China's Economy Stumbles, Africa's Reels

"We can see what drove the growth in Africa when demand goes away."
"Well, demand has gone away, and it's not pretty."
Greg Mills, Brenthurst Foundation, Johannesburg

"What we're going to see going forward is far more fragmentation and divergence across the continent."
"And what's going to determine that divergence is how prudent countries have been during the good times."
Simon Freemantle, Standard Bank, South Africa

BRICS countries, Brazil, Russia, India, China, South Africa - and Kazakhstan

Africa's raw resources drew the attention of the world's foremost consumer of minerals, fossil fuels, agricultural products and more, for years, to fuel its burgeoning economy as China surged ahead in its relentless drive to become the globe's giant of production and export, bringing its gigantic population into emergent prosperity, with India right behind. As long as China's corporate production model expanded to engage the international market, its demand for Africa's raw resources surged.

But as China's growth began to wane, the rapid economic growth across sub-Saharan Africa felt the disappointed outcome to its hopes for an ongoing new era of prosperity. China's hunger for commodities from Africa slumped with the slow-down in its economic outlook, resulting in a matched slide in Africa's emerging economies. Nigeria and South Africa in particular now face a grim outlook in their largest of the continent's economies.

Last month their currencies fell to record lows thanks to China's announcement that African imports fell almost 40 percent last year. When Africa's largest trading partner began to stumble, Africa's economy went into free-fall. Projections for the continent have been sharply reduced by the International Monetary Fund, and credit agencies have responded by downgrading outlook on commodity exporters Angola, Ghana, Mozambique and Zambia.

Economists predict a recession for South Africa as Africa's largest exporter of iron ore to China has had to adjust to a new reality. A slump in mining is afflicting South Africa, matching a downturn in manufacturing and agriculture, with its rand in sharp decline. South Africa will find it more difficult to pay for importing corn, to compensate for drought impacting its own agricultural expectations.

While Africa's largest country, population and economy, oil-producing Nigeria has been impacted by the crash in crude oil prices, even as the country and its new president struggle in its conflict with the Islamist extremist group, Boko Haram. Oil accounts for 80 percent of government revenue, leaving it in a hard place to enable financing to fend off social destabilization in the Niger Delta where most of the country's oil is located.

Nigeria's weakened financial status and the state of its collapsed currency has left it in a poor position to repay loans extended by China, and used by Nigeria in the building of large infrastructure projects. China's reduced economic outlook has gone far in wounding the economies of the continent which had depended on its ongoing expansion to keep their own growing. Kenya and Ethiopia with their diversified economies are far less reliant on commodities sales since they have few and their growth is slated to continue unimpeded.

Zambia's copper exports have similarly suffered from reduced Chinese demand and a price drop. Thousands of jobs have evaporated as mines have closed. Zambia's choice to use its copper revenues to swell civil servants' salaries and failing to invest in growth industries like tourism and agriculture has not served it well. "What we need is a change in the way we approach China", observed Edith Nawakwi, former Zambian finance minister.

"You get from China what you ask for", she said, lamenting lost opportunities for the Chinese in better times to have been persuaded to build infrastructure that would have resulted in furthering regional business and trade integration.

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  G7 leaders and top EU officials met on the margins of a summit on nuclear security in the Dutch capital (Photo: consilium.europa.eu)

Brazil, China, India rally round Russia after G7 snub

25.03.14

BRUSSELS - The G7 club of wealthy nations has cancelled a summit with Russia over its annexation of Crimea, but emerging economies have protested against its exclusion from a G20 meeting.

The G7 leaders – from Britain, Canada, France, Germany, Italy, Japan, and the US – announced the move in a communique published after their meeting in The Hague on Monday (24 March).
The June summit, which was to be held in the G8 format with Russia in Sochi, on the Black Sea coast, will now be held in Brussels.

The communique said Russia’s actions “are not consistent” with the G7’s “shared beliefs” and that they will “suspend” the G8 “until Russia changes course”. It also said G7 states “remain ready to intensify actions, including co-ordinated sectoral sanctions … if Russia continues to escalate this situation”.

For its part, US ally Australia had indicated Russia might also be excluded from a G20 summit in Brisbane in November.But Brazil, China, India, and South Africa rejected the idea.They said, together with Russia, also at The Hague, where almost 60 countries had sent VIPs to a Nuclear Security Summit, that “the escalation of hostile language, sanctions and counter-sanctions … does not contribute to a sustainable and peaceful solution” to the Ukraine crisis.

“The custodianship of the G20 belongs to all member states equally and no one member state can unilaterally determine its nature."

With Brazil and China now wealthier than some G7 countries, Russian foreign minister Sergei Lavrov noted the G7 has lost its monopoly on global governance.

“If our Western partners believe this format [G8] has exhausted itself, let it be. We are not clinging to it. As an experiment, we can wait a year or a year and a half and see how we live without it,” he said.
Lavrov in The Hague met with his Ukrainian counterpart, Andrey Deshchytsia, for the first time since the crisis began.

But he did not agree to launch bilateral talks to resolve the dispute, as demanded by the EU and US.
He noted only that Ukraine must undertake unspecified “constitutional reforms” and repeated the Kremlin line that Ukraine’s revolution is a form of Western expansionism.

Meanwhile, Ukraine circulated a draft UN General Assembly resolution which says Crimea’s recent referendum on secession has “no validity".

It got backing from UN head Ban Ki Moon, who said Russia’s violation of the Budapest memorandum – a 1994 treaty giving Ukraine security guarantees in return for nuclear disarmament – has “profound” implications “both for regional security and the integrity of the nuclear non-proliferation regime”.

Russia on Monday also hit back at Western sanctions by blacklisting 13 Canadians.
It has mocked EU and US blacklists and economic threats.

But its own deputy economy minister, Andrei Klepach, on Monday forecast that Russia’s first quarter economic growth will be zero and that $70 billion of capital will leave the country in developments he linked to “worsening of relations”.

Russia’s state-owned Sberbank the same day said capital flight could reach $100 billion.

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1. Foreign Affairs

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