Greater market access should drive China-Africa relations  

China is certainly emerging as Africa’s most important and assertive development partner. It has offered African leaders a unique opportunity to transform their countries through strategic trade and investment partnerships that would be stimulated by a new three-year $60 billion funding for Africa’s development.

The significant aspect of the financial pledge by China’s President Xi Jinping to African leaders who participated in this week’s Forum on China-Africa cooperation in Beijing was how the deal was packaged. It included a mix of loans and credits, development finance, market access and private sector investment.

The mix was different from a similar facility in 2015 that was mainly in commercial loans.

The value of the pledge by China was particularly striking in relation to the financial support that Africa receives from its other major development partners.

SUPPORT REGIONAL PROGRAMMES

It matches the World Bank’s commitment to Africa. In March last year, World Bank Group President Jim Yong Kim announced a $57 billion financing plan to support country and regional programs.

China has also established itself as a key player and competitor to other big investors in Africa, including the United States, European Union and Britain. China overtook US in 2009 to become Africa’s largest trading partner.

On the face of it, the deal could herald the beginning of a more responsive China to Africa’s development priorities, though this would become clear when details of the beneficiary countries and programs are available.

Presumably, African countries have learnt useful lessons from their long engagement with China and honed their negotiation skills to get the best out of the deal.

ECONOMIC TRANSFORMATION

Negotiations between the two partners should be more focused on trade and investment that would stimulate Africa’s economic and social transformation.

A friendly intervention is critical now that foreign direct investment to the continent is falling. In 2017, FDI flows to Africa declined by 21 percent to $42 billion compared to 2016, according to the United Nations Conference on Trade and Development’s World Investment Report 2018. The significant fall in FDI, after reaching a peak of $60 billion in 2015, is worrying particularly for large commodity exporters, who accounted for a significant share of the fall in FDI.

What African countries need is greater access for their goods and services to the Chinese market and less commercial loans that exacerbate foreign debt and balance of payments deficits. The Chinese private sector should be constructively engaged in upgrading the value chain of Africa’s manufacturing sector, to improve the terms of trade for Africa’s exports and reduce the continent’s dependency on raw, lowly priced commodity exports.

INNOVATIVE TECHNOLOGIES

Modernizing and infusing innovative technologies in manufacturing enterprises would improve the competitiveness of Africa’s products in the global market.

It is also key to expanding economic output and jobs. In Kenya, increasing the share of manufacturing in the national output is one of the government’s Big four pillars of economic transformation.

Investment by Chinese firms and expanded access the Chinese market would help resolve two of Africa’s most crippling problems—rising external debt burden and limited economic opportunities for the youth. Part of the debt problem is from China’s massive infrastructure projects under its $126 billion “belt and road” initiative linking China to Europe, Asia and Africa.

The Chinese funded projects, such as Kenya’s standard gauge railway, have reduced Africa’s infrastructure deficit and improved economic efficiency.

FIGHT CORRUPTION

The World Bank estimates that bridging the infrastructure gap would increase the growth of Africa’s output (gross domestic product) by 2.6 percent.

While China helps with resources for infrastructure development, the recipients need to play their role in improving the environment for the private sector to grow and expand income opportunities for the people. They should fight corruption more viciously to reduce wastage of public resources.

The beneficiary countries should also intensify the fight against the rapidly expanding trade in counterfeit goods and services, as it destroys opportunities for genuine manufacturers and suppliers. Neither domestic nor foreign investors can survive in a market polluted and constricted by counterfeits.

Mr Warutere is a director of Mashariki Communications Ltd. [email protected]