Africa’s prosperity increasingly depends on China. Given recent signs of a slowdown in the world’s largest economy, Africa’s short- and long-term outlooks seem precarious.
The latest sign arrived on October 23 when China cut two benchmark interest rates to spur growth. It was the sixth time since November that China’s central bank has lowered rates and came after a report revealed that its economy grew at the slowest pace in six years.
That’s very bad news for Africa, which has been growing ever more dependent on China, not only to buy its natural resources but also to upgrade its decaying roads, bridges and dams. In the first half of the year, Chinese investment in Africa plunged 84%.
China is the continent’s single biggest trading partner. That means that a slowing China translates into less demand for Africa’s vast resources and less investment in infrastructure, which will cause the continent’s ability to grow – and to produce better lives for its one billion people – to falter.
Africa is China’s source for fuel
Markets have been fretting about a slowdown in China for many months. Its economy grew just 6.9% in the third quarter, down from 7.4% in 2014 and the double-digit gains experienced for the much of the past two decades.
And to some, even that figure is optimistic, masking much weaker growth, such as the 4% drop in exports and 21% slump in imports in September.
Weaker growth means China won’t need nearly as much oil, gas, copper, iron ore and other resources that it has been gobbling up to fuel its breathtaking economic expansion. Africa has become the main source of that fuel, creating a symbiotic relationship that has benefited both parties.
Africa has all the resources – from coltan and cobalt to diamonds and gold – that China desperately needs to feed its industries and to satisfy domestic consumption and exports to profitable European and North American markets. Whenever we purchase computers, cellphones, blankets and flip-flops, we help Africa prosper.
It doesn’t end there. Africa also supplies China with tropical hardwoods, soybeans and maize grown on Chinese-leased farms, Ethiopian leather shoes and, illicitly, ivory from endangered African elephant tusks and horns from the dwindling stock of threatened black and white rhinoceroses.
China in turn sends cheap consumer goods back to Africa, poultry, some manufactured items, tourists and a variety of technologically advanced items. But the balance of trade tips relentlessly in Africa’s favor.
Overall total trade both ways between Africa and China amounted last year to more than $US200 billion, dwarfing the totals for Europe ($137 billion) and the US ($85 billion).
All that trade between China and Africa has made many countries and individuals richer, but it also has a flip side. According to the International Monetary Fund (IMF), a one percentage point decline in China’s domestic investment growth correlates to a 0.6 percentage point drop in export growth of sub-Saharan Africa countries – with even larger effects on the resource-rich places such as the Democratic Republic of Congo, Zambia and South Africa. So any slowdown in China has strong, even disturbing, repercussions.