Xi Begins Africa Tour as Policy Makers Question China's Role
Comment of the Day

March 25 2013

Commentary by Eoin Treacy

Xi Begins Africa Tour as Policy Makers Question China's Role

This article by David Malingha Doya and Robert Mbakouo for Bloomberg may be of interest to subscribers. Here is a section
Seven out of the world's 10 fastest growing economies will be in sub-Saharan Africa between 2011 and 2015, according to the International Monetary Fund. Growth on the continent is expected to accelerate to 4.8 percent this year from 4.5 percent in 2012, the African Development Bank says.

That expansion contrasts with subdued growth in mature markets like the U.S. and Europe and is attracting Chinese businesses looking to sell goods to emerging economies, particularly “highly populated and increasingly wealthy” ones in Africa, Standard Bank said in a November research note.

More than 50 percent of China's imports from Africa in 2012 were coal and oil, with iron ore and copper making up a further 14 percent, Jeremy Stevens, a Beijing-based economist at Standard, said by e-mail. Its exports to the continent are mainly manufactured goods such as electrical equipment, machinery, vehicles and clothing, he said.

Eoin Treacy's view I've met more than a few African entrepreneurs in China who were sending container loads of cheap manufactured goods back to their bases in Uganda, Malawi, Mozambique, Cote Ivoire and Ghana to feed consumer demand they reported as growing steadily. As African countries become progressively more politically stable, the benefits of large cheap labour forces will be appreciated by an increasing number of entrepreneurs. This is helping fuel the economic growth that is creating the demand for low cost products.

Four years ago at The Chart Seminar, a Turkish cotton trader told me that an increasing number of cotton mills were relocating to East Africa because of costs. It therefore makes sense that Chinese entrepreneurs, faced with higher costs at home, are also moving some of their interests to Africa in search of cheap labour. The evolution of Africa as a manufacturing hub might still be in its infancy but is looking increasingly inexorable.

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