US President Donald Trump’s surge of recent animosity toward China in early April 2018, namely in increasing nearly $100 billion of tariffs has provided tremors to global financial markets worldwide and created a shaky environment for many American manufacturers and farmers.
Though the taunts of increasing trade tariffs sent shivers to American and Chinese corporates, the pragmatic response of Chinese leadership to match President Trump by $50 billion in US imports sent a wave of international commentary on a new trade war.
While delving on this topic is of great international significance, the impact to Africa is seen at arms-length, as the dynamics of international trade are rarely impeding national development priorities on a continent that is still considered orphaned by America.
This stance was clearly demonstrated when former U.S Secretary of State Rex Tillerson touched down in Africa in March this year. It was clear his mission was to reinforce America’s grip on the continent. This comes as a number of vibrant economies continue to look “East” for aid and credit, as the continent whose economy mainly revolves around trade, industry, agriculture, commodity, manufacturing and human resource eye a GDP of $29 trillion by 2050.
Addressing the continent from the African Union headquarters in Addis Ababa on March 8, Tillerson asked African countries to be careful when accepting loans from China, the continent’s biggest trading partner.
“We are not in any way attempting to keep Chinese dollars from Africa. But it is important that African countries carefully consider the terms of those agreements and not forfeit their sovereignty,” he said.
The US top diplomat’s mission to Africa was a clear indication that Africa-Sino economic relations are causing jitters in America.
His statements resonate with a sentiment America is currently facing; China’s dominance in Africa could potentially mark the end of US dominion on a continent it once forgot. Yet, the truth that matters is whether the US really cares for Africa or not. America’s current concerns lay with a President focused on “tweeting” his anger toward a country that stands as one of its largest trading partners.
It was not too long ago that in January 2018, US President Trump’s unsavory comments that African immigrants come from “shithole” countries was one that drew rancour among many leaders and people across the continent.
It is no surprise then, Tillerson reverted to making such comments. America’s interest in Africa has been weary, and only recently has there been a “second scramble for Africa”, notably when the US in 2006 became the first non-African country to forge diplomatic relations with the African Union. It was not until 2010 that the US and the AU held their first high-level bilateral summit in Washington DC, as a gesture to expand socio-economic and political ties.
While America’s interest in the continent has been marred with a patchy history, namely its fall in Somalia and prior to that, its support of apartheid, the US has viewed the continent at arm’s length. Only recently has it demonstrated support in peacekeeping, global health and economic development. Yet, much more needs to be done to “play” in a domain dominated by China and others.
On March 9, Tillerson, while in Kenya held talks with President Kenyatta. During that meeting, Tillerson indicated that the US would deepen security cooperation with Kenya to fight terrorism, as well as seek peace in Somalia and South Sudan.
He called for increased US investment and stronger trade and bilateral ties, affirming his country’s commitment to stronger security, and bilateral ties. A day later, Tillerson suspended his itinerary on account of illness, cutting short his African tour. Subsequently, he was sacked by Donald Trump. This in itself marked an unknown position of where President Trump and the US currently see Africa. What one can confidently infer is America is presently nervous of China’s dominance.
Interestingly, China has demonstrated strong political relations decades earlier and with its ability to turn the other cheek when it wished, has proved resourceful given the massive investments it is engaged in. While it may be hampered by a current trade-war with America, the dominance of trade with other continents such as Africa is one that it sees with great promise.
China and Kenya
China has cemented its position in Kenya as the leading trading partner, creditor and main source of contractors, with its investments in the country and other key African states continuing to record year-on-year growth.
Since the establishment of diplomatic ties 55 years ago, China and Kenya have co-operated to complete more than 100 major projects mainly in transport and infrastructure, energy and the construction sector.
This includes the most recent $14.1-billion-dollar Standard Gauge Railway (SGR) project, whose first phase is currently operational and has proved to be a game-changer in the country’s transport sector.
The $3.2 billion Mombasa-Nairobi railway line has already moved thousands of Kenyans and international tourists, while the commercial sector of the project is slowly picking up with cargo haulage.
Construction of the second phase of the project at a cost of $1.49 million is underway, which will see the rail extended from Nairobi to Naivasha.
President Uhuru Kenyatta secured an additional $3.59 billion from China to extend SGR from Naivasha to the lakeside town of Kisumu during a meeting with Chinese President XI Jinping in May last year.
The Chinese government has pumped in an excess of $47 billion into Kenya in the last 15 years, becoming the top source of bilateral loans to Kenya.
China disbursed an equivalent of $5.2 billion to Kenya in the period ending December 2017, the National Treasury data shows.This is more than fourfold what Japan extended to Kenya during this period which stood at $816 million. France disbursed $616.3million, Germany $321.4 million while Belgium extended $99 million to Kenya.
According to Treasury CS Henry Rotich, Chinese loans to the Kenyan government have been growing since December 2015, when it advanced the government a total of $2.7 billion.
China and Tanzania
As Kenya has clearly seen a massive investment from China, current actions demonstrate that Tanzania is also one of the favoured children, albeit partly due to the historic ties from socialism.
Politically, Tanzanian-Sino relations were first established via diplomatic ties in 1964, when China accorded the Union of Tanganyika and Zanzibar. Following that, in 1965 the initial Treaty of Friendship between China and Tanzania embarked a new partnership focused on socio-economic development and trade.
Since then, China has had a hand in East Africa’s development and now, more than ever before, the blessing hand of China’s Renminbi is ever so evident. With the creation of the 1,860 km Tanzania-Zambia Railway, more than 60,000 Chinese workers were brought in for construction.
China’s President Xi Jinping chose Tanzania for his Africa inaugural visit where he delivered the “Trustworthy Friends and Sincere Partners Forever” speech in 2013. The two countries signed 15 cooperation documents covering trade, financial investment, infrastructure and cultural development.
Last year, China and Tanzania signed at least three major co-operation pacts covering construction of government office buildings including the Ministry of Foreign Affairs and East Africa Cooperation, anti-narcotics police training and expansion of one of the country’s major police training institutes.
During that high profile meeting with a Chinese envoy, President John Magufuli received a message from his Chinese counterpart Xi Jinping.
“I assure you that China will continue its co-operation with Tanzania in various areas including agriculture and industries,” the message read in part.
From construction of the $1.2 billion Mtwara-Dar es Salaam Natural Gas Pipeline to the 600-megawatt power station, Bagamoyo port, the largest and most modern port in Africa, the parliament building, the Friendship Textile Mill, Mubarali Rice Farm, Kiwira Coal Mine, Mahonda Sugar Cane Factory and even the number of Chinese-built Golden Dragon buses that plough the Dar es Salaam rapid transport system, China has a hand in almost all of Tanzania’s development projects.
Tanzania is also China’s largest aid recipient country in Africa, and China is Tanzania’s third export partner by export volume after India and South Africa. Data from “AidData” indicate that since 2012, China has accounted for more than 15% of Dar es Salaam’s trade.
According to the Tanzania Overseas Chinese Association, Chairman of Superintendent, Andrew Huang, massive investments will come from large-scale Chinese investors to boost the country’s financial income through Direct Foreign Investment (FDI).
China’s total direct investment in Tanzania soared from $700 million in 2011 to $2.1 billion in 2017, making it Tanzania’s biggest foreign investor – East Africa Business Week.
China and Uganda
With more than $800 million dollars of imported goods from China, Uganda stands as one of East Africa’s largest trading partners with the Asian giant. Historically, Uganda has witnessed noteworthy economic growth being partners with China, and imports mainly electrical and mechanical appliances, clothes and spare parts.
Current foreign direct investment stands at more than $3.07 billion, while a large portion of that, nearly $2 billion is in the oil and gas sector by China National Offshore Cooperation, and over $1 billion is in infrastructure alone. Such investment has the potential to propel Uganda to middle-income status.
As a result, President Museveni has clearly announced his support for China. During the 68thanniversary of the founding of the People’s Republic of China, he stated, “I am here to salute the contribution of China to the emancipation of Africa. All those countries which were fighting (to gain independence) got support from the Chinese government.”
The Battle for East Africa
To try and counter the heavy influence China has in the region, theJapanese government is equally on track to push on infrastructure projects. Under the Japan International Cooperation Agency (JICA), Japan move out of its comfort zone and took the sixth Tokyo International Conference on African Development (TICAD) to Africa.
The forum held in Nairobi in August 2016, was the first TICAD conference held outside Japan since its inception in Tokyo on October, 5 and 6, 1993. The meeting sought to bring global attention to Africa, having the Japanese government pledging $30 billion for investments across the continent. TICAD was aimed to promote Africa’s development, peace and security, through the strengthening of relations in multilateral cooperation and partnership, particularly with the country. Since its launch, Japan has signed at least 73 MoUs with African countries, 22 with Kenya during TICAD.
The resurgence of interest in Africa seems to be a common theme among many of the G8 nations, partially due to a reflection of the post 1990s. Perhaps the collapse of the Berlin Wall in 1989 and the end of the Cold War created a new world order in which developing nations seemed to be the last frontier to be conquered.
The Cold War era saw both capitalist and communist countries race to support African countries in order to expand their own blocs and spheres of influence. Yet today, post the Cold War, the decline in American sentiment to Africa, fall of the Soviet Union and the massive economic upheavals from various economic downturns have caused countries to re-evaluate their impetus for economic dominance.
The UK, India and Germany have also been keenly following the race to conquer East Africa, as historically, each party has been present on the continent far longer than America or China. For the UK, despite being the colonial masters of Africa, African sentiment toward the British has been welcomed, though financial constraints have prevented Britain to dominate a continent it once had in its palms. Germany’s fate post the Second World War, showcases a renewed effort to rebuild socio-economic relations via aid.
The geopolitical dynamics of East Africa’s Indian Ocean pose no great danger for America, Great Britain or Germany. China, India and Japan have been sparring in the Indian Ocean to snag whatever chunks of the continent they can. In fact, the coalition between India and Japan have sought to knock China out, albeit unsuccessfully; however the pact has posed a challenge to the US, Germany, Britain and others eyeing Africa.
A 2017 study conducted by the Centre for Chinese Studies, India and Japan have increased efforts to improve their economic engagement with Africa. Via the creation of the Indo-Pacific Freedom Corridor, the Indo-Japanese project launched the Asia-Africa Growth Corridor (AAGC), officially announced in May 2017 at the African Development Bank meeting in Gujarat, India. The AAGC is an attempt to create a free and open Indo-Pacific region through a combination of ancient maritime networks and new sea corridors that will integrate African and Asian economies. Its aim is to counter the Chinese efforts via the One Belt One Road initiative.
According to the study, “the AAGC is an Indo-Pacific oriented initiative that was not only produced in consultation with African leaders and policy-makers…it aims to prioritise connecting and integrating the economies of South Asia, Southeast Asia and East-Asia with Africa.”
The Chinese strategy on the other hand seeks to connect China to the Eurasian countries of the Silk Route and Maritime nations of Africa. Its aim is to grasp the global share of trade, and why not? The dominance of Chinese products flooding the markets in East Africa stand as China’s tool to muscle the Renminbi into the continent, thus boxing out other currencies that may have any significant influence.
Chinese ambassador to Kenya, Liu Xianfa has since affirmed his government’s commitment to Kenya, East Africa’s economic powerhouse.
“We are willing to make joint efforts with Kenya to strengthen the strategic connection of “Belt and Road Initiative” (BRI) with Kenya’s Vision 2030 and the “Big Four” agenda. We will roll up our sleeves to work together with the brotherly Kenyan people, to achieve Kenya’s rapid and high-quality development initiative,” he said.
Under the BRI, the ambassador said China hopes to achieve policy, infrastructure, finance and trade and people-to-people connectivity, thus build a broad platform for international cooperation to create new driving force of shared development.
‘Trade’ is what is fuel to the current relationship. Today Chinese products stuffed inside international containers destined for the West and Europe, govern today’s consumption of global trade. The emerging economies of Africa, or for that matter, East Africa, also do the same, though at a much lower level. In addition the proximity to the Indian Ocean allow for Chinese products to flood Kenya, Tanzania and other interior economies at prices far cheaper than anything from the US or Europe. This trade enables East Africa to be a critical partner for the Asian giant and a pillar that China will continue to build on.
According to the Center for Chinese Studies, an Institute at Stellenbosch University in South Africa states:
“East Africa seems to be the primary region of competition for China, India and Japan… As a geo-strategic gateway for Africa-Asia trade and the fastest growing region in Africa, all parties seem to be aware of the region’s significance to their connectivity projects.”
The Chinese dominance in the region stands to be a force to be reckoned with. According to US-based Citibank, up to 22 per cent of China’s trade is being conducted in Renminbi. More commonly known as the Yuan, China’s penetration into Africa has dramatically changed the dynamics of banking and foreign exchange.
In 2015, the Chinese Yuan was adopted as legal tender in Zimbabwe, presenting a shift in the paradigm of Western influence in Africa. While this has only happened in one country, the growing Chinese trade has been a critical factor in how African countries adopt exchange rate baskets. Whatis to be seen over the coming decade will only tell whether China’s influence has caught on by other African nations.
As early as 2015, Bloomberg reported that ‘IMF planned to add the Yuan to its basket of reserve currencies, an international stamp of approval of the strides China has made integrating into a global economic system dominated for decades by the U.S., Europe and Japan.’
China-Africa Cooperation Forum Summit
The Forum on China-Africa Cooperation is a set of ministerial conferences held every three years, with the first one held in October, 2000 in Beijing. The latest was held in 2015 in Johannesburg, South Africa.
So with China well on the way to global dominance in trade and influence and with a positive track record with East Africa (and the rest of the continent), how should East African countries approach their relation with the soon to be world’s top economy?
Of course one would have to assess the functions that would approach the relationship with caution and wariness while there are those who welcome it with open arms.
At the start of the year, China’s Foreign Ministry spokesperson GengShuang announced that; “In order to respond to the strong needs by the South African side and the practical needs for the development between China and African countries, the ministerial conference of Forum on China-Africa Cooperation (FOCAC) is to be upgraded to a summit, and is to be held in China in 2018.”
“An array of action plans will be worked out in terms of commerce, security, culture and society between China and African countries during the Summit on China-Africa Cooperation in 2018,” said Wang Lei with the African Research Center of China Institutes of Contemporary International Relations.
It is up to African leaders and economists to consolidate the continent’s development vision and to speak with a single voice to ensure that not only individual country goals are represented but the continent’s as a whole.
Different blocs and regions on the continent have varying needs due to their varying development levels and political ideologies. As such, it is to be expected that there may be contradicting calls from neighbouring countries and even regional trading blocs.
China into the future
The race for Africa will see who can last the longest, in a continent that shows limited certainty for burgeoning democracies, stability and prosperity. China has demonstrated a steadfast approach to building a partnership that clearly sees a future horizon. America or for that matter, many of the developed countries of the West,are wavering in pledging any assurance of long-term partnership.
America itself is in a position of disturbing trade ties with China. In March 2018, President Trump imposed tariffs of $50 billion-$60 billion of Chinese imports, lodged a WTO dispute against China’s technology licensing and restricted Chinese investment in strategic industries and technologies.
According to S&P Global Ratings, the impact is limited because the US represents only about 15 per cent of China’s goods exports, and China’s domestic activity now drives its economic growth rather than exports as in earlier decades.
What is certain is that the current US Administration has demonstrated disdain toward the last continent, only to enable China as the last man standing in a wetland of abundance. With the ongoing developments, China could remain a thorn in the flesh for many developed countries seeking a share of the 1.28 billion populated continent. Nevertheless, the Asian Goliath has set its heart on planting seeds in a fertile territory that will sprout much larger returns than any of its Asian neighbours (India or Japan) seek to find. The renewed “Scramble for Africa” only second to the New Imperialism of 1881-1941, provides a future inclination of a continent that espouses Chinese Friendship, under the guise of economic prosperity.
As we all know, we will only do business with those we like.
Written by Giza Mdoe and Martin Mwita