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Africa, Angola, China, Congo, Ethiopia, Kenya, Malawi, Nigeria, South Africa, Terrorism

Africa’s Future is Bleak unless Economic Growth Revs Up in China

As China slows economically, so Africa’s future hopes of continued prosperity fade. Since about 2005, much of Africa south of the Sahara has been the fastest growing part of the globe, with common national GDP increases of 6 per cent or more annually. But no more. China’s slump threatens to depress Africa’s rising standards of living and to reduce the chances that the 49 nations of sub-Saharan Africa can improve the lives of their one billion people.

Fully half of all Chinese raw material imports – petroleum, natural gas, iron ore, copper, chrome, platinum, coltan, gold and diamonds – come from Africa. Likewise, African exporters of those natural resources have depended for at least a decade on high global commodity prices fuelled by rising Chinese demand.

China’s GDP growth, officially still 7 per cent a year, is believed by knowledgeable experts to have slowed to 5 per cent. Whatever the accuracy of that lower figure, China is buying much less of the world’s minerals than it once did.

Another telling economic statistic is that industrial profits declined in China by 9 per cent from a year ago. Sub-Saharan Africa cannot continue to sell its goods if China is not buying, and at high prices.

Neither Europe nor North America can take up the slack. The sharp fall in petroleum prices from $110 (U.S.) per barrel to $45 per barrel testifies to the significant income loss occurred by all of the globe’s oil producers, especially Nigeria, Angola, Sudan, and Republic of the Congo. Copper and iron ore prices have halved, thus immediately cutting the incomes of Zambia, Democratic Republic of the Congo and Liberia commensurately. Even the recent discoveries of natural gas in Mozambique and Tanzania may have to remain unexploited until China again steps up its purchases.

This gloomy news could not have come at a more worrisome time. Much of sub-Saharan Africa is about to increase its populations, and its youth numbers, at unprecedented rates. Sub-Saharan Africa is the fastest growing part of the globe and Nigeria will soon become the third-largest nation on the planet, with desperately poor Tanzania surging into fifth place and war-torn Democratic Republic of the Congo into eighth place. Feeding, clothing, housing and providing essential social services to this greatly enlarged mass of people cannot easily be accomplished without resurging Chinese economic demand.

Moreover, a full 50 per cent of these new populations will be young. Persons between ages 15 and 34 will be searching for jobs that will not exist without Chinese demand. How the many fragile countries of sub-Saharan Africa will produce a demographic dividend for themselves and for their youth bulges is hard to predict. Unless the engine of economic growth revs up again in China, Africa’s future is bleak.

The bad news is that there is precious little local manufacturing in Africa to replace incomes forfeited because China has stopped buying. A few countries host effective overseas call centres and consumerism within many African countries is strong. But for sub-Saharan Africa to continue on the path of its recent commodity-driven relative prosperity, it must have be able to export profitably the minerals under land and sea that it has in abundance, or to ramp up agricultural exports – again to China.

Furthermore, there is hardly an African country that has failed in recent years to benefit from Chinese official largesse. China has built a ring road around Nairobi, a long coastal road in Malawi, an even longer motorway facilitating trade between land-locked Ethiopia and Sudan, a reconstructed railway from the Congolese copperbelt to the Angolan coast, rail links in central Ghana and western Nigeria, many government office blocks, dozens of massive dams, intelligence headquarters in Zimbabwe and a new headquarters for the African Union in Addis Ababa. Africa desperately benefits from continued Chinese interest and attention.

This is not to say that relations between every sub-Saharan African country and China are without trouble and turmoil. Race relations are not always harmonious, and Chinese firms in Africa often employ their own nationals in preference to job-hungry Africans, thus limiting local employment and technology transfers. African countries have had great difficulty gaining good trade and commercial terms in their dealings with China. Even relatively large nations like Nigeria and South Africa have found it almost impossible to counter the leverage of China in economic dealings, purchase prices for commodities or labour matters.

China has hitherto cleverly bargained only bilaterally, country by country, passing large sums to individual African leaders whenever necessary. The nations of sub-Saharan Africa, on behalf of their needy peoples, should shift instead strictly to multilateral negotiations, thus maximizing their collective continental weight. Only by learning to deal with China from a position of greater diplomatic and economic strength can Africa potentially increase or at least stabilize the prices it receives for its mineral riches and regulate the manner in which China does business in Africa.

This shift in bargaining method is long overdue. Conceivably, adopting it could slow down the shortfall in Africa’s own rise that follows China’s diminished growth trajectory.

This post first appeared under the same title in the  Globe and Mail, Oct. 5, 2010

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