Monday, July 1, 2013

Obama, China, and Africa: Manufacturing

Chinese factory in Tanzania
So far, President Obama's visit to Africa has produced no comments as sensational as the "new colonialist" remarks directed at China by former Secretary of State Hillary Clinton when she visited Senegal and Zambia in previous years.

Yet during a town hall with young African leaders, the President invoked a similar sentiment in his remark that "I want to make sure that as countries come to Africa, that it’s benefiting Africans. ... If there’s going to be manufacturing taking place of raw materials, locate some of those plants here in Africa."

Well ... I wish whoever prepped him for this trip had at least tried to get an accurate picture. Two chapters of my book cover China's many manufacturing investments across Africa. I've since followed up with fieldwork on Chinese factories in the (raw material) leather processing sector in Ethiopia and several articles about the special economic zones -- focused on manufacturing -- being built by Chinese companies in Africa.

A recent guest post by SAIS student Yuan Li on this blog provides another example. In South Africa, the country where President Obama made this comment, the China Africa Development Fund has seven projects: two are in mining, and five are in manufacturing.

Chinese textile factory in Tanzania. Photos: D. Brautigam
The Chinese state that as of the end of 2011, 15.6% of their Africa investment is in manufacturing and 30.6% in mining, with finance (purchase of 20% of Standard Bank) at 19.5% and construction at 16.4%.*   From what I can see, there is far more manufacturing investment from China than from the United States. This includes raw materials processing: oil refineries in Chad and Niger, copper smelters in Zambia. According to the US Bureau of Economic Analysis, the US total stock of investment in Africa as of end-2011 was $56.6 billion. Mining made up $33.3 billion (59%) and manufacturing only $3.6 billion (six percent).

Yes, despite concerns about costs and competitiveness, manufacturing is going to be vital for Africa's future employmet generation. So, President Obama: what is the US going to do to catch up to China here?

* Chinese Academy of International Trade and Economic Cooperation, "China-Africa Trade and Economic Relationship Annual Report 2012." I don't think this is available online yet. I was given a copy last month by the Chinese embassy in Lusaka.


Anonymous said...

Obama also said "The US does not need energy from Africa". I was not aware that the US is now self sufficient in oil. So apparently, the US certainly needs oil from the middle east but not from sub-Sahara Africa. Saudi Arabia is the biggest customer of the US and Saudi Arabia does care much for elections and human rights, and many of it's citizens hate Americans. Recent oil discoveries in sub-Sahara has given the US a golden opportunity to be less dependent on oil from the middle east but the Obama administration does not seem eager to follow China's lead on doing more business in Africa. If Obama is so worried about China practicing fair business with Africa then competition from the US will definitely force China to be more fare. Countries like Angola have made it clear they welcome other countries doing business with them. African cities are growing, the middle class is growing and Sky scrappers are being built but mostly with Chinese construction companies. The Obama administration seems to only see Africa as a charity case that will be taken advantage of by the "so-called" untrustworthy Chinese. Obama seems to not want to view sub-Sahara Africa as an equal business partner where both sides would greatly benefit. Look at all of the construction jobs for Americans that can be created when African cities continue to grow, modernize and expand. The US construction companies can offer deals like using 80% local labor which would force China to try to beat that. Competition will always force any organization to be more fare. China had been fare some extent but becoming even more fare because of competition from Brazil, Portugal and India, but not from the US. In these growing African cities very rarely will you see an American vehicle. Most of Africa's cars are imported from Asian and European countries. So instead those countries getting 50% of the African market and the US getting the other 50% it's Asian and Europe getting close to 100% of the market. Look at all those new potential customers for Detroit. But Obama administration and Americans in general have such a negative perception of Africa that they cannot comprehend doing business that will greatly benefit both sides. So if Obama thinks the US is now self sufficient in oil and gas, then why are we still importing so much oil per day from Saudi Arabia and the rest of the world?

Harald Buchmann said...

Wonderful! I just wish, once again, I could force-feed your articles to every Western journalist. Thank you for keeping your voice up.

Anonymous said...

I meant to say the United States is Saudi Arabia's biggest customer. And I want to also note that China is now Angola biggest customer. It seems like China prefers oil from Sub-Saharan Africa and the Obama administration prefers middle eastern oil. Considering all the problems the US has had with the middle east you would think it would be the other way around.

Anonymous said...

The western media is not interested in the truth, they are just interested in what they want to print. The US does business with Saudi Arabia and that country does not care much for human rights and does not care much for elections but the US has no problem doing business with them. The US president has no problem visiting the dictator of Saudi Arabia but will use democracy as the reason for not visiting certain African countries. Why Obama did not visit Nigeria, Ethiopia, Angola or Kenya. Those countries are important allies.

Anonymous said...

In the not-too-distant past, a visit to the African continent by the American President would have stirred everyone one and elicited endless chatter about it on the continent. Now its almost the opposite, few people, with the exception of a handful of journalists and a handful of policy makers actually care(d) about Obama's visit to Africa. Even the countries he didn't visit, didn't really miss him that much. The truth is, many African countries prefer to trade with China, warts and all, which regards them as an equal partner. Many have simply had it with the the paternalistic, moralistic, self-righteous tone of America particularly, and Western donors/partners in general. China has its own issues, lots of them -- crowding out local jobs and industries, carting away raw materials, are only a few of those. The one thing many Africans appreciate is that with China there are no pretences, what you see is what you get. You know China wants your resources, but in exchange, it will build hospitals, schools, railway lines and more recently, invest in manufacturing firms which the Americans et al JUST WON'T DO

Zen said...

So basically Xijing Ping earlier visit brings 1 Billion loans to Nigeria whereas Obama visit ends up with "We don't need energy from Africa" rhetoric?

Where China goes these days, both respective countries leaders strike a deal (recent China and Russia deal with Oil, Currency swap with France, UK), free trade agreement with Switzerland.

Obama visit? it's like Kate Middleton going for photoshoot days in each country.

Chike said...

Hi Deborah,

Please are you following events like the one week state visit of the Nigerian President to China (& resulting investment pledges: e.g:

Many thanks.