[ 2014-10-10 ]

China still trumps the competition in Africa Inc
US President Barack Obama earlier this year hosted
the first ever US-Africa summit. The event
confirmed a renewed push by developed economies to
cement ties with Africa, with Europe holding its
own regional gathering and Japan’s prime
minister travelling to sub-Saharan Africa for the
first time in nearly 10 years.

Left unsaid in public was that Washington,
Brussels and Tokyo were all aiming to fight back
against China’s growing commercial influence in
Africa, the second-fastest growing region in the
world. Did Mr Obama and his counterparts succeed?
In short, no.

At the inaugural FT Africa summit this week, the
chief executives of six companies with huge
operations on the continent – ranging from
banking to telecoms to commodities and consumer
goods – were asked which foreign power was
playing its cards best in Africa. The unanimous
answer: China is still winning, and big.

“China is doing a fantastic job because they are
coming with patient capital and [a] long-term
vision,” said Vimal Shah, chief executive of
Nairobi-based consumer group Bidco. He added:
“They are not trying to dictate to you how to
run your country”.

Ivan Glasenberg, the South African chief executive
of commodities company Glencore, highlighted
Beijing’s role in building roads, ports and
power stations: “China is investing big in
Africa . . . and they are
doing a lot in infrastructure.”


Herbert Wigwe, the head of Nigeria’s Access
Bank, echoed the consensus view when he observed:
“I have gone to almost every country in Africa
– at least to 50. The Chinese influence is
growing by the day and they are getting it
right.”

That China is still ahead in Africa is, perhaps,
not surprising. Chinese trade with the region has
grown from less than $10bn in 2000 to more than
$200bn last year, overtaking the US and the
colonial European powers. Cheap credit lines have
continued to flow, and Beijing has also maintained
its policy of political non-interference.

But what is perplexing is that others have not
been able to at least close the gap, especially
after Beijing came under criticism inside and
outside Africa this year for its “cheque book”
policy. This refers to its practice of lending
money to African countries to largely benefit its
own construction groups, which have built
everything from roads to hospitals on the
continent.

China, however, appears to have outsmarted its
rivals in recent months by taking steps – some
symbolic and some real – to placate its African
critics.

Chinese officials have, for example, acknowledged
some mistakes. In one of the most candid mea
culpas, Zhou Xiaochuan, governor of China’s
central bank, admitted during a meeting of African
finance ministers and central bank governors that
some Sino-African deals had been “not so good,
not so satisfactory”.

And Li Keqiang, China’s premier, acknowledged
during his first trip to the continent earlier
this year that the relationship between Beijing
and Africa had suffered “growing pains”. Such
comments were music to the ears of disenchanted
African officials.

China has begun to address the larger criticism:
that it is only interested in Africa’s
commodities and only lends money to infrastructure
projects that benefit its own construction
companies.

As the criticism mounted – and the demand for
commodities cooled – Beijing promised to
encourage investments in other African sectors,
particularly manufacturing and banking. Said and
done: First Automotive Works, one of China’s
largest car parts companies, opened a plant this
year in South Africa; shoe producers have set up
shop in Ethiopia; and Kenyan banks are building
relationships with China’s state-owned financial
institutions.

China has also taken a baby step away from its
“cheque book” policy of multibillion-dollar
bilateral deals. In May, it created a $2bn fund in
partnership with the African Development Bank and
announced that it would open the resulting
contracts to the most suitable bidder – not just
Chinese companies.

Even if some of these measures are largely
symbolic, they appear to have succeeded at
quieting the critics, allowing Beijing to return
the focus to its unmatched financial firepower.
Little wonder, then, that Africa Inc still is in
love with China – despite the overtures from Mr
Obama and others.

Source - FT

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