Is China Losing Interest in Africa?

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He sat quietly after taken his favourite Chinese fast food at a popular Chinese restaurant located at Osu, a suburb Accra, Ghana.

The worried-looking Chinese national by name Chang Hu is planning to return home after some five years of staying in Ghana and other African countries.

His bane is that the recent clampdown on Chinese nationals operating in some sectors reserved for African indigenes, is making lives for Chinese very difficult here. He added that African economies are also going through hard-times.

Economic Headwinds

Several reports have confirmed Mr Hu sentiments. It has been reported that African resource-rich countries are facing significant economic headwinds. Nigeria, Africa’s largest oil producer, depends on oil for over 90% of its foreign exchange earnings and three-quarters of government revenue.

The slump in oil prices has adversely affected Nigeria’s economic prospects, pushing GDP growth into negative territory to -1.5% in 2016.

In May, this year, Nigeria’s National Bureau of Statistics (NBS) in its first quarter GDP report indicated that the economy contracted by 0.52% year-on-year (in real terms), 77 bps lower than Bloomberg’s compiled median estimate of 0.25%.

Having declined throughout 2016, the contraction in the first quarter of 2017 extends Nigeria’s recessionary trend, and marks the fifth successive quarter of negative output growth rate.

Broadly, after slowing to 3 percent in 2015, economic growth in Sub-Saharan Africa is expected to fall further to 1.6 percent in 2016, the lowest level in over two decades. The sharp decline in aggregate growth reflects challenging economic conditions in the region’s largest economies and commodity exporters.

Many of these countries continue to face headwinds from low commodity prices, tight financial conditions, and domestic policy uncertainties. Economic activity has been notably weak across oil exporters. At the same time, economic growth in about a quarter of the region’s countries is showing signs of resilience.

These latest figures are outlined in the new Africa’s Pulse, the World Bank’s twice-yearly analysis of economic trends and data for the region.

Growth is far from homogeneous, suggesting that countries are growing at divergent speeds. While many countries are registering a sharp slippage in economic growth, some others—Ethiopia, Rwanda, and Tanzania—have continued to post annual average growth rates of over 6 percent. Several countries—including Côte d’Ivoire and Senegal—have become top performers.

“Our analysis shows that the more resilient growth performers tend to have stronger macroeconomic policy frameworks, better business regulatory environment, more diverse structure of exports, and more effective institutions,” Albert Zeufack, World Bank Chief Economist for Africa said.

Despite a recent pickup, commodity prices are expected to remain largely below their 2011–14 peaks, reflecting the weak global recovery. Faced with growing financing needs, commodity exporters have begun to adjust, but efforts have been uneven and remain insufficient. Against this backdrop, a modest recovery is expected with real GDP in Sub-Saharan Africa forecasted to grow 2.9 percent in 2017, then rising moderately to 3.6 percent in 2018.

Africa’s Pulse noted that the region’s economic performance in 2017 will continue to be marked by variation across countries. While the larger economies and other commodity exporters are expected to see a modest increase in GDP growth as commodity prices continue to stabilize, economic activity is expected to keep expanding at a robust pace elsewhere in the region, supported in part by infrastructure investments.

With the external environment expected to remain difficult, deeper adjustment would be needed in some countries to contain fiscal and current account deficits and rebuild policy buffers.

Losing Interesting 

Besides, Chang Hu and several Chinese migrants who previously adopted Africa as their second home are losing interest in Africa.

Eric Olander, Asia-based Media Executive added:”There is more evidence that China may in fact be losing interest in Africa as new data show that the number of Chinese migrants on the continent has been steadily declining since 2013″.

In some African countries, the numbers are quite stark. In a new report published by acclaimed China-Africa scholars Yan Hairong and Barry Sautman, an estimated 150,000 Chinese have left oil-rich Angola alone.

The researchers said similar declines are apparent in other countries as well. This fall in migrant population dovetails with a sharp drop in bilateral trade between the two regions as trade volumes in 2016 were down sharply from the year before.

“So while the fears of a Chinese ‘take over’ of Africa have always been overblown, now the growing concern is increasingly what if the Chinese decide to look elsewhere for investment and opportunities?”, he asked in LinkedIn post.

Additionally, the state-run China International Contractors Association indicated that while most of China’s migration to Africa has been by small-scale entrepreneurs, the variety of contract employees serving Chinese state-owned enterprises fell 32,000 final 12 months to 233,000.

Barry Sautman, who screens Chinese migration to Africa on the Hong Kong University of Science and Technology told the UK-based newspaper Financial Times: “Continent-wide there seems to be a decrease”.

“In part because of a downturn in the commodities cycle, it became unsustainable for many Chinese to continue their businesses”, Sautman said to the newspaper.

The migrant decline mirrors a fall in commerce and funding between China and Africa, which reached greater than $200bn in 2015, earlier than falling beneath $150bn final 12 months. China’s direct funding within the continent is negligible in contrast with commerce.

In Ghana, the government last year deported more than 30 illegal Chinese miners. While in June 2014 alone, the country’s immigration authorities deported 4,592 Chinese illegal miners whose illegal mining activities have polluted major water bodies in the West African country.

Their activities have also destroyed the environment, farmlands, commercial crops especial cocoa and biodiversities.

Furthermore,  South Africa’s development slowed after 2007 and several other returned Chinese merchants blamed the falling worth of the rand in opposition to China’s renminbi for biting into margins. “The exchange rate is no good,” says Zhang Xueping, 67, who returned a couple of years in the past and was overseeing the addition of a spiral staircase to his four-storey home when the Financial Times visited.

Anti-Chinese sentiments  

From Liberia to Senegal to Mozambique, Chinese migrants who have small business acumen are operating across all the sectors of the economies.

From manufacturing, ICT, agriculture, mining and construction, to oil and gas, the Chinese are there in their triplicate numbers. But recent anti-Chinese sentiments have contributed to returning of Chinese migrants.

The increase in anti-Chinese sentiments in Ghana and whole of Africa  are  due largely to conflict between locals and Chinese migrants.

“Natural resource extraction is a common flashpoint, but any sector or activity that puts migrants and locals into competition is sensitive. Resentment is commonly evident when locals are not employed in foreign-financed projects or when they feel the operations of foreign companies are plunderous rather than mutually advantageous,”  Global Financial Integrity (GFI) report on Transnational Crime and the Developing World collaborated.

For instance in Ghana, Chinese migrants are prohibited by laws from engaging in small scale mining and petty trading. Similarly laws can be found in most African countries. When Chinese migrants go against the laws, they are punished by state-institutions including the courts and  security agencies. Some Chinese migrants have accused of committing crimes ranging from illegal mining, fraud to killings .

China, the savior

However, China is Africa’s largest economic partner. Yet it has been a challenge to understand the full extent of the partnership due to a dearth of data.

A new report by McKinsey Africa, a leading management consultancy firm in Africa finds that its involvement is bigger and more multifaceted than previous studies suggest.

Through a study conducted across eight countries that together make up about two-thirds of Sub-Saharan Africa’s GDP, the report finds that there are already over 10,000 Chinese firms operating in Africa—four times the previous estimate.

About 90 percent of these are private firms, of all sizes and operating in diverse sectors, with about a third in manufacturing. These firms are bringing capital investment, management know-how and entrepreneurial energy to the continent, and in so doing, are helping to accelerate the progress of Africa’s economies.

Across trade, investment, infrastructure, financing and aid, China is a top five partner to Africa—no other country matches this level of engagement. The China-Africa relationship has ramped up over the past decade with trade growing at around 20 percent per annum.

Foreign Direct Investment (FDI) has grown even faster—at an annual growth rate of 40 percent. China’s financial flows to Africa are 15 percent larger than official figures suggest when nontraditional flows are included. China is also a large and fast-growing source of aid and the largest source of infrastructure financing, supporting many of Africa’s most ambitious infrastructure developments in recent years.

Source: Masahudu Ankiilu Kunateh || African Eye Report


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