By Jevans Nyabiage

Many Africans, more specifically here in Kenya, recently celebrated the re-election of Barack Obama, maybe because of his ancestral roots. But, not known to many, a leadership shift was taking place across the Indian Ocean. 

Beijing chose Xi Jinping, to lead the second largest economy in the world for the next decade. Mr Xi may not be a household name outside of his home country, but he is to preside over what may be Africa’s single most important strategic relationship in the 21st century.

China is part of the emerging economies or Brics, an acronym coined over a decade ago to conveniently bring together economies of Brazil, Russia, India and China and later in 2010 South Africa.

World Affairs

The Brics represents a group of developing and newly industrialised nations out to leverage their huge populations – almost half the world’s population at three billion, a combined GDP of $14 trillion (more than that of the US and combined foreign exchange reserves of a similar amount, to assume greater influence in world affairs.

At the start, nobody saw these countries as a block challenging the likes of G8, World Bank or the International Monetary Fund (IMF).

But it is now evident that the gang of five is ready for business. Each is now on a race for Africa resources, trying to outdo the other by pumping billions of shillings in what has lately rattled western nations, literally. 

They are at the forefront of a new scramble for projects and deals in Africa with each one bringing to the continent its own distinct business nous, yet collectively, the Brics are instrumental in transforming Africa’s business fortunes. 

And as things appear, the global balance of power could be shifting into the hands of these rapidly industrialising and emerging growth giants. These nations, excluding South Africa, which is the smallest strategic member, are fuelling the global recovery with their huge demand requirements, high growth multiples and vast deployment of capital.

In Africa, the BRICS have latched onto China’s coattails in seeking commercial favour and opportunity. All have the same purpose; to secure a foothold in Africa’s vast and rich resource offerings. 

Led by that giant of the emerging powers, China, the Brics are now Africa’s largest trading partners and its biggest new group of investors.

Brics-Africa trade is seen eclipsing $500 billion by 2015, with China taking the lion’s share of 60 per cent of this, according to Simon Freemantle, senior Analyst at Standard Bank.

“We estimate that Brics total trade with Africa reached $340 billion in 2012, representing a more than ten-fold increase over the course of a decade. Since 2007, during a period of relatively slow trade growth (for Africa, the BRICS and globally), Brics-Africa has more than doubled,” Standard Bank report prepared by Freemantle, says. 

China’s role in Africa is more proportionate to its relative economic might. China accounted for almost 60 per cent of total Brics total trade with Africa, which is broadly commensurate with its economic size within the grouping.

Similarly, India’s role is consistent with its economic size, while Russia and Brazil are relatively underrepresented.

China-Africa trade has grown more than tenfold, overtaking US-Africa trade in 2009, and is projected to reach $220 billion this year by some measures, up from around $166 billion in 2011. 

Freemantle report shows that US-Africa and EU-Africa trade tripled between 2001 and 2011, while that of the ten top emerging economies increased a massive eight times during the same period.

As the other emerging economies Brazil, India and Russia also scale up trade and investment relations with Africa, their focus is overwhelmingly on commerce, not security and aid.

From as low as $10.5 billion in 2000, $40 billion in 2005 and $166 billion in 2011, China is currently Africa’s largest trading partner, having surpassed the US in 2009. 

Beijing is eager to cement its dominance by burnishing its image through initiatives such as a $20 billion credit to African countries to develop infrastructure and the African Talents Programme, which is intended to train 30,000 Africans in various sectors.

Direct investment

While Europe and the US continue to account for the majority of foreign direct investment to Africa, the gap is narrowing. The likes of Huawei and ZTE of China, Brazil’s Vale and India’s Bharti Airtel and Tata are planting roots across the continent. Washington’s response has been sluggish.

On trade, the landmark African Growth and Opportunity Act in 2000 has helped, providing duty-free entry into the US for most of Africa’s exports.

But volumes have fallen sharply recently, in part due to the global downturn. For the first half of 2012, total US trade with sub-Saharan Africa was at $48 billion, a decrease of nearly a quarter compared to the same period in 2011.

Next to China, US trade numbers look like small beer. And while Chinese firms can count on dedicated and focused state support, US businesses are frustrated by what they see as a lack of interest from Washington in boosting trade ties with Africa. 

And as Xi led the world’s five fastest growing countries in Durban South Africa for the 5th Brics Summit, it was symbolic of a physical manifestation of what is now fast being accepted as a new world order. 

The countries agreed in principle to create a joint infrastructure lender, which is expected to rival the World Bank and the IMF.

The mooted bank is seen as a way of gaining influence on the world stage, countering Europe’s dragging economic crisis and addressing the $4.5 trillion in infrastructure spending the Brics are estimated to need over the next five years.

The proposal underscores frustrations among emerging markets at having to rely on the World Bank and IMF, which are seen as reflecting the interests of the United States and other industrialised nations. Africa holds only three seats on the 25-seat board of the World Bank. 

The group also discussed on the possibility of establishing a high-capacity 28,400 kilometre (17,600 mile) fibre-optic cable between the Brics countries to ‘remove dependency on developed countries as interconnection points.’

The next Brics summit will be in Brazil in 2014, but leaders will meet in Russia on the margins of the G20 in September.

But besides attending the Summit, Xi used the opportunity to do business in Africa, signing several deals with authorities in Tanzania, South Africa and Congo.

In Congo, he signed a string of deals that included a river port in Oyo, Congolese President Denis Sassou Nguesso’s hometown, and a seaport in Pointe-Noire that can export mineral ores shipments.

This was Xi’s first overseas tour of Africa and is seen as a reflection of the strategic importance of Africa’s oil and mineral resources to the world’s second biggest economy.  Congo is a major oil producer. Earlier, Mr Xi visited Tanzania and South Africa. 

In Tanzania, he signed more than a dozen trade and cooperation deals that included plans to co-develop a new port and industrial zone complex, a concessional loan for communications infrastructure and an interest-free loan to the Tanzanian government.

The region seaboard is hot property after huge gas discoveries in Tanzania and neighbouring Mozambique. Earlier this month, Chinese oil company CNPC acquired a 20 percent stake in the Eni Mozambique offshore project worth $4.21 billion.

Oil strikes in Kenya, Uganda and neighbouring nations have also caught China’s eye.

Even though president Xi didn’t pass through Nairobi in his six-day trip to Africa, the county now controls multibillion infrastructure projects.

It is reported that last week, a delegation from China was in the country to assess to conclude a cash deal estimated to be $2.8 billion (Sh238 billion) to finance the construction of the first phase of the much-anticipated Mombasa-Malaba standard gauge railway line. 

Africans broadly see China as a healthy counterbalance to Western influence but, as ties mature, there are growing calls from policymakers and economists for a more balanced trade deal. 

But it is not all about selfless generosity from Beijing. For Martyn Davies of the Frontier Advisory consultancy, which specialises in China-Africa relations, “This is more about the long-term interests of China construction firms in the region, and geopolitics?”

Davies says to reap from opportunities coming from Brics, the regional trade blocks in Africa such as SADC and EAC, it is imperative for them to integrate in order to expand market size.

“The EAC is the most progressive region in Africa when it comes to regional integration,” said Davies adding that small, arguably economically non-viable countries in regions of Africa need to integrate their economies with neighbours in order to expand market size and project themselves as a coherent bloc rather than as a single small economy.

“And the “S” in BRICS should ultimately stand for “SADC” rather than South Africa. It is important that SADC’s regional integration strategy be aligned to the inclusion into BRICS.”

But while seeking to build on expanding economic relations, China’s new leader faces concerns in Africa that the continent is being stripped of its raw materials for export while spending heavily on finished consumer goods from the Asian economic powerhouse.

Last year Germany government complained to Kenya over what it termed as undue advantage accorded to Chinese companies in the award of contracts. None other than Hillary Clinton, then US secretary of State captured this on her recent 10-day visit to Africa last year.