Exclusive
G20 can be booster for African economy
By Hannah Ryder | chinawatch.cn | Updated: 2019-07-10 12:24

The G20 – of which China is a member - is one powerful group of countries. But there is one area that cries out for their greater action. Trade. Global trade has evolved significantly over the past 40 years in particular, as China has gradually evolved into the world’s manufacturing – and therefore trade - hub.

But the future of global trade is not China. It’s Africa. The African continent today has the same conditions China did 40 years ago as it began on its journey — a large, 1.2 billion strong population — many of whom are young and hungry for jobs, smallholder farmers trying to move up the value chain, and abundant land. Africans are also increasingly technology savvy and urban.

In addition, African governments are taking four huge steps to bring the future of global trade to the continent, just as China did. First, on all sides of the continent, in countries large and small — governments are creating industrial parks and special economic zones. Second, they are taking up loans and creating public private partnerships to upgrade their infrastructure — new roads, rail, airports, and ports — often “green” in order to avoid the same kinds of pollution problems that China has suffered. Third, they are competing fiercely to climb up the World Bank’s “Ease of Doing Business Index”, reducing their taxes and bureaucracy as foreign investors demand. And last but not least, African leaders have boldly come together to create the world’s largest Free Trade Area, the African Continental Free Trade Area (AfCFTA). This week, the agreement was finally signed by 54 of the African Union’s 55 members.

Yet, on the other hand, exclusive data released last week by my firm, Development Reimagined, reveals that the G20 is not yet complementing this with an enabling environment for African trade.

For instance, the 55 African countries together account for only 3 percent of the G20’s imports. Of this 3 percent total, 29 countries account for less than 1 percent each. The 29 include countries such as Rwanda and Senegal, who are investing millions to get ahead in trade and investment competitiveness. Even Ethiopia, the African country that Chinese factories tend to know best, only exports 2 percent of the overall 3 percent going to the G20. Indeed, it is countries with abundant natural resources, such as Nigeria and Angola, that dominate imports to the G20.

The result is that for every $1 of goods the G20 countries purchase from Africa, they sell and export $1.4 of goods back to African countries. Even Japan, the G20 host this year, exports more to 37 African countries than it imports from them.

However, this relationship is improving, albeit slowly and inconsistently. Back in 2000, the G20 sold 39 times more products to Africa than it received back from Africa. Now, the G20 sells 36 times more. Even Egypt — a relatively more developed, manufacturing country — has the continent’s largest trade deficit with the G20.

These patterns suggest that without further support from the outside — to complement the four African-led efforts I have outlined above — the vision will not become a reality. Trade is — by its very nature — a two­-way process. Given their economic influence, there is a very strong case for the G20 to do more to disrupt these patterns, and an even stronger case for China to lead this effort.

Why China? Since 2008, China has been Africa’s No 1 bilateral trade partner. However, like many other G20 countries, over 70 percent of African countries have trade deficits with China, and this affects investment prospects for African countries. In addition, in the context of the US­-China trade war, a G20 agenda to diversify imports makes a great deal of sense, and African countries can benefit. Indeed, China is already promoting exports from Africa to China. For instance, the first China Africa Trade Expo was recently held in Changsha, and China has also recently opened up the market for cut and frozen avocados from Kenya, beef from Namibia and Botswana, citrus fruit from South Africa, and more.

This can and should continue, but most importantly, if Africa is going to trade more and better, the world’s current manufacturing hub needs to shift to the future manufacturing hub. In other words, it is primarily the thousands of Chinese factories producing for the world’s consumer markets and the Chinese market that need to shift to African countries. China should therefore also focus on opening up markets for finished and value­-added products, as a means to support Africa to innovate, attract high-value investment and effective technology transfer.

But China doing this on its own will not be enough. The rest of the G20 also need to act with three complementary actions. First, the G20 should accelerate the landmark agreement made in Kenya in 2018 to reduce domestic agricultural subsidies in favor of poorer countries. This will help to generate incentives to improve agricultural yields, which will drive incomes up to invest in education and health — all necessary requirements for development. Second, the G20 should use their aid, other cooperation tools like training and marketing in innovative ways to create incentives to actively shift the highest value parts of global supply chains toward the African continent in a green and sustainable manner. And thirdly but crucially, the G20 should itself explore a G20­-wide Africa preferential trade agreement that recognizes the AfCFTA.

African countries are working hard to get a larger piece of the trade pie. It is in the world’s interest that they do, and China is getting on board. The question is how and when other large, powerful countries will also do the same. G20 — the time is now.

The author is CEO of Development Reimagined and a former policy and partnerships head for the United Nations Development Programme in China.

The author contributed this article to China Watch exclusively. The views expressed do not necessarily reflect those of China Watch.

All rights reserved. Copying or sharing of any content for other than personal use is prohibited without prior written permission.

The G20 – of which China is a member - is one powerful group of countries. But there is one area that cries out for their greater action. Trade. Global trade has evolved significantly over the past 40 years in particular, as China has gradually evolved into the world’s manufacturing – and therefore trade - hub.

But the future of global trade is not China. It’s Africa. The African continent today has the same conditions China did 40 years ago as it began on its journey — a large, 1.2 billion strong population — many of whom are young and hungry for jobs, smallholder farmers trying to move up the value chain, and abundant land. Africans are also increasingly technology savvy and urban.

In addition, African governments are taking four huge steps to bring the future of global trade to the continent, just as China did. First, on all sides of the continent, in countries large and small — governments are creating industrial parks and special economic zones. Second, they are taking up loans and creating public private partnerships to upgrade their infrastructure — new roads, rail, airports, and ports — often “green” in order to avoid the same kinds of pollution problems that China has suffered. Third, they are competing fiercely to climb up the World Bank’s “Ease of Doing Business Index”, reducing their taxes and bureaucracy as foreign investors demand. And last but not least, African leaders have boldly come together to create the world’s largest Free Trade Area, the African Continental Free Trade Area (AfCFTA). This week, the agreement was finally signed by 54 of the African Union’s 55 members.

Yet, on the other hand, exclusive data released last week by my firm, Development Reimagined, reveals that the G20 is not yet complementing this with an enabling environment for African trade.

For instance, the 55 African countries together account for only 3 percent of the G20’s imports. Of this 3 percent total, 29 countries account for less than 1 percent each. The 29 include countries such as Rwanda and Senegal, who are investing millions to get ahead in trade and investment competitiveness. Even Ethiopia, the African country that Chinese factories tend to know best, only exports 2 percent of the overall 3 percent going to the G20. Indeed, it is countries with abundant natural resources, such as Nigeria and Angola, that dominate imports to the G20.

The result is that for every $1 of goods the G20 countries purchase from Africa, they sell and export $1.4 of goods back to African countries. Even Japan, the G20 host this year, exports more to 37 African countries than it imports from them.

However, this relationship is improving, albeit slowly and inconsistently. Back in 2000, the G20 sold 39 times more products to Africa than it received back from Africa. Now, the G20 sells 36 times more. Even Egypt — a relatively more developed, manufacturing country — has the continent’s largest trade deficit with the G20.

These patterns suggest that without further support from the outside — to complement the four African-led efforts I have outlined above — the vision will not become a reality. Trade is — by its very nature — a two­-way process. Given their economic influence, there is a very strong case for the G20 to do more to disrupt these patterns, and an even stronger case for China to lead this effort.

Why China? Since 2008, China has been Africa’s No 1 bilateral trade partner. However, like many other G20 countries, over 70 percent of African countries have trade deficits with China, and this affects investment prospects for African countries. In addition, in the context of the US­-China trade war, a G20 agenda to diversify imports makes a great deal of sense, and African countries can benefit. Indeed, China is already promoting exports from Africa to China. For instance, the first China Africa Trade Expo was recently held in Changsha, and China has also recently opened up the market for cut and frozen avocados from Kenya, beef from Namibia and Botswana, citrus fruit from South Africa, and more.

This can and should continue, but most importantly, if Africa is going to trade more and better, the world’s current manufacturing hub needs to shift to the future manufacturing hub. In other words, it is primarily the thousands of Chinese factories producing for the world’s consumer markets and the Chinese market that need to shift to African countries. China should therefore also focus on opening up markets for finished and value­-added products, as a means to support Africa to innovate, attract high-value investment and effective technology transfer.

But China doing this on its own will not be enough. The rest of the G20 also need to act with three complementary actions. First, the G20 should accelerate the landmark agreement made in Kenya in 2018 to reduce domestic agricultural subsidies in favor of poorer countries. This will help to generate incentives to improve agricultural yields, which will drive incomes up to invest in education and health — all necessary requirements for development. Second, the G20 should use their aid, other cooperation tools like training and marketing in innovative ways to create incentives to actively shift the highest value parts of global supply chains toward the African continent in a green and sustainable manner. And thirdly but crucially, the G20 should itself explore a G20­-wide Africa preferential trade agreement that recognizes the AfCFTA.

African countries are working hard to get a larger piece of the trade pie. It is in the world’s interest that they do, and China is getting on board. The question is how and when other large, powerful countries will also do the same. G20 — the time is now.

The author is CEO of Development Reimagined and a former policy and partnerships head for the United Nations Development Programme in China.

The author contributed this article to China Watch exclusively. The views expressed do not necessarily reflect those of China Watch.

All rights reserved. Copying or sharing of any content for other than personal use is prohibited without prior written permission.