LOOKING BEYOND RAW MATERIALS 

Most of Africa's exports to China, as is well known, are natural resources. In fact, over 90 percent of Africa's outbound trade to its partner in the East is in this form. Yet what about the other 10 percent? In this edition of the Econometer we look beyond the role of raw materials in African exports to see where African industry is adding value in its trade with China.

The other 10 percent

In discussions on China-Africa trade, the focus is always on the massive amount of African resources sent to allay insatiable Chinese demand - and, perhaps, rightfully so. In 2009, Africa exported $43 billion worth of goods to its partner in the Far East, with even greater export amounts expected in the future. Over 90 percent of this total were natural resources, with a full two-thirds comprising oil and coal. Since it is obvious that Africa's economic development will depend on its ability to move up the value-added chain to supply more than just raw materials, it is worth examining its progress toward this end with the continent's fastest rising trade partner: China.

As might be expected, South Africa leads the way in producing finished and semi-finished goods for export to China. Abundant domestic iron ore and coal deposits are converted into iron and steel products for the Chinese market, generating over $1 billion in revenue for the country in 2009. South African plastics are also a leading item, fetching $100 million from Chinese buyers.  South African wine too has gained popularity with 4.5 million liters sold to China in 2009, as have South African pharmaceutical products, auto parts, and even sailboats.

Egypt is another example of Africa's ability to create labor-added value for trade. Second to oil, Egypt's most valued exports to China are marble and limestone blocks, often trimmed and cut to specification. In 2009, Egyptian-crafted ornamental beads, carpets, and the pharmaceutical product insulin were worth millions in China. Other African countries are incrementally following suit. Exporters of wood such as Benin, Cameroon and Gabon are increasingly sending lumber, rather than whole logs, to China. Animal skins from Ethiopia, Uganda and Kenya are being tanned and processed to become leather prior to shipment east. In time this may progress into the production of furniture and clothing.

As Africa increases its commodity exports to China, it also increases the number of opportunities available to add value to these resources – a topic worthy of discussion for those interested in Africa's economic development.

The ChinAfrica Econometer is produced by THE BEIJING AXIS, a cross-border business bridge to/from China in three principal areas: Strategy, Sourcing & Investment.

For more information, please contact: Barry van Wyk, barryvanwyk@thebeijingaxis.com

www.thebeijingaxis.com

➲ SUDAN_December: China will donate $23 million for infrastructure needs in eastern Sudan. China's donation was made in conjunction with a number of countries which pledged a total of $3.55 billion to develop this region, essential to Sudan's economy.

➲ Angola_November: Liaoning Huajin Tongda Chemicals, a Chinese manufacturer of industrial equipment, signed a framework agreement for a joint venture with Angola's Sonangol. The deal, reportedly valued at $2.1 billion, awaits approval from the governments of both sides.

➲ BOTSWANA_November: China signed an agreement of economic and technical cooperation with Botswana and extended a grant worth $6 million. The signing occurred during the visit of a Chinese delegation headed by China's Vice President Xi Jinping.

➲ MOZAMBIQUE_December: A 100 km road linking Mozambique's Gaza and Inhambane provinces was completed by China Henan International Cooperation Group,a project valued at $35 million.

➲ Zimbabwe_December: China announced an $8 million grant to construct schools and hospitals and to complete an agricultural training center in Zimbabwe. The funds, pledged for 2011, are part of a three year Chinese initiative to develop key sectors for Zimbabwe's development.

➲ SOUTH AFRICA_November: China's Yingli Solar signed a memorandum of understanding to team up with a local partner in South Africa to build a new manufacturing facility valued at $435 million.Construction of the facility will begin within a year.