Kampala: African economies have been urged to balance economic ties with the United States and China, rather than opting for either in pursuit for development. By doing so, they will position themselves to gain from both economies instead of losing out on benefits that either side has to offer. 'Africa must ensure reciprocity. The relative and varied merits of engaging with both must be measured and capitalised on,' says a new report released by the Standard Bank in South Africa this week.
Titled 'China and the US in Africa: Measuring Washington’s response to Beijing’s Commercial Advance', the paper was written by the Standard Bank research analysts Simon Freemantle and Jeremy Stevens.
The research was pursued in the wake of the increasing competition between China and the US to be Africa’s leading trading and development partner. Trade between China and Africa reached $115 billion in 2010; up by almost a half the 2009 figure, according to the Chinese government last December.
In Uganda, China took over the United Kingdom as the leading source of Foreign Direct Investment (FDI) last year. Chinese companies had investment projects worth $246 million for the year, according to the Uganda Investment Authority.
The study notes that the fight between the world’s two largest economies has elevated Africa to a new position of influence and as a much-sought-after market, and offers some perspectives on how the continent can use this status to best unlock its potential.
Mr Freemantle and Stevens add that while China’s rise might have overtaken the US in Africa, there are merits in engaging with both countries, and that Africa should rather capitalise on the frictions between the two countries.
'China’s rise as new global pole of influence should be seen as supplementing rather than replacing the role of the continent’s traditional trading partners, such as the US,' they note in the report.
Highlights from the report:
* Last year, China maintained its novel position as Africa‘s largest trading partner.
* China‘s rise has occurred in tandem with an often ignored but undeniable elevation in US-Africa trade. Between 2001 and 2008 US-Africa trade advanced almost four-fold, whilst China‘s trade with the continent swelled more than ten-fold.
* The US‘ trade with Africa is less balanced (and more cyclically insecure) than China‘s. Consider that, in 2009, as commodity prices fell, US-Africa trade almost halved, while China-Africa trade dipped by a more modest 15%.
* Unlike the US, Chinese production has attached itself to Africa‘s fast-growing con-sumer markets. Currently, China is Africa‘s largest import partner. In contrast to the US, China ran a trade surplus with Africa last year.
* The US is Africa‘s largest export partner. Despite the decline in US-African trade in 2009 the US imported USD20 bn more from the continent than China.
* Importantly, African crude oil exports have been almost singularly responsible for the substantial increase in US-Africa trade. At their peak in 2008, crude oil exports from Africa accounted for 63% of the total US-Africa trade.
* US-Africa trade is narrow; three-quarters of US-Africa trade is conducted with five partners on the continent. Given the weight of its exports to Africa, China‘s reach is substantially wider.
* Government and private development assistance from the US to Africa vastly eclipses flows from China. Roughly coinciding with the presidency of George W. Bush, the US has risen to become Africa‘s largest donor. However, it is clear that Beijing is adopting a softer, more developmentally focused, tone in its engage-ments with the continent.
* In response to China‘s surge, the US is reorienting its Africa strategy. Locked within these thrusts, lie strategic opportunities for Africa.
* China‘s rise supplements, rather than supplants, the role of Africa‘s traditional partners in the continent. African governments must guard against a simplistic shift in allegiance from "west to east". A multi-polar globe insists on a more mature and inclusive approach to the world‘s new reality. African states must remain acutely aware of the separate benefits to be gained from seeking deeper alliances with the US—still by some margin the globe‘s largest economy.
* Africa must ensure reciprocity. Leveraging US-China frictions rather than succumb-ing to a race to the bottom. The relative (and varied) merits of engaging with both must be measured and capitalised on.
* Africa must channel poles of influence into regional economic objectives, in light of domestic priorities. At times, niche areas of synergy will be national, such as green technology and mineral beneficiation and others, like infrastructure, may reside in the transnational sphere.
Note: Users can access the ten page report here.