 2013.
China’s stock market hiccups and currency devaluation added greater concerns to other global economic headwinds mid-year. And the expectations of rate normalization in the United States too played out on the continent. African currency depreciations against the U.S. dollar wiped billions off their respective economies, increased their cost of imports, tightened country budgets and expenditure planning and depressed their growth outlook. It came as little surprise when the International Monetary Fund reduced Sub-saharan Africa’s GDP growth expectations for 2015 to 3.8 percent in October (recovering to 4.3 percent in 2016).
China as key financier
With extractive industry projects generally subdued, China continued to be an important
it is likely that 2015 will have served as a landmark in charting a more symbiotic policy direction for the fast-changing chinese economy in its engagement with the african continent that, to date, is home to the largest number of least industrialized economies.
financier and builder of infrastructure on the continent, especially in the transport (railway) and energy (power generation) sectors. Dilapidated rail lines, outdated rolling stock, and a greater focus on regional integration have seen a need for sizable investment into rail projects across Sub-saharan Africa, some of which came online in 2015. One milestone, for example, was the inauguration of the Benguela Railway in Angola. Built by China Railway after breaking ground in 2004, the 1,300-km railway was completed in early 2015. A few months later, China Railway also completed its first light rail project in Africa. By mid-2015, China Civil Engineering Construction Corp. had completed more than half of the 756-km railway line it was building with China Railway in Addis Ababa, which will create a trade route between Ethiopia and Djibouti.
China’s rail project activities further span Kenya and Nigeria, as well as South Africa, host