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China's complex relationship with Africa

Tuesday, September 18 09:17:16

Malawians bill their country as the "Warm Heart of Africa" and pride themselves on a reputation for friendliness. But Jaffa Shaibu, a burly 32-year-old merchant in a clothes market in Salima, a dusty town near the shores of Lake Malawi, feels less than welcoming to the Chinese traders who have moved in over the past four years. "The way it looks, one day there will be a big fight with them," Shaibu said. "One day there will be blood." Echoing a grievance heard across Africa, Shaibu and his colleagues in this town of of 40,000 complain of Chinese businessmen with better access to cheap imports of clothes, shoes and electronics, and deeper pockets that allow them to reduce their margins.

That sentiment is part of a grass-roots backlash against Beijing's increasing diplomatic and commercial clout in Africa. In many ways, the relationship between the two has never been stronger. Bilateral trade has almost doubled over the past three years, to $166 billion in 2011 from $91 billion in 2009. In July, Chinese President Hu Jintao offered Africa $20 billion in cheap loans over the next three years. China, he said, would forever be a "good friend, a good partner and a good brother" to Africa. But a growing number of Africa's billion people are less enthusiastic.

Last November, four Chinese in rural South Africa were burnt alive in an arson attack on their home. In Zambia last month, miners in a dispute over pay crushed a Chinese supervisor to death with a coal truck. In Ghana, armed Chinese informal miners have clashed with gangs of local youths, triggering a government crackdown. In Angola a few weeks ago, 37 Chinese men were deported on suspicion of running a criminal gang that burnt its victims with gasoline before burying them alive, according to China's Xinhua state news agency. And from Senegal in the west to Kenya in the east, traders are up in arms about what they see as unfair competition from private Chinese merchants surfing into Africa on the back of a wave of big investments.

The backlash has reached parts of Malawi, a nation of 13 million people, where anti-Chinese protests in the northern town of Karonga in late June prompted the government to dust off a decades-old law that confines foreign retailers to big cities. So far, the government has not forced the issue. Salima's high street is a tatty strip of tarmac flanked by dusty sidewalks and 200 metres of shop-houses, including nine owned by Chinese traders. There, the end of July deadline to move on came and went without a flicker.

Fuxing Trading, Peng Heng Shop and the other Chinese outlets continue to offer their wares as before, feeding a belief the government will not act against anything even vaguely connected to Beijing. Chinese construction firms have just completed a huge hotel and conference centre in the capital Lilongwe and are busy building schools and upgrading the main road to Tanzania. "The government is slow-slow," said Noel Zenengeya, a portly 48-year-old Salima merchant in a dazzling Hawaiian shirt. "If they don't do anything, we will have to fight for it." The authorities acknowledge the bad blood and insist Chinese merchants - an estimated 140 businesses across the country - will be moved to the three biggest cities as stipulated by law. The Chinese embassy says it does not oppose the move. Ambassador Pan Hejun has appealed to Chinese businesses to move to designated areas "to respect principles guiding the development of China-Malawi relations."

At the same time, Malawian officials sense they can only go so far before annoying their giant benefactor. "It's a very big issue and politically sensitive because the Chinese have been very helpful to Malawi. It's becoming tricky how we treat their nationals," Salima District Commissioner Ali Phiri told Reuters. "But we anticipate a lot of conflict if they don't move."

As trade has soared almost 20-fold in the last decade, the basic nature of the exchange has not changed: raw African materials - oil, ore, timber - flow east, while manufactured goods flow west. Malawi's case is typical. It sent $46 million of tobacco, coffee, spices and other agricultural goods to China last year, and in return bought $112 million of textiles, machinery and high-tech goods. Even South Africa, far and away the continent's biggest and most industrialised economy, as well as a major coal and iron ore producer, faces an imbalance. In Beijing in July, President Jacob Zuma said the trade relationship was "unsustainable in the long term".

Faced with an official unemployment rate of 25 percent, South Africa's ruling ANC talks incessantly about the need to boost domestic industry. In particular it would like to see its minerals processed at home. But the problem runs deeper: parts of South Africa's manufacturing sector, nearly 20 percent of the economy, are in direct competition with China, and in many cases are losing the battle against a much cheaper producer.

According to a recent study by economists at Britain's University of East Anglia, South Africa lost 78,000 manufacturing jobs to Chinese imports between 2001 and 2010. Goods of Chinese origin accounted for about 18 percent of South Africa's imports of manufactured goods in 2010, up from 2 percent in 1995, the study said. Labour-intensive industries such as textiles, clothing, footwear and furniture, have been the hardest hit, with more than 40 percent of footwear and knitted fabrics purchased in South Africa coming from China. Chinese imports have also cut into South African exports to other African countries. "The economy hasn't been able to absorb the labour force, and of course the manufacturing sector, far from absorbing labour, is expelling labour," said Rhys Jenkins, one of the authors of the British study.

Like consumers around the globe, Africans have an insatiable appetite for cheap goods, and China supplies them like no other. Africa has enjoyed average economic growth of 5 percent in the last five years, and this year contains five of the 10 fastest-growing economies according to the International Monetary Fund: Sierra Leone, Niger, Angola, Liberia and Ghana. But disposable income levels remain very low, defining the way many Africans buy things. Hawkers selling individual cigarettes are a common sight at bus-stops throughout the continent; many people can only afford to buy one at a time. It's a similar story with clothes or shoes: where the cheap Chinese option beats out locally-produced goods irrespective of the quality. "In the past, I used to buy from the local market, but now with the prices in the Chinese shops, I buy from them," said Enifa Mbeleko, a 35-year-old Malawian mother of six who took a 50 km (31 mile) bus ride to shop for a blouse. "I've never had a problem with the quality."

Africa's growing power as a consumer market has registered 11,000 km away at the other end of the supply chain, where there's new recognition that the continent is one of the few bright spots in a gloomy world. In the eastern Chinese province of Henan, Shao Yali sits in her office at Kaifeng Tianyi Garments sketching out various commercial strategies on her computers. The euro zone crisis has hammered exports to Europe, the clothing factory's biggest market until last year, and she is worried about generating enough sales to keep the 100-employee operation running. Africa now accounts for 70 percent of revenue.

"The Africa market is extremely important to us," Shao said. "When orders for Europe dropped, we had to look for ways to push down prices and ship items to Africa." "We are doing all we can to boost orders from South Africa." She's not the only one. Services firms such as Asia Inspection, which runs supply chain audits and quality checks on Chinese manufacturers, are also busy cashing in on strong demand. Chief executive Sebastien Breteau said European business has declined but a new office in Nigeria, Africa's most populous nation, will help take up the slack. "Europe is flat to declining. We see Africa growing big time," Breteau said. "It's all over Africa, but especially in Nigeria. We believe in growth there.( C) Reuters