[Marxism] African Economies, and Hopes for New Era, Are Shaken by China

Louis Proyect lnp3 at panix.com
Tue Jan 26 09:33:07 MST 2016

NY Times, Jan. 26 2016
African Economies, and Hopes for New Era, Are Shaken by China

JOHANNESBURG — Years of rapid economic growth across sub-Saharan Africa 
fueled hopes of a prosperous new era. To many, the world’s poorest 
continent was finally emerging, with economies that were no longer 
dependent on the fickle global demand for Africa’s raw resources.

But as China’s economy slows and its once seemingly insatiable hunger 
for Africa’s commodities wanes, many African economies are tumbling, 

Since the start of this year, the outlook across the continent has grown 
grimmer, especially in its two biggest economies, Nigeria and South 
Africa. Their currencies fell to record lows this month as China, 
Africa’s biggest trading partner, announced that imports from Africa 
plummeted nearly 40 percent in 2015.

“We can see what drove the growth in Africa when demand goes away,” said 
Greg Mills, the director of the Brenthurst Foundation, a 
Johannesburg-based economic research group. “Well, demand has gone away, 
and it’s not pretty.”

The International Monetary Fund has in recent months sharply cut its 
projections for the continent. Credit rating agencies have downgraded or 
lowered their outlook on commodity exporters like Angola, Ghana, 
Mozambique and Zambia, which were the darlings of international 
investors until just over a year ago.

Many economists expect South Africa, the continent’s most advanced and 
diversified economy, to slide into a recession this year, a projection 
disputed by the government. As Africa’s biggest exporter of iron ore to 
China, South Africa is suffering from a slump in mining, as well as in 
other sectors like manufacturing and agriculture.

Like the currencies of many commodity-exporting nations, South Africa’s 
rand has declined sharply in recent months because of the worldwide fall 
in prices of raw materials and because of poor government policies. The 
weak rand will make it more painful for South Africa, which is 
experiencing the worst drought in a generation and is usually an 
exporter of agricultural products, to import corn, the nation’s staple.

Higher food prices could pose a challenge to the government of the 
nation’s president, Jacob Zuma, who is confronting widening public anger 
over rising income inequality and whose party, the African National 
Congress, is expected to face serious challenges in municipal elections 
this year.

Nigeria, Africa’s biggest economy and oil producer, is reeling from the 
crash in crude prices, at the same time President Muhammadu Buhari tries 
to deal with Boko Haram, the Islamic extremist group that has long 
terrorized the nation. With oil accounting for 80 percent of government 
revenue, the government may also lack the resources to quell potential 
unrest in the Niger Delta, the source of the country’s oil.

Nigeria’s currency, the naira, collapsed to record lows this month after 
Nigeria’s central bank placed restrictions on the sale of American 
dollars to protect its shrinking foreign reserves. The currency fell to 
about 300 naira to the dollar in Nigeria’s black market, down from about 
240 early last month.

Weakening currencies will make it harder for Nigeria — and many other 
African governments — to repay China for loans used to build large 
infrastructure projects. The tumbling naira and China’s downturn are 
also reverberating across private businesses, large and small.

Happiness Awonegbe, a businessman in Lagos, Nigeria, whose companies 
import paper, tires and other goods from China, said the restrictions on 
the dollar had made it difficult for him to place orders with Chinese 
suppliers. When he can place an order, his Chinese suppliers now take 50 
days to fill it instead of 30, apparently because of reductions in their 
work force, Mr. Awonegbe said.

“We are feeling so much this spillover effect,” said Mr. Awonegbe, who 
employs 50 people. “What happens in China affects Nigeria.”

As the slumping economies have underscored the continent’s growing 
vulnerability to changes in China, they have quieted much of the heady 
talk of “Africa rising,” a catchphrase that symbolized the continent’s 
fortunes. Growing consumer demand and an emerging middle class, while 
real in many African nations, are insufficient to offset a fall in the 
continent’s main driver of growth, which remains commodities.

But experts also see bright spots on the map. While previously 
high-flying commodity exporters, like Angola and Zambia, have been hit 
hardest by China’s slowdown, other countries are showing greater resilience.

“The ‘Africa rising’ narrative wasn’t true, but neither is the 
diametrically opposed argument that Africa is no longer rising,” said 
Simon Freemantle, a senior political economist at Standard Bank, a South 
African bank. “The truth is obviously in between.”

“What we’re going to see going forward is far more fragmentation and 
divergence across the continent,” Mr. Freemantle added. “And what’s 
going to determine that divergence is how prudent countries have been 
during the good times. Have they embedded macro reforms? Have they saved?”

Mr. Freemantle said East African countries, including Kenya and 
Ethiopia, which have been forced to diversify their economies in part 
because of their dearth of commodities, will probably continue to enjoy 
robust growth.

Even Nigeria, which remains dependent on oil, has experienced growth in 
other sectors in the past decade. A rising middle class has led to the 
emergence of Western-style shopping malls. A booming entertainment 
industry helped Nigeria overtake South Africa as the continent’s biggest 
economy in 2014.

Still, experts say, most nations failed to take advantage of the boom 
years to carry out long-term changes to their economies. They failed to 
deal with some of the biggest obstacles to sustained growth — like the 
severe lack of electricity across the continent — and spur industries 
that would create jobs. In South Africa, where a chronic shortage of 
power has constrained the economy, the unemployment rate hovers around 
25 percent.

Zambia, whose economy depends on copper exports, has suffered from 
waning demand from China and a drop in copper prices. Mines have closed, 
and thousands of jobs have been lost in recent months.

Critics say Zambia could have taken advantage of the boom by negotiating 
better terms with Chinese companies, including securing technology 
transfers or employment for infrastructure projects. Zambia used revenue 
from copper to increase the salaries of civil servants but did not 
invest in potential growth industries, like tourism and agriculture.

Edith Nawakwi, a former finance minister in Zambia and now leader of an 
opposition party, said large infrastructure projects were often wasted 
opportunities that failed to lead to economic development. African 
leaders, Ms. Nawakwi said, could have asked the Chinese to build 
infrastructure that would have furthered regional integration, business 
and trade.

“What we need is a change in the way we approach China,” Ms. Nawakwi 
said. “You get from China what you ask for.”

Last month, in a summit meeting here with most of Africa’s leaders, 
President Xi Jinping of China pledged $60 billion in development 
assistance to the continent and promised to support “Africa in achieving 
development and prosperity.”

Robert Mugabe, Zimbabwe’s president and the chairman of the African 
Union, heaped praised on China as a counterpoint to Western powers. Many 
delegates to the summit meeting said China, unlike the West, treated 
Africans as equals.

But with the impact on Africa of China’s downturn and a growing trade 
imbalance — China exported $102 billion to Africa last year but imported 
only $67 billion from the continent — skeptical voices are increasing.

“The Chinese are not romantic anymore about their relations with Africa 
— far from it,” said Ibbo Mandaza, a political analyst and businessman 
in Zimbabwe. “For them, it’s purely economic.”

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