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Reforms, China give Africa a new chance for growth

Posted on: June 14, 2009


Reuters – Saturday, June 13

* Africa urged to keep up reform, avoid protectionism

* China strengthens position during downturn

* Pressure for Africa to provide more than raw materials

By Matthew Tostevin

CAPE TOWN, June 12 – Africa must keep up reforms and avoid protectionism to turn the global crisis into an opportunity for growth driven by more than just China’s quest for minerals, delegates at the World Economic Forum said.

The unprecedented Chinese presence at this week’s World Economic Forum on Africa was a clear sign of how China has further strengthened its position during the crisis to become the most important partner for many of the continent’s states.

Africa enjoyed average growth of over 5 percent for five years, but it is expected to dip below 3 percent this year. That has piled pressure on some governments to slow reforms and raise tariff barriers. Delegates said that would be dangerous.

“This is perhaps the best opportunity for Africa to address issues which they have always put aside,” said Omari Issa, head of the Investment Climate Facility for Africa, a continental investment body.

A new report from the World Bank, African Development Bank and World Economic Forum, however, showed competitiveness had not improved in the past year — sub-Saharan Africa had an average rating of 3.5 versus 4.7 for China. [ID:nLA1030080]

South Africa’s new President Jacob Zuma, who has stuck to pro-business policies despite pressure from union allies, warned African states — and the West — against protectionism.

“This includes the crowding out of credit through the huge bailout packages,” he added.

There is little doubt the immediate impetus for African growth will come from China. Its efforts to build metals stocks have boosted commodity prices and it has not halted its investment in African mines despite the downturn.

On the day the conference closed, data showed China’s factory output had rebounded more than expected in May, bolstering evidence of its recovery. [ID:nPEK330475]

CHINA ON THE MOVE

Not only were there more Chinese delegates at this year’s Africa forum, it was co-chaired by Jiang Jianqing, chairman of the Industrial and Commercial Bank of China <1398.HK> <601988.SS>.

“China’s on the move again,” Jacko Maree, chief executive of South Africa’s Standard Bank, told Reuters. ICBC holds 20 percent of Standard Bank, Africa’s biggest bank by assets. Maree said they were working together on 60 deals. [ID:nLB810320]

China’s role is not welcomed across Africa though, particularly by those seeing its cheap exports put factories making everything from textiles to tin cups out of business.

African governments and international institutions were urged do more to improve the business environment and invest in infrastructure and skills so the continent can develop industries of its own.

“There is no reason why our clothes should be made in China using our designs,” commented World Bank Managing Director Ngozi Okonjo-Iweala, a former Nigerian finance minister, in her brightly patterned cotton dress.

“China will move up the value chain a bit more than it did before. Can African countries position themselves to step in and take over some of the lower end manufactures? Can Chinese investment contribute to doing this and creating more jobs? Those are the kinds of things African leaders need to start thinking about.”

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