China Becomes Africa's Largest Trading Partner
    2012-12-22 07:00:26         Web Editor: Wang Wei

This year, China has surpassed the United States and Europe as Africa's largest trading partner. Bilateral trade was around eleven billion US dollars in 2000 and reached 160 billion dollars in 2011.

Chinese businesses are putting their investments into Africa with overseas direct investment going from 500 million dollars in 2002 to nearly 15 billion last year. To see the direction Chinese businesses will be taking in Africa we go to Autumn Szeliga.


"We are a country that is in the development and we value the investment of China to our country."

Rwandan Finance Minister John Rwangombwa praises the flow of Chinese investment into his country.

Between 2005 and 2009, Rwanda-China trade increased five-fold.

Chinese companies signed contracts worth over twelve billion US dollars in Rwanda in 2010.

Rwanda is an example of the rapid growth of China-Africa trade, which is expected to rise to 220 billion dollars this year.

The CEO of Johannesburg-based marketing firm Brand South Africa, Miller Matola, outlines the reasons behind China's investments in Africa.

"It has admittedly huge natural resources, and obviously to fuel its growth China does need those resources but also Africa is a very resilient and growing economy if you consider what's going on in the eurozone and those believe that Africa has a role to play in assisting with the current economic challenges."

Africa has approximately 40 percent of the world's chromite, 60 percent of the world's cobalt and 20 percent of the world's gold.

The opportunities in Africa have brought over two thousand Chinese companies to do business on the continent.

Some criticize this investment as "neo-colonialism" by China.

US Secretary of State Hilary Clinton brought public attention to this during the summer..

"The days of having outsiders come and extract the wealth of Africa for themselves, leaving nothing or very little behind, should be over in the 21st century."

The Vice President of the China Institute of International Studies, Ruan Zongze, argues Chinese investments in Africa are far more diverse than just natural resources.

"The accusation for example says China just focuses on mining or resources issues, but apart from those, China is also very much focuses on agriculture and also focused on personnel training and to provide expertise for those people from Africa. And also China's enterprises, they learn to play a bigger part in exercising their social responsibility".

And the CEO of the Nigerian Investment Promotion Commission, Mustafa Bello, emphasises the importance of Chinese investment to Africa's business environment.

Diversification is fast build the infrastructure of these countries that have deficiencies in infrastructure. And then you can ride over it and bring in other investments, like steel industrial sector, tourism, transportation and so on and so forth. If you don't build the infrastructure, you will have difficulty doing good business.

Diversified interest in areas such as telecommunications and transportation has helped improve trade and business ties throughout Africa.

Chinese telecoms firm Huawei operates in 25 countries across the continent and had revenues of three and a half billion US dollars from Africa alone in 2011.

Chinese firms are among the leaders providing infrastructure to Africa's 700 million mobile phone subscribers.

However, there are concerns over the stability and transparency of the business environment in Africa.

China Foreign Affairs University Professor, Mark Morrison, highlights corruption as a threat to investors.

"As far as dealing with the countries, corruption is a huge issue in Africa in many different countries and I don't think China should overlook that. I think China should address that and should recognise that that's an issue and try to work with these countries to overcome these kinds of issues."

In this year's Transparency International index on Global Corruption, 36 African countries scored 3 or less out of ten and are termed 'very corrupt'.

Nigeria's Petroleum Revenue Special Task Force also found billions of dollars in royalties and oil revenues have disappeared over the past decade due to embezzlement and corruption.

Chinese businesses looking to establish a physical presence in Africa are also anxious about the security of their workers.

In November, two Chinese construction workers were shot dead by gunmen in northeastern Nigeria.

Mustafa Bello argues the issues of worker security are being solved.

"We have addressed this issue substantially. It used to be the case, yes, in the past but recently I am sure you would have found this has gone down substantially. All I would advise is the Chinese workers in Nigeria to avoid going to those areas that have the potential of this kind of problem. In every country you have this kind of areas that are no-go areas."

Despite security concerns, Bello sees the benefits provided by African governments, such as Nigeria, as a continued pull for investment from China.

"What we have done as a country is to put a whole range of incentives that will attract investment. Number 1 is population, that if the market, you are looking for market, you can find it in Nigeria. Number 2, we can give you a corporate tax holiday of up to five years as an enterprise. So that that company from the beginning up to the first five years, will not pay corporate tax."

With the World Bank predicting economic growth for Africa of 6 percent for this year, the opportunities for Chinese companies into the continent should continue to grow as well.


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