How to rebalance Africa’s relationship with China

Sub-Saharan Africa’s economic ties with China have grown significantly this century. Beijing became the sub-continent’s biggest trading partner in 2009. But for sub-Saharan Africa to benefit fully from this relationship both parties need to change their behaviour and attitude.

The dramatic rise in trade has been driven by two factors: China’s energy needs and Africa’s lack of infrastructure. China has found a ready source of energy in Africa while the continent has welcomed investment in much-needed infrastructure projects.

The development of infrastructure will benefit Africa, including, for example, enabling the continent to better integrate its economies.

But China’s economic relations with sub-Saharan Africa are not without their tensions. These need to be addressed if the sub-continent and China are to strengthen their ties and the relationship is to become more mutually beneficial.

What are the big challenges

The over-riding need is for a rebalancing of the relationship between China and sub-Saharan Africa.

A practical example of this is that many Chinese companies import labour from China to work on large projects. This has conveyed the erroneous impression that local people are incapable of doing the work required. It has also been interpreted as a lack of respect.

No economic relationship is ever truly beneficial if there is no technology transfer and building of the local capacity. Chinese companies could easily train local workers to the desired level.

A further source of frustration has been evidence that Chinese companies are importing inferior quality products to African countries.

Chinese manufacturers are capable of producing products to different standards. But there is no reason why a Chinese company should produce a product of low quality for a Nigerian importer and do otherwise for a client in Europe or Australia.

There have been cases of producers showing a higher quality product at the inception of a contract and a down payment. On opening the container, the customer in Africa has discovered a lower quality product was supplied.

It is also possible that African importers are conniving with Chinese producers to exploit consumers. African countries should guard against production and technical faults in imported products and ensure that cheap products are of desirable quality.

Improvement of inadequate customs control would be a good start.

Reciprocal access

A noticeable gap in the relationship between China and sub-Saharan Africa is the fact that Chinese entrepreneurs are operating on the continent but the success of African businesses in establishing a presence in China is minimal.

One obstacle is unnecessary bottlenecks in the visa system. Africans can live in China temporarily as students, business people or as English teachers though there is a bias in favour of Caucasians from Europe, Canada or Australia. The renewal of work permits for Africans that are legitimately in China has improved but more needs to be done.

The Wholly Foreign-Owned Enterprise initiative is a step in the right direction. This allows foreigners to start a business in mainland China on their own without a Chinese investor.

It allows for a year-long renewable visa for a chief executive officer and four foreign employees. The major challenge is that it requires a lot of funds from the foreign country and paper work which a start-up entrepreneur may not be able to afford.

African businesses and governments could also take steps to improve access to China. Entrepreneurs should learn more about Chinese culture, including Mandarin and Cantonese.

Embassies should be strengthened with experts who know about China, particularly its economy, competitive advantage and trade. Governments should also publish up-to-date trade information on their websites as stipulated by the World Trade Organization Trade Facilitation Agreement.

What Africa needs to do

There is a great deal that Africa needs to do too. Effective environmental regulations need to be put in place and enforced to ensure that resources are exploited with minimal environmental degradation.

Governments could insist, for example, that timber exporters replace trees they cut down to avoid deforestation and loss of biodiversity.

Africa should also increase its capacity to process products which would create employment. An example would be to start using timber locally instead of shipping the raw lumber.

As African countries open their markets to China they should also put in place measures to protect their economies. Market price support by guaranteeing prices for certain products could be trade distorting but would be beneficial to certain economies.

Another strategy that could protect local economies is through the design of a mechanism under which gainers, for example traders and exporters, compensate the losers, for example workers, in a transaction.

And markets should be differentiated in such a way that products for export are attractive to the Chinese market while quality is not compromised at home.

African countries should also investigate joining the Chinese- initiated Asian Infrastructure Investment Bank (AIIB) as non-regional members. Egypt and South Africa are already founding members of AIIB.

Joining the initiative would be in the interests of sub-Saharan African countries. The bank has the potential to transform the development landscape by creating a potential competitor to the World Bank. It will also be another source of technical and financial assistance.

Special thanks to Adedeji Ayodeji Adekunle in Shanghai for providing up-to-date information

This article is published in collaboration with The Conversation. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Bamidele Adekunle is a SEDRD Adjunct Professor, University of Guelph & Contract Faculty, Ted Rogers School of Management, Ryerson University at University of Guelph.

Image: Scales of Justice are seen in Brittany’s Parliament, during the trial concerning victims of the Queen Mary 2 accident, in Rennes western France April 2, 2009. REUTERS/Stephane Mahe.