Weekly news

News round-up: 20 August 2013 to 29 August 2013

CAN comment: Possibly the most significant development in the Sino-Africa relationship in recent years is the news that the USA is now exporting oil to China, and therefore will no longer be competing as a customer for Africa’s oil, but as a competitor to African oil exporters for China’s market. The US’s new found energy self-sufficiency resulting from its increased exploitation of shale oil and gas in the US may result in significant policy changes in Africa as its energy security concerns diminish.

CAN comment: East Africa has a long relationship with China (Admiral Zheng He in the early 15th century and the Tazara railway in the 1970s are particularly noteworthy) and the relationship has in recent years grown stronger. The large oil and gas finds in the region and access to Asia across the Indian Ocean makes China a natural trading partner. While resources are important to this partnership, China has also been able to provide significant infrastructure support, particularly in road building and telecoms. More recently there has been considerable activity in the railway construction as Chinese companies are financing and building railways in Uganda, Rwanda, Kenya, Ethiopia and Djibouti, helping to connect the countries as well as to provide a export route to the coast.

CAN comment: Kenya’s President Uhuru Kenyatta visited China in August cementing relationships with senior leaders in Beijing and seeking further investment. As well as speaking about the traditional areas of cooperation such as infrastructure, resources and manufacturing Kenyatta placed considerable emphasis on the tourism sector. China’s tourists present a significant opportunity for African countries to establish a more diversified economy. According to Kenyan Ministry of Tourism, over 40,000 Chinese tourists visited Kenya last year, an increase of 10.4 percent compared with 2011.

CAN comment: While the world’s major mining firms seek to curtail their expenditure and sell off under-performing assets, Chinese gold mining companies have been steadily increasing their market share. Firms such as Zijin Mining Group, the world’s seventh-largest gold company by market value, and Zhaojin Mining Industry are monitoring various companies and assets and considering their options. Under these monopsony conditions there may well be bargains available for savvy Chinese buyers looking to grow their portfolios in Africa and elsewhere.

CAN comment: This article provides an interesting case study into the difficult relationships that exist between immigrant Chinese communities and local inhabitants in many countries in East Asia and increasingly Africa. This is an issue of increasing importance, especially where immigrant Chinese are running businesses that local populations feel should be reserved for their own. African governments should seek a stronger understanding of how these relationships affected countries like Indonesia, Thailand and Malaysia as they seek to maximize the positive impacts of Chinese immigration.

CAN comment: Cheap labour, access to manufacturing inputs and preferential tariff relationships have made African countries attractive places for Chinese companies to move manufacturing businesses. Furthermore Chinese firms and government have helped to break down other barriers to African manufacturing, such as helping to build improved power and transport infrastructure. While local populations are often angered by Chinese encroachment in industries such as petty trading or artisanal mining, it is important to note that entrepreneurial Chinese migrants have also brought with them precious potential for economic growth.

Comments are closed.