China and India helping Africa

An increase in trade and investment between China, India and Africa holds great potential for growth and job creation in the poverty-stricken sub-Sahara, a new study says.

The sub-Sahara is home to 300 million of the world's poor
The sub-Sahara is home to 300 million of the world's poor

However the report, by the World Bank, also urged an array of trade and investment reforms to allow those opportunities to be realised.


“These two emerging economic ‘giants’ of Asia are at the centre of the explosion of African-Asian trade and investment,” said the study, entitled “Africa’s Silk Road: China and India’s New Economic Frontier.”


Harry Broadman, the reports author, told reporters that China  and India both have a history of trade and investment ties with Africa.


“But what is new is that the rapidly growing societies of China  and India, particularly the growing middle class, really does  present a rare opportunity for Africa to increase its exports.”


Amos Kimunya, the Kenyan finance minister, welcomed China’s push into the region, which is home to 300 million of the world’s poorest people.


“I see this as an opportunity for the African countries, who  traditionally look West, and now are looking East,” Kimunya told reporters.




Today, Asia receives about 27% of Africa’s exports, in  contrast to only about 14% in 2000, while the European  Union’s share of African exports halved between 2000 and 2005, Broadman’s report said.


“Asia’s exports to Africa also are growing very rapidly – about  18% per annum – which is higher than to any other region.”


Absent certain policy reforms, the opportunities presented by China and India’s interest in Africa may not be fully realised

Harry Broadman, World Bank report author

While the volume of foreign direct investment between Africa and Asia is more modest, it is growing at a “tremendous” rate, the report said.


Sub-Saharan Africa still only accounts for 1.8% of global  foreign direct investment inflows.


Existing Chinese and Indian investment has concentrated on the mining and oil sectors but diversification is occurring in the apparel, food processing, retail, fisheries, commercial real estate and other sectors, it said.


“It is about far more than natural resources,” Broadman said,  noting opportunities for Africa to engage in processing of commodities and the export of labour intensive goods and services outside the natural resources sector.


Policy reforms


A growing number of the Chinese and Indian firms investing in  Africa are global players using world class technologies, Broadman said.


“They are actually fostering the integration of Africa, not only  within the global economy but perhaps even more important, fostering the regional integration among the countries within Africa itself,” said Broadman.


But despite the growth in trade there is a major imbalance in the relationship, with African exports to Asia constituting only 1.6% of what Asians buy from the rest of the world, the Bank said.


African purchases by China and India comprise only 13% of  Africa’s total exports, the report said.


“Absent certain policy reforms, the opportunities presented by China and India’s interest in Africa may not be fully realised, while the existing imbalances could continue for the foreseeable future,” the report said.


Among the reforms, it calls for is the elimination of China and  India’s escalating tariffs on Africa’s leading exports, and removal of African tariffs on certain inputs.


The World Bank also urged African nations to strengthen basic market institutions, improve governance and improve their transportation infrastructure.

Source : AFP

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