Africa and the trade dispute | Economy | '
Investors and trading partners are in Africa, the jack in the hand. In mid-June, the US invited to the US African Economic Summit in Mozambique's capital Maputo to promote "the resilient and sustainable US-Africa partnership," was the summit motto. The US also presented its new "Prosper Africa" initiative, which aims to improve trade and investment.
Only a few days later, Beijing emphasized its good relations with Africa. Joint projects must be sustainable, Foreign Minister Wang Yi said this week, dismissing criticism that China is putting debt into African debt. Such allegations testified to a lack of understanding of the "true friendship between China and Africa," Wang said.
Race for market access
"China, the US, and to some extent Europe, are competing to strengthen their economic ties with Africa," says Giovanni Valensisi, an economist specializing in Africa at the United Nations Conference on Trade and Development (Unctad) in Geneva. "They also want to improve their opportunities in the African market, which is characterized by a young population and dynamic growth."
Heads of State or Government at Maputo Economic Summit on 19 June 2019
Deputy Secretary of Commerce Karen Dunn Kelley openly admits US ambitions. "US exports to Africa have dropped 32 percent since peaking in 2014," she said at the Maputo Summit. "We want to reverse this trend."
The interest is not coincidental, because at the end of May the continental African Free Trade Area (AfCFTA) was finally launched. The current climate of trade conflicts and protekionism has once again made it clear to the Africans how important this agreement is, believes Unctad economist Valensisi.
"One of the strategic goals of the African Free Trade Association is to make the countries of the continent better prepared for such situations," Valensisi told ‘. "The more the inner-African market grows together, the better its bargaining position with the major powers USA and China."
Dependent on China's raw material hunger
However, the position of the Africans is not completely safe. The trade dispute with the US is slowing Chinese economic growth, and the less China is growing, the lower its demand for the raw materials it buys from Africa, including oil, iron ore or metals.
However, this effect is currently limited, says Klaus-Jürgen Gern from the Kiel Institute for the World Economy (IfW). "We see the prices on the raw material markets, that there is currently no crisis-like development," said the researchers to ‘. "Prices have declined slightly from the peak levels in early 2018, but are well above 2016 levels as global commodity prices plummeted."
Gern also considers another risk to be low – namely that African countries could be forced to choose one side, ie to do business either with the USA or with China. Gern sees no signs that China is driving such a course. "And Americans would probably find it very hard to compete against the strong presence of the Chinese with an exclusivity claim."
Africans would therefore be well advised to focus on the swift implementation of their continental free trade area. There is still a lot of work to do, but the chances are huge. Currently, African countries barely trade with their neighbors on the continent, unlike Europeans or Asians.
Goal: More value creation
Even the transition to a true free trade area with 1.3 billion people could increase intra-African trade by 33 percent, according to a new Unctad report. "I see a strong political will that did not exist before," said Giovanni Valensisi, who co-authored the report. Clear and simple rules should now be put in place to make trade in African products easier and cheaper.
Even the notoriously poor infrastructure needs to be improved. "The economic centers must also be connected so that they can trade with each other," says Klaus-Jürgen Gern of the IfW. "Here, the Chinese can help with their investments, but that will not happen overnight."
"However, trade does not automatically lead to sustainable development for all and not more jobs," the Unctad report said. To achieve this, the African countries would have to build their own value chains. Because currently is still everyday, what the Unctad report describes the example of cocoa.
"West African cocoa producers export untreated cocoa beans outside the continent, while chocolate manufacturers in Egypt and South Africa need to import cocoa butter and other ingredients from outside Africa." The same can be observed for many raw materials, the report said. "The Continental Free Trade Area could help change that."
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