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China discovers the African market thus Africa rise

         Date: 2012-03-08

           Tag: African market, China discovers African market

Summary: The tiny country on the Arabian Peninsula saw about $1.5 billion of trade with Africa each year, barely enough to register on government statistical reports.

The tiny country on the Arabian Peninsula saw about $1.5 billion of trade with Africa each year, barely enough to register on government statistical reports. Other exchanges were also rare: Aside from the occasional international meeting, African ministers rarely had an occasion to frequent the Emirates.

Fast forward just about a decade later, however, and the situation couldn’t be more different.

With two of the continent's major trading partners, the European Union and the United States, struggling to climb out of recession, African economies – many of which are booming – have increasingly looked elsewhere to buy and sell goods. China has been an obvious beneficiary. Less visibly, African countries have dramatically boosted economic ties with the Gulf.

Between 2000 and 2009, trade between African countries and the Gulf Cooperation Council, which includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab Emirates, rose by 270 percent, to more than $18 billion annually. UAE-Africa trade grew even faster, 637 percent – to $14.5 billion annually.

The numbers for East Africa are particularly striking: More than 10 percent of imports for both Kenya and Tanzania now come through the UAE, as well as an increasing number of exports. Uganda saw trade volumes rise from $118 million in 2004 to $643 million in 2008, the most recently available year for statistics. Exchange with the UAE now makes up 10 percent of that country’s total trade.

Increasing economic ties are an indication of how both the emerging markets of Africa and the UAE itself have changed in recent years. A decade ago, many African economies seemed locked in stagnation; commerce was sluggish even in the resource-rich countries that could rely on oil or minerals to boost their GDP growth rates.

These days, with the West in a slump, many countries in Africa are booming. The continent is expected to be home to seven of the 10 top global growth rates between 2011 and 2015, according to predictions released in January by the Economist Intelligence Unit. And while resources have been a big part of that expansion, so too have industries such as telecoms.

The UAE has also come of age over the past decade – in a way that seems particularly suited to the African continent. The country’s two largest emirates, Abu Dhabi and Dubai, have spent massively on infrastructure, building roads and increasing port capacity such that the country now ranks No.1 globally in road infrastructure and No. 4 for its transport infrastructure more broadly. The country has captured a massive chunk of global trade in its ports and airports. Today, it is the world’s 19th largest exporter – punching far above its weight with a population of a mere 7.5 million.

The UAE’s newfound infrastructure was of interest to African countries for two reasons: use and example. Most immediately, the UAE was an obvious clearing house for imports and exports from the region. “African countries look to Dubai in terms of export routes, and even import routes,” Kenya’s Central Bank governor, Njuguna Ndung’u explained from the sidelines of the conference in Abu Dhabi Feb. 12.

More than 60 percent of the imports that arrive in the UAE are re-exported elsewhere. Louis Kasekende, deputy central bank governor in Uganda, said used cars in his country, for example, are almost exclusively sourced through the UAE.

But perhaps even more crucially, the UAE has developed expertise in a field that African countries themselves are now eager to engage in: infrastructure development.

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