There are thousands of Africans working as traders in Guangzhou © David Hogsholt/Edit by Getty Images
There are thousands of Africans working as traders in Guangzhou © David Hogsholt/Edit by Getty Images

What does Covid-19 mean for China-Africa relations?

10 June 2020

A table for five may yet unravel Chinese president Xi Jinping’s carefully laid plans to bring Africa under his country’s wing.

The table, at a restaurant in Guangzhou, was reportedly occupied by five Nigerians who didn’t realise that they had Covid-19. When the restaurant’s owners, staff and customers caught coronavirus, some locals in the southern Chinese city retaliated against African immigrants, harassing them, evicting them and even, at one branch of McDonald’s, putting up a sign warning that no black customers would be allowed to enter.

Footage of these incidents caused outrage in Africa, a fury even an anti-racism crackdown by the Chinese government could not assuage. Many African heads of state, understanding their need for Chinese finance, were more circumspect, condemning the discrimination in public and chastising the Chinese ambassador in private.

A video on Twitter purporting to show Chinese businesses in Nigeria burned down in a street brawl with locals was exposed as a fake. The video, viewed more than 1m times before it was removed, reflects the African public’s unease about the extent of China’s influence. “Any big project in African cities that is higher than three floors or roads longer than three kilometres is most likely being built and engineered by the Chinese,” Daan Roggeveen, architect and urbanisation expert, told Forbes magazine recently.

That might sound like an overstatement but Sino-African trade exceeds $200bn a year. There are said to be at least 10,000 Chinese companies operating across the continent. Between 2001 and 2014, more than 1m Chinese citizens moved to Africa to work.

It is not clear how many people went the other way – estimates of the number of Africans in Guangzhou vary from 4,500 to 15,000 – but it is clear that some of the continent’s leaders see this short-term controversy as an opportunity to, as the familiar phrase has it, “take back control”. That conviction is made more urgent by expectations of a long-term realignment of the world’s supply chains.

Some African academics and business leaders believe that the new African Continental Free Trade Area (AfCFTA) is the continent’s best, and possibly last, chance to achieve economic transformation. The pandemic, they argue, highlights the importance of Africa becoming more economically self-sufficient and, by exposing the fragility of existing global supply chains, has made the continent more attractive to foreign businesses anxious to diversify their sourcing.

As Mimi Alemayehou, managing director of the Black Rhino investment platform put it, Covid-19 could act as an “unfortunate form of shock therapy to wean Africa off its long-time dependency on imports, many of which can be produced locally.”

At the moment, with the global economy stricken, such optimism may seem positively Panglossian but, as Supply Management reported recently, AfCFTA will, when fully functional, be the largest trading bloc in the world.

Every African nation has signed the accord, which includes an agreement to reduce tariffs on 90% of all goods. Many critical issues are still to be negotiated, including competition protocols, intellectual property and the fine detail on tariff concessions. The continent does not, yet, have the equivalent of the European Union’s free single market and customs union but if it does, it could, the United Nations Economic Commission on Africa (UNECA) predicts, increase intra-continental trade by 52%.

The same kind of demographic dividend that fuelled China’s dynamic growth should also benefit sub-Saharan Africa. Between 2020 and 2050, the region – along with India – will account for nearly all of the world’s growth in the working-age population. Even taking increasing automation into account, that resource could help the region become much more integral to the global supply chain.

Covid-19 may also have acted as unfortunate shock therapy for multinationals single-sourcing from China. Neil Newman, an investment analyst for pan-Asian markets, told the South Morning China Post that the pandemic caused a “broad systemic failure” which could trigger a “mass exodus from China”.

Many multinationals will reshore some, most or all of their production yet others, factoring in Africa’s demographic dividend and burgeoning commitment to free trade, may consider the continent an attractive, low-cost alternative to China. Alemayehou is convinced that the crisis is “creating opportunities for local and regional suppliers” in Africa.

Yet there remain, according to a recent African Regional Integration Report, many obstacles to be overcome if a pan-African economic transformation is to free millions of people from poverty.

A report, from the African Development Bank (AfDB), African Union Commission (AUC) and UNECA, warned that effective regional supply chains could not be built on “poor or non-existent logistics”. The authors also called for greater transparency and competition in the procurement of infrastructure projects.

Building a globally competitive pan-African infrastructure won’t be cheap – it is estimated that governments need to collectively find $100bn a year to close the gap on the rest of the world. For some countries, the only way to finance that is to borrow money.

China loaned more than $152bn to 49 African countries between 2000 and 2018, according to the China Africa Research Initiative at John Hopkins University, New York. The fact that this largesse has been extended through a complicated amalgam of cash, infrastructure construction agreements and resource-backed loans has fuelled the ‘debt-trap diplomacy’ narrative which, coincidentally or not, originated in think tanks in Washington D.C., capital of the United States, China’s greatest economic rival.

There is little evidence of China taking control of African assets in cases of default but many of its loans are tied to future income from the borrower’s natural resources, such as gas, minerals and oil. Angola, the biggest recipient of resource-backed loans in Africa, owes China $21.4bn under such arrangements.

It is also clear that China’s money has not always been well spent. Between 2000 and 2017, according to the World Bank, infrastructure in Benin, Burundi, Cameroon, Chad, Lesotho, Liberia, Malawi, Mali, Mauritania, Mauritius, Mozambique, Namibia, Nigeria, Senegal, South Africa, Uganda, Zambia and Zimbabwe actually got worse not better.

In fairness, the quality of infrastructure in Ethiopia, the Gambia, Ghana, Guinea, Kenya, Rwanda, Sierra Leone and Tanzania improved significantly over that period – which it didn’t in Germany or the UK – but, given the sums borrowed and invested, progress was slow.

Sub-Saharan Africa’s leaders cannot be held entirely accountable for war, climate change, and global recession. They can be blamed for the abysmal quality of governance exemplified, at its worst by Robert Mugabe’s Zimbabwe, a regime described by The Atlantic magazine, as “a how-to manual for national destruction”.

The lurid details of Mugabe’s misrule – such as the Instagram clip of his son Chatunga proudly pouring champagne over his diamond wristwatch – have, coupled with similar tales from elsewhere in Africa, reinforced the perception of corruption. This has deterred foreign direct investment by regulation-conscious Western businesses and convinced many African politicians that they must deal with China.

Stewart Paterson, research fellow at Hinrich Foundation, an Asian-based economic think tank, points out: “Foreign direct investment played a major role in raising productivity levels in China. The country enjoyed net FDI inflows of around 4% of GDP in the first decade of this century and up to one third of its economic growth can be attributed, directly or indirectly, to FDI’s impact.”

Over the same period, FDI accounted for just 2.5% of GDP in sub-Saharan Africa and less money was flowing in even before the pandemic. That said, Paterson says it is plausible that the region could attract an extra $35bn a year in FDI, enough to create an economic miracle on a similar scale to China’s.

Such success depends on many things – most obviously the impact of Covid-19 on Africa’s health and business and the strength of the global economic recovery – but also on how committed its leaders are to genuine change. The litmus test of their commitment will be whether they take the tough decisions needed to fully implement AfCFTA.

At present, Africa owes China around $55bn, making it one of the country’s biggest debtors. By 2050, if leaders make the right strategic choices, the continent could become one of China’s biggest competitors. If they don’t, Africa risks replacing Brazil in the old conference circuit joke that: “Brazil is the economy of the future – and it always will be.”

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