AFRICA-CHINA TRADE AND THE NEW FOCUS ON AGRICULTURE (FOOD)

Hello there,Grab a seat and let’s have a close discussion on Africa-China Trade and the new focus on agriculture. It going to be a worthy long read, so grab a glass of chill drink as well.

Okay! Having done that, let’s begin.

China has been Africa’s largest trading partner for the last 14years. The Chinese have been both importing African natural resources and investing in huge infrastructure projects as part of the Belt and Road Investment program (BRI), thus strengthening China’s ties with Africa.

But lately, the focus of African-Chinese trade relations has shifted to agriculture. The volume of trade in agricultural products between China and Africa has significantly increased. In just two months of 2023, Shanghai ports reportedly handled more than 40,000tons of African food products worth more than $100 million. In this article, I’ll walk you through a closer look at the change of focus; discuss its reasons and benefits for Africa.

Why is China turning its attention to African Agriculture?

China didn’t just suddenly look at the African agricultural sector and decided to chip in. For years, Chinese investments have been flowing to this part of the continent’s economy. More than $415 million have been invested in 115 projects in Africa since year 2000; Agricultural trade increased to $6.92 billion in 2018.

However, this is just a fraction of what China is planning to reach. During the 2021 Forum on China-Africa Cooperation (FOCAC) in Dakar, President Xi Jinping announced specific measures to help Africa-China food trade hit $300 billion by 2025. At the same time, China’s investments in infrastructure projects in Africa decreased by 55%. So, what’s with the shift? As is often the case, there are several reasons for such a significant change in economic interests.I

n the last 20years, African nations took enormous loans from China to build roads and railways suggested by the BRI initiative. Since 2000, China has loaned $143 billion to African nations (from 2000 to 2017), thereby becoming the continent’s largest bilateral creditor/lender.

Recently, a few countries, including Zambia, Niger, Chad and Egypt, have been unable to take new loans, and some of the infrastructure projects have been postponed or cancelled. So, infrastructure projects are no longer considered desirable by China, and Chinese foreign investments have gone to less risky areas with higher profits (Agriculture).

Another reason why China has been willing to switch to agricultural products is to fix its worsening image. China was repeatedly accused of stripping Africa its natural resources and creating an unhealthy trade balance by mostly importing crude oil, copper, cobalt, and iron ore. To counter these accusations, the Chinese have said they were very eager to start importing avocados, soybeans, and sesame seeds.

The last but arguably the most important reason for Chinese interest in African crops is China’s enormous population and its relative lack of arable land suitable for cultivation, which has made the country the biggest agricultural importer in the world (surpassing both the European Union (EU) and the United States in 2019 with imports totaling $133.1 billion).

What are the benefits for Africa?

Although about 35% of Africa’s GDP comes from agriculture, the sector is severely underdeveloped. The continent holds about 60% of the world’s uncultivated arable land in the Sub-Saharan region (Central Africa, East Africa, Southern Africa, and West Africa) but still contributes only 10% to the global agricultural output. Africa’s agricultural sector is plagued by low productivity, under-investment, and other problems that limit its ability to become one of the world’s biggest food exporters.

Moreover, the African agricultural sector consists mainly of smallholder farmers who cannot really access big international markets such as China. In 2018, it was estimated that Africa required about $45 billion of investments per year to bring agriculture to its full potential, including scaling smaller businesses. With all the inflation and current economic instability, the sum has probably doubled, if not tripled.

China, alone, cannot provide this level of financial investment, but also sends its scientists and professionals to upgrade agricultural practices and introduce the most advanced farming methods. Thanks to the joint work of Chinese scientists and African farmers, 10 African countries have been successfully growing drought-resistant hybrids of millet since 2007 (We’ll prepare a separate article for this). Notwithstanding, even if at some point China withdraws financial support, knowledge will stay.Additional China movement to boost Africa-China tradeIn 2021, on the same Forum in Dakar that we’ve mentioned above, President Xi promised to open “green lanes” for African agricultural products. And he actually did. Since then, China has allowed access for 25 kinds of food and agricultural products to its market, including avocados, soybean, sesame seeds, chili peppers, cashews, and spices.

Beijing has implemented zero-tariffs for 98% of products coming from more than a dozen countries across Africa. The “green lanes” also imply faster inspection and shorter quarantine.Just recently, Wu Peng, Director General of the Chinese Foreign Ministry’s African Affairs Department, has tweeted that high quality fruit from Africa is gaining more and more recognition in the Chinese market. The commitment to open the Chinese market for African products has led to an 18.23% year-on-year increase in African exports.

Africa’s key exports to China

What exactly is China buying from African countries? The biggest portion of its imports consists of various fruits, nuts, sesame, and soybeans. To illustrate the importance of free access to the Chinese market, let’s take a look at some stats.Within three months of 2022, Kenya shipped to China 1,700tons of avocados and earned $55 million. In 2023, the country expects to supply 20,000tons of the fruit to the Chinese market.

African countries produce about 65% of the world’s sesame and they now account for 90% of Chinese import of the seed. Cashew imports have soared from $1.4 million in 2019 to $10.7 million in 2022. Africa is now also the second-largest exporter of apples to China after New Zealand.

In conclusion, the recent progress in Africa-China relations has shown that both countries can benefit from the agricultural investment projects and free trade. Cooperation in the agricultural sector should have an overall positive impact on the further development of African continent’s economy.

However, if we take into account the not so transparent trade in natural resources and projects that has left some African countries indebted to China, governments and agricultural organizations should keep a close eye on Chinese involvement in African agriculture.

Thank you for staying through to the end.I love you and do have a productive week.

Happy New Week!

Yours Sincerely,

Daniel, Jacob A.

CEO, Aretecom Ltd.