GENEVA — Major emerging economies led by China are increasing trade and investment links, including in textiles and apparel, with rapidly growing poor African nations, according to a report from the International Monetary Fund.
Increasing wages in India, Brazil and China are factors influencing some of the investment in manufacturing, which include some big investments in Special Economic Zones in numerous African nations. There is some indication, the report notes, that Chinese companies are seeking growing domestic and regional markets in sub-Saharan Africa or taking advantage of preferential trade treatment of SSA exports in rich countries.
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“Some southern African countries have also attracted FDI [foreign direct investment] in the apparel sector from China thanks to the U.S. Africa Growth & Opportunity Act,” it said.
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The IMF’s latest regional economic outlook report on sub-Saharan Africa forecasts growth in economies in the region will on average expand 5.8 percent in 2012, up from 5.2 percent expected for 2011. The study highlights that, after a long history of reliance on trade and investment from North America and Europe, SSA countries are increasingly engaging with emerging nations such as China, Brazil and India.
Between 1990 and 2010, the share of sub-Saharan Africa’s exports to advanced economies declined to 52 percent from 78 percent and the share of the region’s imports declined to 43 percent from 73 percent, notes the report. By 2010, sub-Saharan Africa trade with Brazil, India and China reached 3 percent, 6 percent and 17 percent, respectively, rising from negligible shares in the Nineties, it said.
“A fast-paced reorientation in SSA toward new markets is under way, with nontraditional partners now accounting for about 50 percent of the region’s exports and almost 60 percent of its imports,” said Antoinette Monsio Sayeh, IMF director for Africa.
FDI is also diversified, she noted. The report points out that China is also establishing several SEZs in sub-Saharan Africa aiming at promoting manufacturing in the region.
“The substantial and more recent investments from China in SEZs in sub-Saharan Africa seem to be well-funded schemes that are associated with a secure demand from Chinese companies,” it said.
Five SEZs are under construction in four sub-Saharan African countries — Ethiopia, Nigeria, Mauritius and Zambia — and one in Egypt, with $250 million in Chinese investment by yearend. The ones in Mauritius and Zambia include a focus on the textile and apparel sectors.
The report says that direct investment in SSA nations by Chinese companies include outlays for the manufacture of apparel in Ethiopia, Madagascar, and Kenya, and textiles and apparel in Mauritius. But it also concludes that there is an evolution of the sophistication of sub-Saharan exports, with several SSA producers moving up the value chain, including in apparel in Lesotho.