Chart of the Day: South-south trade defines Africa's rise

WSJ story on US companies seeking to "catch up" in Africa.  As the chart indicates, US trade with the region has remained steady in the high teens (percentage), while it's Europe that has lost ground to emerging south-south trade (emerging and developing markets trading with each other).  That share was about one-third at Cold War's end, but now it's up to more than half.

Old Core demand for African commodities has long been an up and down affair (boom and bust according to its business cycle), but with rising New Core economies creating plenty more demand, Africa enters into a supercycle of demand that floods the local economies with money and cheap consumer goods in reply.  In combination, Old and New Core demand create a lift-off moment for the continent, the likes of which it has never seen before.

Many good things will come of this, but so will a host of painful transitions, the trick being that the primary integrating agent right now on the continent is the one country famous for not caring about its local impact whatsoever.  This is touted as a virtue by many (Beijing consensus), but it comes with a price - this indifference.

Comments

[C. Chike]

As someone living in Africa let me add my two cents.

North American trade with Africa (US and Canada) is mainly centered around the Oil and Gas Industry, the structure / nature of the trading relationship has not changed significantly and US businessmen are just beginning to see Africa as land of opportunity.

In 2009, I saw workmen putting finishing touches to the first KFC outlet in Lagos. The first question I asked the manager was "why did you wait so long?" and that question is still pertinent today. US firms were late to the game in the fastest growing Telecommunications market in the World - they left that to the Indians, Chinese, South Africans and everyone else. Walmart just bought over South African Massmart, but another South African firm, Shoprite has not only studied the African market but is planning 20 new outlets in largest retail market in Africa in the short and medium term.

There is another article in the WSJ (http://professional.wsj.com/article/SB10001424052702304778304576375190147545626.html?mg=reno-wsj), about this same topic. This single statement explains why the US might have been slow to recognise and take advantage of opportunities - an American businessman in Zambia is quoted as saying that "America has more medical doctors and Ph.D.s here than businessmen".

All said, I think corporate governance, policy frameworks and infrastructure will only improve in Africa. (Nigeria just signed a Freedom of Information Bill). I believe a lot of money will be made here and I also think is too early in the day to abandon Africa to China. What the West needs is the same rugged pioneer spirit that defined the US in the 19th Century.

The US also needs a coherent Africa policy. You need to coordinate your economic, counter-terrorism and healthcare / social development policy thrusts and determine what the sharp end of your engagement with Africa should / will be. I suggest you emphasise economics not counter-terrorism and I also suggest that you:

(a) Increase the number of commercial counselors in your African embassies.
(b) Stop sub-contracting your Africa economic policy to a combination of Bono, Angelina Jolie, Jeffery Sachs, Madonna and USAID.
(c) Stop the pretense that AFRICOM can do the work of the Peace Corps and USAID.

The relationship between China and Africa is complex and rapidly evolving. Deborah Brautigam in her book "The Dragons Gift" dispelled many of the cliches, stereotypes and myths that prevail in the Western media. There is a lot of lazy reporting in the Western media about China and Africa and she picked apart an article from "the Economist" that was full of inaccuracies about China's role in Africa. (Please read her blog article: http://www.chinaafricarealstory.com/2011/05/chinese-in-africa-economist-gets-some.html).

China's role is not totally benign and the Chinese are beginning to see the benefits of proper stewardship of the environment (they are learning from the experience of Shell in the Niger Delta!). The Chinese are also learning fast - the Chinese are only a few years away from their own Western type NGOs and all the "touchy feely" social development work that the West has a monopoly on.

A recent BBC poll showed that 82% of Nigerians and 77% of Kenyans had a positive view of China, so obviously the Chinese are doing something right.

Snapping at the heels of the Chinese are the Indians. If the Chinese are the infrastructure provider of choice for Africa, the Indians have the potential of being the "service provider of choice". Huawei can provide infrastructure at unbeatable prices whilst Bharti will give you cheap services. Sinochem can build a cost-effective Cement plant whilst Indian management will run it efficiently at a much lower cost.

Sorry for taking too much of your time.