Will China help, hurt the AfCFTA?
AFRICAN countries want to trade more with their partners on the continent — through the African Continental Free Trade Area (AfCFTA) agreement that launched operations on 1 January – but will that hurt big trading partners like China?
In its public statements, Beijing is wholly supportive of the AfCFTA, seeing it as a ‘win-win’ solution and arguing that free trade and multilateralism are key foundations to the global system. In November 2020, China’s foreign minister Wang Yi said the government “will provide cash assistance and capacity-building training to its secretariat”.
The focus on intra-African links is likely to involve China in two main ways: trade and the building of infrastructure to facilitate trade.
Building infrastructure
Infrastructure is necessary to make the reduction of tariff and non-tariff barriers
AfCFTA secretary general Wamkele Mene told the Financial Times: “If you don’t have the roads, if you don’t have the right equipment for customs authorities at the border to facilitate the fast and efficient transit of goods . . . if you don’t have the infrastructure, both hard and soft, it reduces the meaningfulness of this agreement.”
China is the top investor in African infrastructure, and so Beijing is likely to play a key role in projects to set up transport corridors that would support African industrialisation and the processing of its raw materials. For example, China financed the construction of Kenya’s standard gauge railway (SGR) and the Addis Ababa-Djibouti railroad.
The Chinese government wants to boost its links to East and North Africa through its Belt and Road Initiative (BRI), which aims to create a new ‘Silk Road’ and ties more countries into its economic orbit. Kenya’s SGR is part of the BRI, but Kenyan exporters and companies from across the world can use the infrastructure to transport their goods – it is not a purely China-focused project.
While more developing-world partners like Turkey and India are increasing their interest and activities in Africa, they have not come close to rivalling China in the provision of finance for infrastructure.
But Beijing itself may be more reluctant to lend because of borrowing countries’ high debt loads. Nonetheless, China is set to be a major beneficiary of the drive to build new African trade corridors and the infrastructure to link African raw materials to processing centres and markets.
Potential for trade tensions
The AfCFTA is designed to boost trade amongst African partners. But that very reason alone could cause the most friction with China, which is the continent’s single-largest trading partner.
Some commentators argue that China’s role as ‘the world’s factory’ has stunted the development of African manufacturing and supply chains. Kenya’s cement exports to East Africa neighbours have been low due to an influx of cheap Chinese cement. Over the past 10 years, Tanzania and Uganda increased their imports from China by 60% while sourcing just 4%-6% of industrial products from Kenya.
Chinese products are often cheaper than their African counterparts, and some business leaders are worried about the impact of the AfCFTA on businesses and their costs.
“The Buy-Africa-only mindset of AfCFTA doesn’t work. As cross-border traders, we know China moves our goods in a cheaper way than anyone else,” says Dennis Juru, president of the International Cross Border Traders Association, based in South Africa.
The free-trade deal does not include a common external tariff, leaving it up to each country to decide what duties it will impose on Chinese goods.
Intra-regional trade statistics
(2019) via Afreximbank
Africa — 14,4 percent
Asia — 52 percent
Europe — 73 percent
Some African countries use industrial policy — which can include tariffs and other measures — in order to support their local industries so that companies can build up the strength to compete on regional and global markets. But there are not many countries on the continent using such tools at the moment.
Rules of origin
The AfCFTA’s rules of origin will help to shape the development of manufacturing on the continent. The free-trade provisions are for African goods, and policy-makers need to decide what “Made in Africa” means.
Rules of origin can be based on the percentage of value-added or require that certain manufacturing processes be carried out within the country or zone of origin. Those rules have not been agreed on, and they are key to responding to concerns that foreign investors could set up shop, make a minimal commitment to the economy and then benefit from the AfCFTA to export duty-free to other African countries.
The AfCFTA secretariat says that it expects the final discussions on the rules of origin to be completed around the middle of this year.
Once the rules are discussed, foreign investors — Chinese ones included — will be required to ensure that they meet the requirements so they can use their operations as regional and continental platforms.
For example, Volkswagen could seek to use its planned operations in Ghana to export to the Economic Community of West African (ECOWAS) states; and when the AfCFTA is fully operational, the auto manufacturer could in theory sell its cars tariff-free all over the continent.
Still in the starting blocks
AfCFTA is still an aspirational agreement. For now, China will not lose much of its market for manufactured goods in Africa.
“It will take at least 10 years before it even begins to look like being the primary means of African trade. At its outset, the AfCFTA will not cause China, or anyone else, too many problems,” says Stephen Chan, a professor of world politics at the School of Oriental and African Studies in London.
“Kenyan cement, will hardly be enough to satisfy the demands of a continent. Nor even would Dangote Cement from Nigeria and its subsidiaries on the continent. For now, the Chinese can undercut many local producers,” adds Chan.
Getting the continent to agree on what to do to protect and support its cement producers or textile producers — if that is something policy-makers want to do — will take a lot more diplomacy and negotiation than it does now when only single countries seeks to implement such policies.
So while the AfCFTA is an important step forward towards continental economic integration, there are still many obstacles to overcome — and ones that put China’s and Africa’s interests in competition. — The Africa Report.
WITH the NFL season coming to a close this week, I thought it would be fun to tell the background story on one of my favourite charity initiatives in sports.
What am I talking about?
How one former NFL player, despite making almost US$100 million in career earnings, has spent the last 5 years transforming communities and saving lives in Eastern Africa.
Let’s start in 2013 . . .
Chris Long traveled to Tanzania in an attempt to summit Mount Kilimanjaro — the highest peak in Africa.
Days later, Long conquered the summit and returned down the mountain with immense gratitude toward the region.
After arriving back at the hotel, Chris Long ran into Joe Buck and Doug Pitt - Brad Pitt’s brother.
What were they doing in Tanzania?
As Goodwill Ambassador to Tanzania, Doug Pitt was in town building a sustainable water well for local residents.
Joe Buck travelled with Doug Pitt to volunteer his help.
Over a few drinks at the hotel bar, Doug Pitt and Joe Buck explained the problem to Chris Long.
Here are the facts:
785 million people, or 1 in 9 globally, lack necessary drinking water.
1 in 5 child deaths under 5 years old is from a water-related illness.
By 2025, half of the world’s population will live in water-stressed areas.
Even more interesting?
Doug Pitt and Joe Buck took Chris Long to see the problem first-hand.
“When you see a four-year-old kid drinking water from the same pond where animals defecate — you cannot help but be motivated to do something.”
After seeing the lack of clean & drinkable water firsthand, Chris Long was deeply disturbed.
Once he arrived back in the US, Chris Long took action.
In 2015, Chris Long teamed up with other NFL players to launch the “Waterboys”. As a Waterboy, you have one mission: “To provide clean, accessible drinking water to communities in need.”
The group set out to install 32 water wells in Tanzania — one for each NFL team.
What about fundraising?
With an individual well costing US$50 000, Chris Long started to look for unique ways to educate and raise money. This is where “Conquering Kili” came in. Chris Long and former NFL player/Army Green Beret Nate Boyer started organising an annual climb of Mount Kilimanjaro to raise additional funds for their Waterboys initiative.
Here’s how it works . . .
Chris Long and Nate Boyer started recruiting NFL alumni and retired military personnel to attempt Mount Kilimanjaro’s summit.
Each person had a fundraising goal, typically around US$50 000, with the total money raised being put toward installing additional water wells in Tanzania.
The Conquering Kili initiative alone would’ve been commendable, but seeing the impact their mission for clean water had on local citizens, Chris Long doubled down.
In the years since Chris Long has worked with NBA player Malcolm Brogdon to expand the initiative within the NBA
In 2018, Malcolm Brogdon started Hoops2O — a group of NBA players with the same mission.
Within the first year, Hoops2O raised over US$275k — which provided clean water for thousands of Tanzanian residents.
In total, the Waterboys and its respective affiliates have provided clean & accessible water to over 350 000 people.
The best part?
They are just getting started.
The group has expanded to communities within the US and has a goal of providing water to 1 million people.
Ultimately, I love this story for one simple reason:
We’re often force-fed stories of professional athletes getting in trouble or losing their money.
In this case, it’s refreshing to see Chris Long display an incredible amount of humbleness, hard work, and compassion — ultimately saving thousands of lives. — Online.