China is set to become Africa’s ‘largest export destination’ and single biggest trading partner in 2012, according to analysis from Standard Bank, South Africa. This is a dramatic turnaround in just 4 years, since in 2008 ‘exports to China stood at half those to the US’. China has also managed to rapidly increase exports to Africa, with analysts describing China as ‘well positioned to participate in Africa’s next phase of development’. Bilateral trade volumes between Africa and China now exceed US$160 billion per annum, or almost one-fifth of Africa’s overall trade. ‘Imports [to Africa] from China stood at $73 billion in 2011’, up 23% on 2010.
According to Standard Bank, ‘the rapid growth in trade between the two regions is putting pressure on more established partners such as the EU and the US to strengthen their commercial ties with Africa’. Significantly, ‘fuels, ores and metals account for almost 90% of all Chinese imports from Africa’.
A critical issue faced in Africa’s trade relations with China is whether this new global trade dynamic can be used to assist in the transformation of the basis of Africa’s engagement with the global trading system. In this context the observation that 90% of all Chinese imports are ‘fuels, ores and metals’ is a matter of concern. Indeed, analysis from the South African Revenue Service indicates that exports to China are even more commodity dependent than trade flows with traditional partners such as the EU and US.
In this context, the question arises in the agro-food sector of what strategies African governments need to set in place so that the new trade dynamic with China gives rise to investment in moving African production up the value chain to higher-value products. This relates not only to trade with China per se, but also to the utilisation of the new trade dynamic with China to leverage new investments from traditional partners in value addition (for example within the cocoa chain, where major Western industrial chocolate producers such as Barry Callebaut are concerned about securing future supplies of cocoa to ensure they can continue to meet growing consumer demand for cocoa products in Asia).
There are examples of African producers repositioning themselves within the value chain, ranging from the Mauritian sugar sector’s move over to refined sugar production and export (in part preparing for the shift in global sugar demand towards Asia) to Kenya’s production and marketing of consumer-ready horticultural products. However, there remains considerable scope to capitalise on expanding Asian demand to move into higher-value production in sectors such as coffee, cocoa and tea.
The challenge for policy makers is to identify the policy framework and flanking measures required to assist national private-sector producers in making this transition.