African nations that have been supplying oil, copper, iron ore and bauxite to feed China’s supercharged growth have suddenly woken from a dream.
China is slowing and trying to shift to a consumer-driven model that will inevitably depend less on African raw materials, and commodity prices are tumbling as a result. Further, some international investors, spooked by the prospect of rising US interest rates, have lost their appetite for emerging markets.
“The past decade has been very benign for Africa,” says Paul Collier, an Oxford economist, “but that’s over.” The period began, he says, with debt relief, before “commodity prices went through the roof”. In the 10 years to 2014, trade between Africa and China increased 20-fold to more than $200bn.
The combination of low debt and high revenue allowed many African governments to tap capital markets for the first time. In some cases, that funded the discovery of more reserves of minerals and hydrocarbons.
“This was the biggest opportunity Africa ever had,” says Mr Collier, “but it’s broadly been a missed opportunity.”
Countries that did not prepare in the good times by diversifying or building strong economic buffers are now likely to suffer a Chinese hangover.
Yet that does not mean the Chinese-African relationship has ended — far from it. For a start, China’s economy may be slowing but, barring a catastrophe, it is unlikely to grind to a halt. Even at 5 per cent growth, China would add an Indian-sized economy to its already massive bulk in four years, implying a steady, albeit more moderate, demand for African raw materials.
Second, the China-Africa relationship goes much deeper than extracting raw materials. “Rwanda and Ethiopia are not commodity exporters,” says Deborah Bräutigam, an expert on China-Africa relations at Johns Hopkins School of Advanced International Studies. Those two economies have close trade and investment ties with China, and have racked up years of impressive growth. “So something else is going on.”
In the case of Ethiopia, the relationship has been built on trade, and investment in infrastructure and manufacturing, says Arkebe Oqubay, architect of the country’s industrial policy. “I don’t think Chinese investment in Africa is primarily driven by resources.”
More than any other country in Africa, Ethiopia has made concerted efforts to build an industrial base.
“While Africa cannot copy Chinese stages of development, it may be able to learn more than from Europe,” Xu Weizhong of the Institute of African Studies told a Chatham House conference this year. “Ethiopia, for example, has studied Asian dragons and tigers, which have influenced its policies.”
Chinese companies, many of them private, have been among the most enthusiastic investors. In the leather industry, Huajian, one of the world’s biggest shoe manufacturers, employs 4,000 workers in an industrial park outside Addis Ababa. Its experience has been largely positive and it plans to increase its workforce to 40,000.
Howard French, an academic and author of China’s Second Continent, says that rising labour costs at home and the Chinese public’s growing awareness of environmental damage is driving some lower-end manufacturing out of China. These push factors, says Mr French, make Africa an interesting offshore destination. “It’s already a big deal, and potentially it’s a very big deal.”