Increased trade competition in Africa from its BRICS peers

Chinese contractors are the most successful in winning contracts and hence, the most prevalent on the continent; Chinese companies conclude new deals in Africa on a weekly basis; and bilateral trade is expected to have exceeded $150 billion in 2011. China is clearly in the vanguard in Africa, yet increasing competition is coming from its BRICS peers (Brazil, Russia, India and South Africa) for trade and deals within Africa. Although the other BRICS are in China's shadow in terms of the extent of trade and investment in Africa (in 2010, for example, China alone accounted for 64 percent of total BRICS trade with Africa), each of the BRICS is making its own particular mark in Africa.

Brazil's multinational companies have mostly been involved in construction, upstream exploration and energy production in Africa. Brazilian companies have a comparative advantage in Lusophone countries, namely Angola and Mozambique, although oil and gas giant Petrobras and mining giant Vale are active in a range of countries on the continent and both are planning substantial new investments in the coming years.

Russian firms in Africa are largely focused on energy and mineral resource acquisitions, led by giants such as Norilsk Nickel (the world's largest nickel producer); Alrosa (which has diamond interests in Angola, Namibia, and the DRC); Severstal (which undertook a $2.5 billion iron ore mining project in Liberia); and state-owned oil and gas major Gazprom (which has sought interests in Namibia's gas fields, Tanzanian offshore blocks, and West African deep-water exploration).

India is a vital and more versatile partner (compared to Brazil and Russia) for Africa, sharing close cultural links, especially with East Africa. Bilateral trade is expected to have exceeded $50 billion in 2011, and India has already signed duty free trade deals with 34 African countries. Indian companies (which, in contrast to China, are mostly private) have created a particular niche in the telecom, pharmaceutical, hospitality, automotive and banking sectors.

South Africa has a comparative advantage in Africa in the form of a complimentary economic structure and geographic proximity, and it is the largest emerging investor of FDI in Africa, making around $2.6 billion in investments per year, nearly double that of China. Telecommunications major MTN has successfully broken into the West African market, and financial services group Standard Bank as well as multinational brewer SAB Miller, logistics major Imperial Holdings and construction and engineering firm Aveng all operate in various African countries. In addition, South African miners such as Anglo American and De Beers operate mines in 11 African countries. 

China is a leading player in engaging Africa for trade and investment, but the rest of the BRICS all intend on making their own presence felt.

The ChinAfrica Econometer is produced by The Beijing Axis, a cross-border business bridge to/from China in four principal areas: Commodities, Capital, Procurement, & Strategy.

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

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