There is an argument to suggest that trade wars around the world seldom yield beneficiaries. As the United States and China embark on an all-out trade war, it’s a good time to consider the knock-on effect of such trade wars on Africa, including its tech scene. The truth is, although the likes of South Africa are likely to get caught in the cross-fire between the US and China, Africa has been at the mercy of trade wars for many years. Today, we’ll look at how this approach impacts on consumer tech availability in Africa.
Since Donald Trump was inaugurated as the 45th President of the United States, he has set about dismantling and renegotiating a string of trade agreements around the world. His “America First”, protectionist approach does appear to be having a positive impact on the Dow Jones, but is this just a short-term effect before more problems are created? Trump’s trading feud with China is just the latest in a long line of trade wars from the 20th century to the present day:
Some may argue that the European Union (EU) has also curbed the opportunities for free agricultural trade throughout Africa. It has adopted a protectionist approach to its trade, eliminating the chance for African nations to have a competitive advantage. It is said that more than half of the 7,000 harmful trade measures agreed worldwide since 2009 were derived from the EU. The EU’s common agricultural policy (CAP) has depressed the cost of maize, sugar and beef throughout Africa, preventing African farmers from exporting in a free, fairer marketplace.
However, in the case of the current US-China trade war, it is possible that Africa will end up a winner from this dispute, both in economic and technological terms. China’s president, Xi Jinping confirmed in a keynote speech at the Forum on China-Africa Cooperation in September that China plans to expand imports from Africa in a bid to spread the risk presented by its trade war with America. The value of trade between China and Africa during the first half of 2018 was up 20% year-on-year, with imports from Africa climbing by 30% to the value of $56.8 billion for the African economy.
US and Chinese tech giants butting heads is also good news for African infrastructure
Africa’s technological infrastructure is also bearing fruit thanks to the intensified competition between US and Chinese tech giants throughout African markets. In the last decade, China’s leading tech conglomerates such as Huawei, Tencent and ZTE have invested heavily in Africa’s second-generation mobile network, fostering an explosion in mobile communications and the emergence of e-commerce throughout Africa. In Africa’s most advanced markets, such as South Africa and Nigeria, smartphone penetration has reached 44%. China-based smartphone manufacturer, Transsion Holdings is now selling 80 million mobile devices to the continent annually.
The most intriguing battle between US and China in Africa will be its e-commerce market. China’s Alibaba platform is working hard to tap into Africa’s emerging markets, investing $10 million in an African Young Entrepreneurship Fund as a means of assessing the key players in each burgeoning region. Alibaba has also sought to build relationships with French-speaking African nations by partnering with French firm, Bollore Group, to provide new digital services. In contrast, America’s Amazon e-commerce platform has made slow progress in Africa, with the continent’s infrastructure hurdles likely to make it harder for Amazon to adopt the same subsidiary e-commerce models as they have recently in India.
China strengthening its ties with Africa
China has made a conscious decision to minimise its trading links with the U.S. and the Middle East, compensating for a fall in imports of natural gas from the US by importing more crude oil from Angola. It is said that almost a third (30%) of all oil sourced overseas by China could derive from Africa in the near future. The heightened trade barriers in the U.S. for China has also been Africa’s gain, with more vehicles and car parts exported to African nations too. The ability for Chinese e-commerce platforms such as Alibaba and AliExpress to operate and sell to Africans has also made it easier for countries such as South Africa to import Chinese tech goods from smartphones and chargers through to desktop computing accessories. The price of these goods is unlikely to be volatile for the African market given that they are Chinese made and have no link to the US.
Some trading partners on the continent have voiced their displeasure at importing vast quantities of Chinese-manufactured goods. At the end of 2017, China-manufactured desktop computers made up more than two-fifths (40.9%) of all global computer exports. China’s export domination is not just restricted to PCs either. Other technologies such as solar cells are heavily manufactured here, becoming the leading market for photovoltaics and solar thermal energy, shipping $26.8 billion worth of solar-powered diodes and semiconductors in 2017. Nevertheless, Beijing has reacted positively to Africa’s desire for self-sustainability by investing vast sums of money in improving production facilities throughout Africa, creating more local jobs in the process. In fact, foreign direct investment from China to Africa now totals $40 billion and is inching ever-closer to America’s $57 billion financial commitments.
By no means does Africa wish to be a pawn in a long-term game of global trade chess between China and the US. However, China’s desire to provide competitive infrastructure loans and investment will help Africa to minimise its overreliance on America, giving the continent’s own burgeoning tech sectors a chance to experience their very own technical renaissance.