Editor’s Note-Entering Africa

Editor’s Note-Entering Africa

Some notes on China's new economic frontier.

It was six years ago this month that Twin Cities Business introduced regularly recurring coverage of the international business activities of Minnesota companies, most recently in our “Going Global” department. In that time, no country has been mentioned more often in our coverage than China, no continent less often than Africa.

In this issue, “Going Global” includes an interview with St. Louis Park tax attorney Henry Ongeri, the founder of the Pan-African Business Alliance, who laments the tendency of U.S. companies to overlook—for reasons you can begin to read about on page 144—opportunities to do business in Africa. Those opportunities have not been overlooked by business operators in other nations, especially not in China.

I have been reading about Chinese involvement in Africa for the past several weeks, ever since learning that Steven Leuthold, one of Minnesota’s most celebrated investment advisors, placed 1 percent of his personal investment portfolio in a T. Rowe Price Africa & Middle East Fund (TRAMX). I’d recommend Africa in China’s Global Strategy, essays edited by Marcel Kitissou, who teaches at Cornell University’s Institute for African Development; Africa’s Silk Road, by Harry Broadman, regional vice president for Africa at the World Bank; and China in Africa, by Chris Alden of the Department of International Relations at the London School of Economics.

We tend to view Africa’s 54 countries and 740 million people through a lens of poverty, instability, disease, illiteracy, and corruption. From 1996 through 2005, however, 19 African nations have averaged economic growth of more than 4.5 percent, five of them more than 7.5 percent. Chinese investors have discovered a continent offering untapped natural resources, new markets for consumer goods, reliable diplomatic partners, and—astoundingly—labor that can be purchased more cheaply than on the Chinese mainland.

 

Chinese businesses have been on a shopping spree in Africa since the mid-1990s. In Zambia and Gabon, copper mines, smelters, and iron ore mines that had been idle for a generation are operating under Chinese ownership. Chinese firms have invested in logging in Liberia, cotton plantations in Tanzania, textile manufacturing in Kenya, and telecommunications in Djibouti and Namibia.

Energy resources are the most important focus of China’s involvement. Thirty-one percent of all of China’s oil requirements are sourced from Africa, and that will increase with a purchase of significant shares of Nigeria’s delta region. Angola has become China’s largest supplier of oil, having surpassed Saudi Arabia in 2006. After buying a 40 percent share of Sudan’s Greater Nile Petroleum Corporation, China’s largest oil company demonstrated an ability to manage petroleum extraction operations to international standards. Chinese investors have also bought into Algeria’s natural gas fields.

The Chinese are not merely extractors from Africa; they are also builders—of roads, railways, stadiums in Sierra Leone and the Central African Republic, a building housing Uganda’s parliament—and traders. By mid-2006, more than 800 Chinese companies were doing business in 49 African countries, and 480 were involved in joint ventures with African firms. Total trade between China and Africa increased from approximately $10 billion in 2000 to more than $50 billion in 2006. In 10 years, Chinese trade with Africa has grown tenfold. Those figures do not include large illegal exports from Africa of timber, diamonds, or products made from endangered wildlife.

Do you wish you knew more? So should many of your peers. Laudably, the Minnesota Trade Office has a full-time trade representative assigned to research and facilitate exports by Minnesota companies into Africa, and in late March, Governor Tim Pawlenty will lead a trade mission to South Africa.

More could be done. It is not too late, even in a season of budget shortfalls, for the governor and legislature to expand the trade office by 8 to 10 people, restoring it to the size it was when Jesse Ventura took office. For a continent the size of Africa, two trade representatives would not be excessive.

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