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Wednesday, September 15, 2021

China’s trade with Africa is not helping the continent in value addition, not even South Africa exports manufactured goods

Columns China’s trade with Africa is not helping the continent in value addition,...

By Edward Chisanga and Caesar Cheelo

On 5th May 2020, The Economist published an article by Dambisa Moyo, our Zambian compatriot reading, “Marshall Plan for Africa”, which attracted some response from various observers and scholars. Because we notice that Dambisa repeats in this article what she has said before, in her book, “Dead Aid,” namely, eulogizing trade between Africa and China with generalizations rather than detail, we wish to react to one particular point and raise some debate around this. In a glorifying way, Dambisa’s article highlights that Chinese exports of goods to Africa reached US$90 billion in 2018. It is a useful headliner insight. In her book, she also happily advises Africa to trade with China and, again quotes some trade figure between the two without providing detail.

Our concern is that without detail behind the statistics, the headliner is prone to be misconstrued. We therefore try to interrogate some of the commonly held arguments around China-Africa trade relation. We draw on UNCTADstat (https://unctadstat.unctad.org/) trade statistics to build Table 1 and Figure 1 below, which form the basis of most of our ensuing comments. Table 1 provides estimated exports of $104.5 billion (not far from Dambisa’s figure and acceptably so) as China’s total exports of all products or goods to Africa in 2018. By no means pillorying Dambisa, the approach of presenting trade statistics without providing details has at least one key weakness. It leaves considerable room for speculation and omission of important information. Simply stating that China’s exports to Africa reached US$90 billion is rather general and could paint an overly China-centric picture. A balanced approach with detail would be more helpful.

The summit and quality of trade is manufacturing

It is a good starting point to highlight China’s aggregate trade with Africa and vice versa. But, in in order to understand the quality of that trade, it is important to dissect or disaggregate the trade and understand its ins and outs. The China-Africa trade relationship in general epitomises glaring and unbridled lopsided partnership in favour of China and at the expense Africa. This can be observed in Table 1 and Figure 1, which, even in aggregate terms, shows imbalances of China’s total exports to Africa of all products of $104.5 billion, reflecting about twofold that of Africa to China. On the other hand, despite lower absolute values, Africa exported more all products to the US than the US did to Africa.

However, our main chronicle or narrative is about drilling down to the China-Africa partnership in terms of trade in manufactured goods; which we refer to as the “summit of trade”. In Table 1 and Figure 1, it is evident that almost everything that Africa exports to China is primary commodities or unprocessed goods which accounted for 96% of its total exports. As can be seen, instead of reducing this dependence, Africa’s share rose from 66% in 1995 and this continues unabated. Meanwhile, China’s exports to Africa are largely manufactured goods, accounting for 94% in total, a rise from 88% in 1995. So, Africa’s dependence on imports of manufactured goods from this partner is rising instead of going down. Experts like Dambisa and the authors have a responsibility to highlight asymmetries like the one seen in China-Africa trade partnership to help our leaders enrich their dialogue with the latter for purposes of creating balanced trade partnership.

Notable too is the fact that the proportion of Africa’s exports of manufactured goods in total to China eroded from 19% in 1995 to 4%, so, even the little that is being exported as manufactured goods to China is divesting. We also included Zambia’s share of exports of primary commodities to China in total and found that they account for 98% meaning almost no manufactured goods are exported to that country. The flip side is that the proportion of China’s exports of manufactured goods in total to Zambia is 94%, meaning almost everything coming from that country is manufactured goods. Yes, infrastructure in roads comes from China but it would be appropriate to rethink and encourage the policy of a partnership that that focuses on teaching Zambian firms, students and other related institutions as well as doing exchange programs between the two countries in production, skills development and show-casing how manufacturing, starting with textiles and clothing is done in China juxtaposed by foreign direct investment and technology transfer.

That is why, if we might be indulged, we would advocate for encouraging African countries to expand exports in manufactured goods with the United States (US). Although Africa’s actual export values of all products to the US are smaller than those to China, the share of Africa’s exports of manufactured goods in total to the US rose from 15% in 1995 to 23% in 2018 while that for primary commodities fell (Table below). The US’s Africa Growth and Opportunities Act (AGOA) provides free market access for Africa’s exports particularly of textiles and clothing products to the US and this has largely contributed to more exports of manufactured goods. The paradox is that Africa is withdrawing. In 2008 and 2018 while Africa’s exports of manufactured goods to the US remained the same, $7.7 and $7.2 billion respectively primary commodities slumped from $100.4 to $23.2 billion due largely to market diversification to China (not in Table 1). Yet, this market diversification is not having a corresponding diversification or value addition in exports.

Therefore, considering the difficulty of breaking old trade habits, if the traditional pattern of exporting primary commodities to China cannot be changed, Africa must strive to preserve, and in fact expand exports of manufactured goods to the US. Equally, we would argue that instead of a Marshall Plan for America and Europe that provides direct cash transfers to households, an “Investment Master Plan” that focuses on expanding foreign direct investment with impact in productive sectors like manufacturing and technology transfer to Africa should be erected. This should build productive capacity and in turn boost the manufacturing sector, thus expanding Africa’s exports of manufactured goods to the US and other rich countries. That would be a better development model than the ones we have witnessed before, which simply help local populations to cope with their poverty situation from day to day (delete because it repeats blue below). In part, because the structure and behaviour of bilateral recipients of donor funding remains the same, a Marshall Plan is unlikely to yield anything different compared to what previous flows of aid delivered.

Remember too, Vietnam, a small country in Asia has overtaken Africa in exports of manufactured goods worldwide. In 1995, Africa’s global manufactured exports to the world stood at US$28 billion whereas Vietnam’s were US$2 billion. In stark contrast, in 2018, African manufactured exports had increased to US$112 billion while those of Vietnam had risen to US$197 billion. Africa’s performance in international economic diplomacy has become so low that it is no longer necessary to compare its performance with Asia as a region because all you do is compare with Vietnam. It is such information that Dambisa and others, the authors of this article included, ought to be critically analysing and sharing with African Governments to help them focus on industrialization and trade strategies that matter. Manufacturing value added matters for international trade, not big export numbers based on raw minerals and petroleum oils. The configuration of China’s trade with Africa and vice versa ought to change and promote the latter’s integration in global trade rather than perpetuate marginalization. That is good for China. That is good for Africa.

It is disquieting that not even South Africa – a BRICS country like China – exports significant volumes of manufactured goods to China. Figure 1 below shows trends in South Africa’s proportion of exports of primary commodities to China in total. From 2000-2018, the share rose sharply from 54% to 86%. On the other hand, the share of China’s exports of manufactured goods to its partner surged from 90 to 95%. Sadly, for South Africa, whereas in 2000 its share of exports of manufactured goods in total to China was a handsome 45%, by 2018 it experienced erosion to 14%. Some observers might disagree, but it is flabbergasting to learn that South Africa, Africa’s economic jewel, also behaves like the Continent’s rentier states that depend on exports of petroleum oils and mineral products. South Africa’s top exports to China are rather basic, comprising of ores and concentrates of base metals, iron ore and concentrates, pig iron, copper, wool and other animal hair, pulp and waste paper, fruits, jewellery and articles of precious material and silver.

Finally, taking detail into account equally shows that trade between Africa and China or China and Africa is embodied with further asymmetries. One of them is that the distribution of China’s total exports of all goods of $ 104.5 billion in 2018, from our Unctadstat source reveals that of the 55 African countries, 28 of them accounted for 95%, leaving the other 27 with only 5% or $5.0 billion in absolute values. In China’s exports of manufactured goods to Africa, 24 African countries accounted for 90% leaving 31 countries to account for only 10% or $9.0 billion. The other contrast is that Africa’s total exports of manufactured goods to China was only $2.3 billion in 2018, and, of this total 23 countries accounted for 99% leaving 32 countries with only 1% or $30.8 million. In Africa’s’ total exports of all goods to China of %54.4 billion in 2018, 16 countries accounted for 95% leaving the majority 39 with only 5% or $2.8 billion.

Summary

In closing, one can argue that the extolling of China’s exports to Africa must be looked at with caution. Preference of the current form of trade between China and Africa depends on what we want to praise: sheer large export numbers of primary commodities or quality of trade? We believe it is the quality of trade that has distinguished Asian countries from Africa. It is trade in manufactured goods that has contributed to reduced poverty and increasing prosperity in Asia. On the other hand, exports of primary commodities have failed to do the same for Africa. Building productive and export capacities in manufacturing is a developmental imperative for Africa. Analysis of this trade must also take into account the growing and huge unevenness in country distribution of benefits.

Some countries are deeply inside the circle while many too are in the peripheral. Africa’s past economic development difficulties have many similarities with China. The cultures are also closely related. China’s economic model, in particular in manufacturing may be easier to share with Africa for the benefit of the latter. But this can take place in negotiations, and, as experts, it is these negotiations that we must encourage Africa to get into and obtain favourable trade-off. If China is interested in petroleum oil or copper, there must be a better price to pay other than money. Money comes and quickly vanishes. But knowledge and skills, in manufacturing often have longer life spans. The modalities of obtaining this exchange is what Africa needs to sought out. Edward and Caesar would rather exchange Africa’s wealth with this kind of knowledge.

22 COMMENTS

  1. Africans I general suffer from poor work ethic compared to Asians……….

    Saying that, not even whites can come close to the Asian work ethic…..thats why trump hates them

    The lyrics of a well known song…….
    ” But we gonna do it anyway……”

    Is appropriate.
    Force China to manufacture those goods in zambia, starting with chitenge material……then all GRZ textiles.

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  2. The Trade imbalance between Africa and China is a relationship of a horse and a rider. Even the massive or huge loans they give to African countries does not add any value to their economies because material and labor comes from China and they only remit a small portion to cover administration costs. African leaders have to team up and renegotiate their dealing with China.

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  3. The problem I have with this article is that it seems to suggest that China has imposed unfair trade on Africa. Africa has been a primary producer of raw material for industries worldwide. There’s nothing wrong with that as long as Africa gets the true value for its products. Trade is a two way traffic, a willing buyer and a willing vendor. China gets what it wants and so does Africa. But what does Africa want? Lack of accountability. At a time China declared that it had imported from Zambia mukula worth USD96M, Zambia declared that it had exported USD900,000 worth of mukula to China during the same period. This is the scenario across the board. So, is China the problem or Africa itself? Even if Africa develops capacity to process its raw material its beleaguered economic situation shall…

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  4. Just across the Nakonde border post, John Pombe Magufuli refused overtures from China for loans. Pombe described Chinese loans as being for mad people. He died without leaving Tanzania with a crippling Chinese debt. Did China force us to kongola? No! It had to take China to refuse to fund us for Edgar to control his appetite for loans, even now there are still undisbursed loans. Ministers were even making commissions for committing Zambia to debt! Ndise chabe vipuba

  5. @Spaka thank you.
    These Ydiots are used to free things. If our continent was first colonized by China Africans would have been very competitive in trade business. China does not give free things, you hate them because they’re simply here to make business and they mean just that. Reason they don’t even waste time learning the whole syllabus of English to them it’s either work, no power or money and no job.
    Now since most of these article writing goons are a product of white man’s free things like scholarships, they think thats the only way we can be at peace with the induced stagnation.

    Like a child once you give them free things, they won’t see need to work for it next time, if it doesn’t come their way instead the child will wait and complain about it coming late.
    Africans…

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  6. We shall always remain complaining continent. First time I have agreed with #1 Spaka…yes our work culture is poor but always expecting high rewards. If you are coming from a mining industry to join a city or municipal council that’s when you can see how poor our work ethics are in this country. We want money but we don’t want to work for it. We don’t protect our employer from collapse but we want high wages.

  7. What is not mentioned is the undercover siphoning of hundreds of millions of undeclared profits by Chinese small businesses in African countries…..

  8. Sometimes we should question the motives and significance of such articles. As the saying goes, if two elephants are fighting, it’s the grass that suffer. China has been the manufacturing hub of the world for decades. Without Chinese investment, Africa and Zambia in particular would still be in the stone age, okay that’s a bit of an exaggeration but you get my drift. When a country with a population of about 1.5 billion people move to middle income status, the impact on its manufacturing abilities are huge. The obvious place to offload some of these abilities is Africa. We shouldn’t blame the Chinese for our failure to do better deals. Chinese deals are optional if we are to compare them to the alternative.

  9. China is one the biggest sources of imports for EU and USA. This means that quality is not an issue. China is high quality. Two, China is affordable compared to EU or USA commodity producers. Therefore, trade with China is win-win scenario. It is hate speech to single out China for criticism when ICT is showing the opposite. It is prudent to approach each complaint on a case by case basis. Africa is the poorest continent. Asia is a good learner. Latin America is good learner. At this rate, Africa will remain a bad leaner for a long time to come.

  10. It is a good article but it is in the wrong place. If responding to Dr Moyo’s article or book, it is better to do so on the same platform where the article was published other than on this platform where 99.99% of the people have not read the source article. Giving knowledge to people who do not need it is not education, it is showing off.

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  11. To force them to import our goods since thats what we want ,,, why dont we try the trump way ; since the raw materials come from us we can impose trade tarrifs and put restrictions on some of their goods but it goes without saying that the biggest probelm is the african governments too shallow and blinded by the grants they are given.

  12. Has Europe, USA or Japan been treating Africa differently?
    China never colonised anyone; they are also victims of colonialism.
    China’s influence on Africa has overwhelmed many, especially that, that country is fighting for recognition against their West, hence this backstabbing.

  13. I have no time to mark this homework.
    I didn’t teach for past 1 year. I just got email 2 days ago with 2 courses offer I can teach starting next Wednesday.
    So boys, I will be busy again, but I am here to punch holes in HH’s government.

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  14. Bwana , to put in a language every one can understand; Africa does not manufacture goods and if they do , it’s very little , so why expect high figures. The western world is busy manufacturing their products in China for the whole world and we are just busy studying economic figures.

  15. The crux of the African problem lies with leadership. We’ve refrigerated from ambition and vision, to rhetoric and dependency. The biggest driver of trade deficits and extreme lopsideness is lack of manufacturing in Africa. Even the raw materials export are exported by foreign companies. Where’s the leverage? HH is a good start. However, a lot needs to change, before we can see any benefit from our resources.

  16. The crux of the African problem lies with leadership. We’ve refrigerated from ambition and vision, to rhetoric and dependency. The biggest driver of trade deficits and extreme lopsideness is lack of manufacturing in Africa. Even the raw materials are exported by foreign companies. Where’s the leverage? The government has no clue what’s being exported. HH is a good start. However, a lot needs to change, before we can see any benefit from our resources.

  17. Great article – Exporting raw goods to China versus importing finished goods from China in the stated volumes hands the added value advantage to China and none to Africans. Some experts romanticize notions of no strings attached trade policies of China: Make no mistake China’s trade tendencies are largely pernicious to African countries to benefit China. Western nations set conditionalities such the presence of human rights and a prevailing democratic environment. This seems like interference in the affairs of another country, but really only African leaders with intentions of being dictators have to fear such ideas.
    Having said that, we should approach China and the West pragmatically. Strike the best deal that works for us with whomever is willing. Neither China nor the West will…

  18. ….Having said that, we should approach China and the West pragmatically. Strike the best deal that works for us with whomever is willing. Neither China nor the West will place our best interest above theirs no matter how sweet and none threatening their words. And why do we simply accept, as matter of course, that the teaching of our people should come from China?

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