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AfricaMoney | November 8, 2016

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Sub-Saharan Africa turns to China and India to bolster economy

Sub-Saharan Africa turns to China and India to bolster economy

The report notes that China is the main trade partner for Sub-Saharan Africa among all rising powers, and that emerging economies are rapidly increasing their trade share at the expense of developed, high income countries. (Image: Xinhua)

The economic relationship between Sub-Saharan Africa and its traditional trading partners – developed, high income nations, primarily from the European Union – appears to have given way to new trade links with emerging economic powers such as Brazil, Russia, India, South Africa (BRICS), the Gulf states or Turkey.

These new economic relationships represent fresh economic opportunities for African countries, and, at the same time, pose a challenge to their existing relationships with traditional partners largely from the ranks of the Organisation for Economic Co-operation and Development (OECD).

This is the central finding of a report on the �economic engagement footprint’ of the rising powers in Africa by Xavier Cirera, until recently at the UK Institute of Development Studies (IDS).

For Mauritius, the findings of the report can be better understood in the light of a need to diversify its trading partners as its traditional market, Europe, was hit hard by recession.

With slower-than-expected recovery in major trading partners in Europe, especially France, the island nation is increasingly relying on India, China and South Africa to bolster its economy.

In fact, the recent tourist arrivals report for the month of October by Statistics Mauritius showed that the decline in tourist footfalls from Europe is long and sustained, and that visitors from India and China are increasingly making up for lack of European spend.

Moreover, even for its booming textiles sector, the island nation is turning to newer markets. Mauritius is already ranked as South Africa’s second-largest supplier of exported textile products, showing that the diversification of its market from the European Union to the BRICS nations is well underway.

Moving on to the broader implications of the study, it postulates that the importance of rising power engagement in Sub-Saharan Africa is likely to increase in the near future given the recent trends and economic difficulties in OECD countries.

The study highlights that it is probably FDI flows from rising powers, especially investments in services, which are likely to become a significant opportunity for growth in the Sub-Saharan African region.

The report notes that China is the main trade partner and the rising powers have been rapidly increasing their trade share at the expense of OECD countries. India, China, South Africa and the Gulf states are important sources of FDI in the region.

It further observes that BRICS countries have entered the development arena through their expanding relationships with low-income countries (LICs) and comments that mainly China, and to a lesser extent India and the Gulf states, are significant aid donors in the region.

It also highlights that rising powers use instruments for development cooperation other than those that are considered �development assistance’ under the OECD DAC framework.

In other words, aid is used as a foot in the door for emerging economies to gain access to populated markets in Sub-Saharan countries and to establish their presence in closed economies where they may not otherwise be welcome.

Also, while it may be thought that the emerging economies will be targeting different countries and sectors than the more developed, OECD countries, the report concludes that it is not so.

In fact, significant similarities appear, especially in trade flows and aid allocation across Sub-Saharan African countries by both BRICS and OECD nations. Allocation of rising powers, just like the OECD economies that engaged with Sub-Saharan Africa before them, is more concentrated in natural resource-intensive countries and countries with larger UN affinity.

Thus, there does not appear to be a significant change in the developmental landscape of the Sub-Saharan countries with increasing intervention of rising powers, even though the economic landscape is being reshaped.


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