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Executive Summary
Some fifty representatives of the South African and regional governments, embassies, donors, business associations and research institutes attended this seminar. It was aimed at assessing those economic and poverty reduction implications and potentials in China's shifting engagements and new policies- particularly economic - for Africa, and in particular for the SADC region. SARPN adopted a 'broad cost benefit' approach in framing the seminar and three presentations, which asked; what are the likely benefits and threats to African economies in this new era, what role should Africa play in harnessing benefits for its now mandatory suite of pro- poor policies, and what should be done to mitigate any negative effects of China's economic expansion?
The seminar covered both higher and lower order, more downstream issues. Some of the macro themes queried the implications of China's current growth path globally, its motivations in Africa and the uniqueness of its 'non western developmental model'. They traced the implications of China's major internal drivers; its growing middle class with its associated consumption, the commodity supper cycle upholding resource prices globally, its predatory multi-nationals and the related ability to capture much in the global value chain and alter international competition, particularly in manufacturing. Questions were asked whether Africa's current developmental paths and socio-economic models for growth - embodied within the design and unfolding of NEPAD - were preparing it sufficiently to compete globally. Could these Chinese challenges to other countries be turned into opportunities?
China's economic influence on specific issues in trade and development in SADC were likely to be a function of the frailty in Southern Africa's socio-political dynamics, with the resilience and adaptability of many countries existing economic frameworks to these trends questioned. Various Chinese investments in the region were held as likely to alter existing attempts to create more 'developmental states'. The resultant need for much more reactive policy development in labour absorbing growth paths and regional industrial development strategies was raised, and the potentials for contrasting positive and negative outcomes for different countries in the region noted.
These themes were exemplified by a case study of China's engagement in extractive, resource based industries in the region. It was argued that its growing involvement in Mozambique's relatively large timber industry in Zambezia province was deliberately non compliant with well developed national Mozambican policies for growth and pro-poor development, and contrary to both those African and global conventions for sustainable development in the timber industry. The relationship, moreover, was held to have encouraged a corrupt collusion between senior party people, widely specified 'Asian' entrepreneurs and with industry officials, leading to-among other issues- preferential concession and contract allocations, large scale over exploitation of allowable off take, overpricing to cover 'costs of doing business', and data manipulation in statistics to mask some of these trends.
Developmental investment in downstream processing and related enterprises was held to be conspicuous in its absence. The case study raised a wide range of proactive actions held capable of restoring the industry to a leading sustainable and developmental 'sector' in the county, including donor action, inward investment in downstream processing via well developed joint ventures, internationally led monitoring and evaluation and constructive multilateral engagement with the governments of China and Mozambique.
Subsequent open floor discussions therefore then questioned the sustainability of small, open African economies to resource based development, recognizing that this was clearly a governance issue, with the onus on SADC governments to ensure that the returns-the 'resource rents'-from such Chinese (and other country) investment was more effectively managed in the interests of the countries pro-poor developmental paths, rather than to reward a narrow band of local (party) elites. Moreover, countries in the region were urged to more effectively build supply side led capacities in suitable and improved infrastructure, institutions and in skills in order to capture the benefits more economically (as is the case currently within South Africa's Accelerated and Shared Growth Initiative). Questions in this regard were also asked about Southern Africa's willingness and ability to catch the Chinese 'wave'.
Discussions on the growth and pro-poor impacts of Chinese dominance in manufacturing and exponential increases in exports to Southern Africa (fortified by the presence of many Fortune 500 companies in joint ventures) reflected on the additional impacts of World Trade Organization requirements to lower protective tariffs on SADC's labour intensive industries. Some predictions were for further large scale dislocation from the need for subsequent restructuring. Emotional appeals were made for raising tariff barriers locally to limit job losses, while the Chinese marketplaces in Johannesburg responsible for a large measure of the distribution of cheap imports essentially through the informal sector were said to be the likely target of violent aggression in future. Conversely cheaper imports from China and India were held to be capable of benefiting poorer people, but at the expense of other third country exporters, such as the case in Kenya and Uganda. The positive potentials for a virtuous cycle arising from regional trade expansion where local capabilities in financial and construction, for example, could engage in China reciprocally, were raised. China's desire to become responsible partner in addressing the negative consequences in these former investments were also highlighted.
China's demands for high volume and niche agricultural and fisheries products were also raised as a potential major benefit to the region's development, given low tariff barriers there and Africa's capabilities in labour intensive production. This potential includes Chinese investment directly into agriculture here, as is happening in Zimbabwe. However there are complexities regarding the present inability of agribusiness in this region to penetrate a diverse and competitive Chinese agriculture, exemplified by the example of Chinese strawberries imported into South Africa for jam production, in a situation where local agribusiness itself was having to go 'offshore'. African countries were again admonished for not catching the Chinese wave in this sector, speakers citing the obvious potentials for extensive prawn and shrimp exports from suitable developments on the ample coastline having now been missed by China's own recent investment in these markets.
In addressing global trends in China's growth path, the Australian case was cited as a real win-win situation, having moved from the cold war mood of suspicion and fear to one of many mutually beneficial investments and large local gains being realised. Extensive Chinese tourism, very strong Chinese enrolment in Australia's higher education system and a resulting enrichment of Australia's avowed multiculturalism has occurred. Many interests at the seminar were keen to assure everyone that this pattern was the ideal and likely outcome of present trends in this region.
In recognising the importance of China's growing investment in Africa's resources and markets, the seminar concluded that the balance of opportunities and possibilities in SADC countries existing and future relationships outweighed the negatives and the threats, despite the caveats of the case study material in Mozambique. This was strongly qualified by the need in SADC for a far stronger, responsible and more pro-active role from governments in managing the relationships, and changes in the way of doing business characterising many engagements to date. In certain sectors it may require a serious revisit of current policy development for local and regional growth. Future negotiations with China will need to be undertaken from a better informed platform and predicated on leveraging more 'structurally significant' benefits, with Chinese expansion better directed into well defined areas of national interest. The supply side capacity of countries needs to be strengthened, with better cooperation between countries in the region in these relationships, despite capacity problems. Conversely, there needs to be something more from the Chinese themselves. They should aim in their investments to more effectively create the necessary balance between 'extraction' and economic growth, with a primary objective of getting the mix between local growth, trade and poverty reduction correct in many sectors. The key to the future, embodied in the case study, is the progressive achievement of good governance at all levels of institutions.
* Report by Jeff Zingel
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