|Type of paper:||Research paper|
Why Africa Lagged Behind in Manufacturing
According to Page (2014), there are many reasons why Africa has continued to lag far behind in industrial manufacturing. One of the reasons for this situation is lack of diversification and sophistication in its economy. Africa concentrates it export structures on agriculture and natural minerals which are both primary commodities. Global data suggest that diversifying production and export structures brings higher per capita incomes. Also, production and export of more sophisticated products are associated with faster economic growth in high-income nations. Therefore, industrial growth has been slow in Africa because it makes too little of what it needs for economic growth.
Moreover, African countries over depend on agriculture for employment. Unlike manufacturing, agriculture does very little to enhance structural change because most of the produce is consumed or exported without much value addition. Agriculture is, thus a low value-added sector with a limited flow in labor. The continent's average labor productivity in agriculture is barely more than a quarter of manufacturing.
Also, Africa lacks the three crucial forces that push industrial explosion: reducing the cost of transport and communication, ability to offer competitive prices and quality, economies of agglomeration. Africa still has limited communication and transport network. Therefore, the cost of trade logistics continues to rise in the continent as other parts of the world take advantage of their falling prices. Firm competitive capabilities remain low in Africa due to lack of non-traditional exports, manufacturing foreign direct investment, and export dynamism.
Lastly, Africa has lagged behind in ease of doing business because of its bad investment climate. Africa is not an attractive investment destination because of the enormous indirect costs involved in entering its market. Hence, despite its relatively lower the rental and wage rates, multinational manufacturers find it difficult to begin business in the region.
Africa's Huge Debt Accumulation in the 1980s and Early 1990sIn the 1980s and 1990, Africa accumulated alarming debts. The sudden rise debt over the period has been associated with changes in borrowing composition, unprecedented depreciations increasing the value of debts, inflation, and series of civil wars. First, international borrowing composition expanded, allowing countries to access loans from development banks and multilateral. Earlier on, African countries could only borrow from the rich-world export credit agencies. The diversification of lending sources tempted Africa to take more loans.
Secondly, the two decades were marked with rampant civil strife which disabled GDP in most parts of the continent. For instance, the effects of the Eritrea war hampered domestic production in Ethiopia, forcing to the increase its national debt ration by more than 100 percent (Thomas & Giugale, 2015). Similarly, countries such as Mali, Uganda, Central African Republic, Chad, etc. were characterized with successive coup d' etats, which made it necessary to increase borrowing to meet national budgets as GDPs reduced. Civil strife also led to sudden depreciation and recession. Hence, the international exchange rates rose, increasing the value of existing debts.
Also, as the international community began to waiver export credit loans for poor African countries, they took advantage of lighter debt burdens to take new loans from the alternative sources -multilateral and development banks. By 1990s, most of the debts taken in the previous decade generated payment streams. Therefore, most of the countries borrowed further from the multilateral to service the older loans. As a result, their debt-to-GDP ratios rose exponentially.
The Three Phases of China-Africa Relationship
There have been three phases of China engagement with Africa. The relationship between these two economic blocks dates back to 1960s when African nations had just begun to gain political independence from western colonialists, and China's GDP was less than 25 percent of combined GDP of sub-Saharan African countries. Since then, China has been an alternative trade and development partner for Africa besides Europe and USA. Notably, China relates to Africa as a multilateral partner rather than an imperial power.
The first phase of China-Africa relationship began in the 1950s with the formation of the non-aligned movement in Bandung, Indonesia. African countries were represented in the anti-colonialism conference by Ghana and the Central African Republic. Having been removed from the United Nations, China sought to use the solidarity as an opportunity to prove its commitment to international cooperation and development. The other forces that pushed China into a friendly relationship with Africa were: developmental challenges in Africa; Western consideration of China's Cultural Revolution as amoral, and politics of Cold War.
One of the most significant outcomes of the China-Africa relationship is the TAZARA Railway, which connects the cost of Tanzanian to Zambia. The project was proposed by presidents Julius Nyerere and Kenneth Kaunda to enable Zambia export copper without having to go through the European-dominated South-African ports. Evidently, the political situations that surrounded the financing of the project indicate that initially African leaders did not readily welcome China-Africa cooperation. First, there were fears that the countries working with China would be considered aligned to communist ideals. Hence, despite China's commitment to finance the project through a long-term interest-free loan, the Tanzanian and Zambian presidents had to offer the opportunity to willing Western powers first. It was until 1967 when all the western countries expected to be interested in the project declined to finance it that the countries accepted China's help. Notably, China did not fund the project to gain political dominance or economic returns in the region, but to tame the influence of imperialists-USSR and USA -in East Africa.
The second phase of China-Africa relationship was characterized by the arrival of industrial businesspeople from Taiwan and Hong Kong. It began in the 1970s when most African countries needed an economic boost from manufacturing of clothing and textile. At the same time, companies in the non-mainland China needed to expand to new markets with cheaper labor (Akyeampong & Xu, 2014). The Apartheid colonialists, for example, sought the cooperation of these Chinese to overcome economic difficulties caused by sanctions on South Africa. By 1996, more than a half of all factories in South Africa belonged to immigrant Taiwanese. There was a significant industrial boost in the economy of South Africa until the colonial government stopped its support for the Taiwanese manufacturers, many of them go back home. As a result, Chinese from the Mainland China came in to replace them. However, the Chinese investors extorted African economies in the second phase of the China-Africa relationship because they violated tax policies and business competition rules.
The third phase of the China-Africa relationship began towards the end of the 20th Century when the Chinese government began to fund infrastructural projects in Africa through bilateral relations. Notably, the Chinese government sent its citizens to work on most of the projects that it financed through loans. Some of these workers would settle in Africa and bring over their family members to join them. This phase has disadvantaged African, who, are mostly unskilled and poor as they cannot compete with the rich and highly-skilled Chinese for the limited opportunities in the developing countries. For instance, many Chinese who came to work in the gold mines of Ghana settled in the country and had been having endless battles with the locals over the rights to exploit the resources.
Three Different "Faces" of China
China has presented three different faces in its relationship with Africa. Africa has had to deal with China as a global power, a major trading partner, and as a developing nation, all at the same time. As a global superpower, China is represented in Africa by its government, which holds bilateral talks and gives loans to finance projects in different parts of Africa. As a trading partner, China is represented by its public and privately owned companies operating in Africa. Lastly, as a developing nation, China is represented by its individual citizens who go to Africa to seek opportunities for work and business.
Each of the three Chinese faces has its agenda and interests in Africa. China as a global superpower is in Africa to influence the region and limit the political control of its rivals such as the USA. The interest of China as a trading partner is to reserve new protected market for its manufactured commodities and engineering services. As a developing nation, China is in Africa to create employment opportunities for its citizens and obtain raw materials as well as cheap labor for its manufacturing industries. Many Chinese multinational companies have subsidiaries in Africa.
Akyeampong, E., & Xu, L. (2014).The Three Phases/Faces of China in Independent Africa. In The Oxford Handbook of Africa and Economics.
Page, J. (2015). Manufacturing, Natural Resources, and Industrialization. The Oxford Handbook of Africa and Economics: Volume 2: Policies and Practices.
Thomas, M. R., & Giugale, M. M. (2015). African debt and debt relief. The Oxford Handbook of Africa and Economics, 2, 186-203.
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