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David Pilling Correspondent
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 $200 billion.

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 percent 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.”

Chinese individuals, and Chinese companies such as Haujian, he says, can have a potentially beneficial impact.

One of Africa’s attractions is that it is largely uncontested territory. “Chinese companies can go and cut their teeth at (low) prices, because the top tier of Western companies is not there. It’s an ideal training ground.”

Mr French remembers 18 months ago on a drive into Kampala from Uganda’s Entebbe airport, seeing billboard after billboard for Chinese goods: “Mattresses, fridges, washer-driers, roof tiles — you name it.”

Cheap Chinese products, such as textiles, have often been blamed for wiping out whole swaths of African industry. But Mr French argues that the death of inefficient industries selling overpriced goods to unfortunate African consumers is not necessarily to be mourned.

The trick is to harness the new opportunities provided by Chinese interest in the continent, he says. If governments respond with the right incentives, as Ethiopia has tried to do, by encouraging manufacturers to invest locally, transfer technology and employ local staff, China can be more a boon than a threat.

Ha-Joon Chang, a development economist at Cambridge university, says that even though the Chinese state has been every bit as exploitative as the West, Beijing’s growing presence in Africa has been largely beneficial.

“The most important thing is that there’s competition,” he says. “For African countries, there used to be only one bank in town. It was called the World Bank.” Ethiopia has found Chinese finance “smoother and faster”, he adds. African nations, says Mr Chang, must wean themselves off simply “digging things out of the ground”.

Instead, they need to move to an early industrial phase in the mould of now-wealthy South Korea, whose GDP per capita in 1960 was half that of Ghana’s. One of South Korea’s first successful industrial experiments was wig-making, he says, a labour-intensive operation that required workers to attach individual strands of hair.

Other countries such as Rwanda, Mauritius and Ghana, have set off in the right direction, says Mr Chang. On the other hand, “Zambia is still digging copper . . . and Angola doesn’t appear to be doing much to prepare for the future.”

The next decade or so, he predicts, will see a sharp divergence between countries with good policies and those without. China’s interest in Africa, albeit tempered by its current slowdown, means that opportunity will continue to knock. But it will not knock equally. — FT.