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  World Economic Forum on Africa
    Cape Town, 31 May – 2 June 2006
World Economic Forum on Africa Home   

The Impact of China and India Printer friendly versionSend to a friend
"There are a lot of new ideas on the continent, in the private sector. There's a lot of creativity. We are beginning to see a huge number of African entrepreneurs who are starting new businesses and growing them." Patrice T. Motsepe Executive Chairman, African Rainbow Minerals (ARM), South Africa
China and India's deeper engagement with Africa offers both opportunity and cause for caution.
•  The need for China and India to fuel their surging growth has boosted trade between resource-rich Africa and the two Asian economic giants.
•  Africa needs to develop a coherent strategy with which to approach relations with China and India. NEPAD could offer a useful platform for the management of those ties.
•  Because of their development experiences, China and India offer valuable models for Africa as the continent seeks to achieve sustainable growth.

"I see in India and China an opportunity to convert our comparative advantage into competitiveness." Firmino Mucavele Chief Executive, NEPAD Secretariat, South Africa
China and India have become major trading partners of Africa and are increasing investment on the continent. Africa has the raw materials and commodities that China and India need to fuel their surging growth. Africa must develop a coherent approach to the two Asian economic giants, with commercial relations based on sustainability and mutual profit. China and India serve as models for Africa because their experiences hold useful lessons for developing countries on how to manage gradual economic and political transformation.

Like any other region, Africa is dealing with the implications of the emergence of China and India. In one session, moderator Millard W. Arnold, Director, Murray & Roberts, South Africa, asked if China is a great opportunity or whether it should be approached with a great deal of caution. His question – one that even China's immediate neighbours are posing – captured the ambivalence Africans have about their growing relationship with Asia's two economic giants. Arnold's fellow panellists delivered the answer in unison: "Both!"

The numbers support the case for China and India as an opportunity. China, the second largest consumer of energy, is importing nearly 30% of its oil and gas from sub-Saharan Africa. Chinese trade with Africa will exceed US$ 36 billion this year (nearly three times what it was in 2002), but this is still less than the US$ 50 billion in trade that the US conducts with the continent. China is now Africa's third largest trading partner, ahead of the United Kingdom. According to an Organisation for Economic Cooperation and Development (OECD) study, Chinese enterprises are investing about US$ 1 billion a year in Africa, mainly into the energy and commodities sectors.

Indian companies are following. The Tata Group, for example, has invested about US$ 100 million and plans to triple that over the next three years. Like China, India has invested in energy exploration in the Sudan and elsewhere. It has also extended credits to West African nations to boost sales of Indian IT services, mimicking China's offers of financing to win infrastructure-building contracts. China has parlayed its purchases of commodities, from copper to cassava, into sales deals for its companies to provide anything from construction services to arms.

Sir Mark Moody-Stuart, Chairman, Anglo American, United Kingdom, makes a point on the impact of Chinese resource hunger on Africa
as NEPAD Secretariat Chief Executive Firmino Mucavele looks on

"India and China need Africa," said Firmino Mucavele, Chief Executive, NEPAD Secretariat, South Africa. "If you look at the resources we have, we have a comparative economic advantage in mining, agriculture and tourism. I see in India and China an opportunity to convert our comparative advantage into competitiveness." As Nigerian entrepreneur Omwan' Busty Okundaye, President, International Operations, USTY Global Company, People's Republic of China, advised potential investors in China, Africa will have difficulty competing with the Chinese in low-end manufacturing. While labour costs may be comparable, poor infrastructure and other factors make transaction costs much higher.

The seemingly perfect match of wants and needs could turn sour if not properly managed. The last thing Africa needs is another round of despoiling by plundering juggernauts hungry for the riches under its soil. Tanzanian President Jakaya M. Kikwete made that crucial point when he underscored Africa's new confidence and asserted that "China and India will not transform Africa; Africans will transform Africa." He declared, "There is no scramble for Africa."

China and India are still feeling their way in Africa – and Africans have yet to forge a coherent strategy in relations with their new Asian partners. "The success of relationships with India and China depends on how we [Africans] work together," reckoned Mucavele. "We need to increase domestic investment and productive capacity. If we do that, we don't need to be afraid of China, India or whomever." Africans, he explained, had worked hard to end conflicts on the continent. The increase in commerce with China and India is part of the peace dividend. But, he argued, China and India are not saviours. "Our development will come from our own investment. The development of Africa depends on Africans."

"For the first time, there are centres of power that understand our development challenges." Mandisi Mpahlwa Minister of Trade and Industry of South Africa

For this reason, he and other participants, including Mandisi Mpahlwa, Minister of Trade and Industry of South Africa, called for NEPAD, the African Union's framework for improving governance and promoting sustainable development across the continent, to be the platform for managing a sound and sustainable pan-continental policy towards China and India. "This relationship should assist Africa with capacity challenges and should create the basis for sustainability into the future," Mpahlwa said. "We need to clarify the nature of our relationship. NEPAD must be the centrepiece of our engagement."

Good governance is the key, concluded Sir Mark Moody-Stuart, Chairman, Anglo American, United Kingdom. Whether it is China, India or any other trading partner, he said, "…we should maintain the growing standards of transparency, particularly in resources. I would encourage subscription of all countries and companies to the Extractive Industries Transparency Initiative."

To be sure, as developing countries, China and India pursue economic diplomacy in styles different from the US and Europe. In particular, China's value-neutral approach has made it welcome – even hotly courted – in certain markets where Western interests are reluctant to enter or do so with attached strings. For Africa, the attraction of China and India may be as much the sympathetic means as the mutually profitable commercial ends. "For the first time, there are centres of power that understand our development challenges," Mpahlwa observed. "We see China and India as models giving Africa the hope that sometime, someday, with the right policies, we will get there," added Kikwete.

In the long run, that hope may be the most valuable product that China and India can trade to an aspiring Africa.

"We need to change from a defensive mindset about China and India to one that is more embracing, and one in which we can help determine the terms of engagement." Ebrahim Rassool Premier of the Western Cape Province, South Africa

"China and India will not transform Africa; Africans will transform Africa." Jakaya M. Kikwete President of Tanzania

"We no longer need to go through a boom and bust cycle, at the end of which people say 'Money was made, but what happened to it?'" Obiageli Katryn Ezekwesili Minister of Solid Minerals of Nigeria