Africa must cut trade deficit with China

In the midst of the latest merry-go-round with China, once more foreign aid takes centre stage with a bouquet of loan offers, cancellations and grants concocted for the continent.

This helps, but is far from the answer to Africa’s medium and long-term development goals.

The answer lies with fairer trade and with the continent looking within itself for products and markets.

The first step to getting a fairer deal from the world is for us to decide we wish to be less dependent on China or other powers, to decide we want to manufacture, locally, most of what we need.

The “Africa Rising” movement actually carries our hopes. We make what we want and can, and make friends all over the world— friendships, not servitude to others.
We neither look East nor West (the dogmas and theories will waste our time) but within.

Our biggest problems in development centre on our trade deficit as a continent with the rest of the world.

Bar South Africa and Nigeria, our countries have heavy trade deficits with just about anyone.

And we have this trade deficit with the world because all we do is dig holes all over the continent, mine whatever resources we find and shuttle them elsewhere.
“Where we ship them, the resources create jobs and then come back to us as finished goods.

And since we all mine almost the same raw materials, our volumes of trade among African countries are low. Mariama Sow of the Brookings Institution for instance notes: “Africa’s intra-regional trade lies well below that of other regions.

In 2016, intra-African exports made up 18 percent of total exports, compared to 59 and 69 percent for intra-Asia and intra-Europe exports, respectively. The figures for imports are similar.”

The figures are even more imposing if you then consider the trade deficit we have with just one country, China.

“China’s trade surplus narrowed sharply to US$27,91 billion in August 2018… Imports jumped 20 percent to a record high while exports rose at a softer 9,8 percent,” the Africa China Research Initiative details.

For those not into numbers, the sad news is as a whole continent we still sell less to China than what China sells to us by some $27,91 billion.

This is a classic problem. And it is not unique to Africa.

East Asian countries such as Singapore, Malaysia and also South Korea among others used to face the same problem.

They reversed this by investing more into making goods they could use domestically and also sell to the world.

It suffices to say, then, that the medium- and long-term solutions to our development challenges are within the continent.

Granted, we are not some federal State that can have certain regions being mandated to focus on certain industries; but this is where our regional bodies come in.

In fact we are making progress on regional integration as 44 countries for instance this year signed the Continental Free Trade Agreement under which tariffs would be cut by up to 90 percent — notable omissions at that time were Nigeria and South Africa for various reasons, though not of principle.

Given such progress, we must now move to manufacture what we need in different hubs, then interchange.

Sadc and other regional bodies for instance have plans on regional economic development and industrialisation.

These ought to be tools for the establishing of parts of our regions as hosts/manufacturers of certain capital goods.

Let us manufacture not just goods but capital goods — goods and machinery that’ll be used to make other goods.

The difference in how trade deals are cut can be drawn from China and USA.

Donald Trump looks at the Chinese and makes demands that would open up greater spaces and opportunities for US citizens and companies. The Chinese do the same.

However, when it comes to summits with Africa, it becomes a concoction of aid, grants, and money lending agreements.

The arguments are less on balancing our trade deficit with China; they are less about avoiding dumping of Chinese goods into Africa and sometimes flooding our markets so much that we are unable to produce our own.

The handouts from China or elsewhere will only serve to deepen our woes and dependence on other countries for our development.

For so long as China views us as trade and development weaklings relative to them (and they do, though they won’t say so; and indeed we are at this point in time), we will get the raw end of the deal. — DM

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