What will China gain from the growing cooperation with Africa?

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The discussions in the recent past have been inclined on how Africa is set to fall in the “debt trap” which many people think is what China wants. Well this is not the case because it’s not 100% about Africa gaining from China. It goes without saying that, when two parties enter into an agreement of any sort, and then there are mutual benefits in that agreement. This happens to be exactly the same thing happening in the China-Africa cooperation. CAMAL has been attending the forums which are aimed at bringing a better continent with the Asian country.

Many people have continued to see the impact China is having in Africa in terms of development and poverty alleviation in Africa. Africa has been able to influence policy formulation in China thanks to the relations. If you want to fight any negative idea in a country you have to deal with the source of that problem first.  A good example of this is the when Africa became united and said it’s illegal to do ivory trading, China adhered to that and being one of the biggest market of ivory from Africa, then the elephants and rhinos are now safer than before.

China has been speculated to be colonizing Africa slowly by coming up with attractive monetary deals which will entice African leaders to allow China to invest in their countries. Mainly, China is pushing for the cooperation with Africa, for the following reasons,

  • Political connection with Africa. China knows that Africa represents over 50 votes in the United Nations and other international organizations.
  • China’s quest for new Markets. As the domestic market become saturated while more and more Chinese are going global, Africa represents a new market for the products produced.
  • As the Chinese economy continues to grow, there are certain products that Africa can provide depending on the demand from China. A good example is the Minerals from Africa. More Chinese are coming to buy Manganese and Marble from Africa and CAMAL has continued to connect the suppliers in Africa to the buyers in China. More and more suppliers are now trusting CAMAL to do the negotiations with china and bringing them buyers from China.

For those who are for the idea that China is out to colonize Africa, there is need to understand that the companies in China operate like any other Company in the world. The end product should bring profit to the company. This is the reasons why, companies in China are working closely with CAMAL to help them cut on cost by getting their raw material from Africa in order to ensure that the locals in Africa where the minerals are being mined benefit in one way or the other. If these relations were not for a good reason, then the number of countries in FOCAC would be less. From the previous engagements, only one country is not in the China-Africa cooperation.

China is set to adopt innovative technology which comes from Africa. A good example is the M-PESA innovation from Kenya. This technology has continued to wow other countries across the world, china being one of them. To support more of these innovations, China has established innovation centers in different parts of Africa where Chinese are offering different projects to the locals to see to it that they embrace the available technology from China.  This has mainly been happening in the Agricultural sector.

China has also benefited from Africa in terms of techniques of environment conservation. Due to industrialization in China, there has been an increase in the pollution levels making the cities in China a health threat. However china has visited some of the African countries such as South Africa which is one of the most industrialized countries in the continent and learns how they manage pollution in the country.

Generally we can say that both parties are gaining from the relations and if this continues in the future, China and Africa should have more benefits for each other. CAMAL continues to push for more exports from Africa to China; the firm believes that china should build more capacity in Africa to facilitate the standard they require because the resources are there. The procurement by China from Africa should not necessarily revolve on raw materials but also finished products. The best thing about the cooperation China is having with Africa is that it has brought competition among the super powers.  More European countries are now investing heavily in Africa to match what China is doing and this means more development for Africa.

You can watch the interview CAMAL’s Managing Director Mr Walter Ruigu had with CGTN about this topic

 

CAMAL’s Managing Director reviews the achievements of FOCAC2015

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China- Africa cooperation has been going on for some time now. CAMAL’s Managing Director Mr. Walter Ruigu was spent some time to review the progress of FOCAC2015 which was held in South Africa. The theme was how to facilitate the movement or transfer of the industrial knowledge from China to Africa.

  1. From the macroeconomic perspective, the conference was successful because China stepped up the pledges from $20 billion to $60 billion which will be in different forms, they will increase financial funding to develop the SMEs
  2. China will offer more training support to African Students who will learn more about technology.
  3. From a company level FOCAC2015 could have done more as the attendance was mainly done by the Government state owned companies instead of firms from Africa. Africa should have more of these forums so that we can they can be a step in the same direction with China.
  4. China’s economy has been slowing down in that China has moved from economy that was based on investment and to fixed asset to domestic consumption. This means that Africa being a large trader in Commodity trading, the continent has been suffering from the economic fluctuation of the prices of these commodities.
  5. The Chinese manufacturing sector has been operating in over capacity i.e. the steel industry; this means there is need to move some of these industries in Africa. However, there is a lot of information which would help the industries in China to move to Africa. Many small medium enterprises are closing down because they do not know how to move to Africa because they do not have the regulations of the country they would want to move to.
  6. The companies in Africa need to engage with China at a macroeconomic level for them to benefit. Once the African companies engage with the big companies in China, definitely the issues of infrastructure will be addressed. China is able to integrate many companies to come up with one common industry.
  7. The market in china cannot be gauged by looking at the population, this is because of the difference in the consumption pattern and the marketing plans. African countries have to research more on Chinese market. Africa should focus on value addition so that export can be increase to China.

Comparing this with FOCAC2018, there has been an improvement as many companies came on board and attended the forum. Unlike in 2015, more countries are sending companies in china to carryout market research, procurement purposes and to get investors. CAMAL continues to be on the forefront to see that clients from African Continent get the best from china. CAMAL also continues to link more industries from China to the African market making it easy for entrepreneurs to source from China. The theme of these forums has been to see to it that Africa has achieved economic growth through these relations in the long-run.

Attached is a file with an audio where CAMAL’s Managing Director Mr. Walter sheds more light on what Africa needs to do for a smooth cooperation with China.

 

CAMAL attended F0CAC2018 in Beijing.

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Forum on China-Africa Cooperation 2018 was held in Beijing where various Heads of State from Africa represented their countries in this forum. Chinese President Xi Jingping opened the forum on 3rd of September 2018. Most Africans were eager to know how their countries would benefit from these relations.  CAMAL attended the opening ceremony where Xi Jingping delivered a keynote speech at the opening ceremony of the 2018 Beijing Summit of the Forum on China-Africa Cooperation.

Africa Heads of states during FOCAC2018 in Beijing China

Chinese President Xi Jinping pledged $60 billion in financing for projects in Africa in the form of assistance, investment and loans, as China furthers efforts to link the continent’s economic prospects to its own. Some of what $60 billion will do can be broken down to:-

  • Xi said the figure includes $15 billion in grants, interest-free loans and concessional loans, $20 billion in credit lines, $10 billion for “development financing” and $5 billion to buy imports from Africa.
  • He added that he will encourage companies to invest at least $10 billion in Africa over the next three years.
  • Xi said China was planning initiatives in eight areas, including providing $147 million in emergency food aid, sending 500 agricultural experts to Africa, and providing scholarships, vocational training and trade promotion opportunities.
  • President Xi Jingping promoted Beijing’s initiative to build ports and other infrastructure as a tool for “common prosperity” in a world facing challenges from trade protectionism.
  • China will implement 50 agricultural assistance programmes, provide 1 billion of emergency humanitarian food assistance to African countries affected by natural disasters, send 500 senior agriculture experts to Africa, and train entrepreneurs in Agri-business.
  • China pledged it will implement 50 trade facilitation programmes for Africa, as well as undertake 50 projects for green development and ecological and environmental protection.
  • Tailor-made programmes to train 1,000 high-calibre Africans will also be put in place. 50,000 government scholarships and 50,000 training opportunities for seminars and workshops will be offered.
  • On the other hand, 50 medical and health aid programmes for Africa will be upgraded.
  • Xi said that we should build a China-Africa community with a shared future that promotes harmony between man and nature. The Earth is the only place which we mankind call home. China will work with Africa to pursue green, low-carbon, circular and sustainable development and protect our lush mountains and lucid waters and all living beings on our planet.

China has continued to push for cooperation with Africa to help the African states achieve economic independence in the long-run.This initiative has been achieved by financing projects in Africa. A good example is the infrastructure development where china has continued to bring modern technology in this sector. The presidents in attendance were positive that Africa was taking off towards a better future of economic growth.

CAMAL Group has been doing business in China for more than 8 years and has seen China’s economy grow overtime. FOCAC2018 has opened many opportunities where people from Africa will be  allowed to do business in China. CAMAL has helped some of it’s clients  get foreign investment from china hence creating a positive economic impact.

CAMAL will continue to bring serious investors to Africa and also help the African produce get market overseas. As Xi jingping finished his speech he  insisted by saying that there is need for China and Africa to work together in order to conserve the environment, CAMAL continues to push for environmental hygiene by organising trips where African countries can come to China and benchmark on environmental conservation and how china manufactures the waste treatment plants. With the growing African population, there is need to take care of the environment at all costs.

As the bond between China and Africa becomes stronger, there is need to evaluate  the economy and check the available opportunities in the market because Africa has untapped potential. There are many benefits which can be reaped by business firms, investors and organisations that are in their take-off stage matching towards economic independence. This phase will spearhead development in countries which will channel the loans for development purposes. We just hope that the loans will bring productivity because it is a debt which will be paid later even though president Xi Jingping said that China will write-off some loans for some countries depending on how the economy is doing.

 

CAMAL participated in China Trade Week Kenya

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The CAMAL team participated in the annual China Trade Week Kenya 2017.

CAMAL Booth

There was a large interest by Kenyan firms in finding Chinese partners and China procurement.

CAMAL’s MD, Walter Ruigu gave a presentation on China’s macroeconomy and changing procurement trends especially their impact on African countries

CAMAL acquired new procurement and advisory clients at the event and we plan to participate every year.

For any inquiries, please email: info@camaltd.com

China’s Mining Sector an Opportunity for Africa

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Overview of China’s mining sector

Although Africa is home to some of the largest mining deposits, China retains the title of the world’s largest mining sector. It is a leading producer of minerals such gold, lead, zinc, coal, tin, iron and silver and the world’s foremost producer of rare earths, accounting for over 90 percent of the global production. Ironically, China is also the world’s top consumer of the same minerals and often has to rely on imports to deal with the internal deficit. There is no doubt that the future success of the Chinese economy is dependent on the ability to secure long-term access to mineral and metal resources.

Consolidating the mining sector

According to China’s Ministry of Land and Resources, there are over 100,000 mining companies in China with more than half of these classified as small-sized enterprises. So many small companies have resulted in inefficient mining in many areas and high-risk operations as smaller mines tend to be the epicenters of mining accidents, particularly in the coal sector. To address these issues, the Chinese Government has been consolidating the mining sector. As consolidation takes place, the smaller companies face these options:

• Increasing output to government-directed levels – Companies with enough capital and reserve levels can simply increase output and comply. However, considering high output requirements and restrictive capital expenditure costs, this option is not always feasible;

• Partnering with bigger players or other companies to reach required output – This is the favored approach of most companies. However, competition between companies, difference in their cultures, divergence in cooperation terms, etc. mean this route is not always feasible;

• Exiting the market – If the above two options are not viable, smaller companies must exit the market either by shutting down or going overseas. This is an opportunity for African companies, especially those seeking partnerships.

Opportunity for African companies

In some provinces such as Hebei, smaller (and often private) companies are being pushed out of the iron and steel sector. Some of these companies’ technology and processes are inherently not problematic; the key issues driving consolidation are low output value and a drive to reduce high energy consumption and high polluting industries. African companies’ opportunities can be summarized as follows:

1. Opportunity for technology transfer – The opportunity for technology and expertise transfer is real. Given the vast scale of China’s mining sector, what is considered small scale here may actually be large scale in parts of Africa. Smaller players that cannot meet the output are forced out of the industry. But where shall they go?

2. Opportunity for capital investments – As the small companies are pushed out of the domestic sector, they will either put their capital into other domestic sectors or go abroad in search of viable projects.

3. Opportunity for exports – As the smaller companies exit and the global mining slowdown continues, China’s mineral deficit will continue to drive commodity imports, especially of high grade minerals.

4. The “going out” drive – It is not only the smaller players that are seeking to move out of China. With a steel sector that has been producing over capacity for years and facing decreasing government subsidies, even larger players have been moving out of China. Sinosteel, one of China’s largest iron and steel companies, has signed a cooperation deal with the Kenyan Government to jointly develop a steel plant in the East African nation.

African companies need strategic partners

It would be naïve to think that all the companies that have been pushed out of China’s domestic sector are viable partners. In fact, there are many that are indeed problematic in terms of excessive energy consumption, environmental damage, inadequate technology and poor safety records. This is why African companies must be strategic in selecting their Chinese mining partners. They should understand the implications of the offered technology/processes, particularly in terms of the environment. One needs to only visit the polluted areas in Inner Mongolia to understand that sometimes the best lessons coming out of China for African companies may be what not to do.
This article originally appeared in the Chinafrica Magazine, China’s Mining Sector an Opportunity for Africa