Sunday, October 17, 2021

Here is why China’s new economic direction is likely to miss Botswana

Of equal importance to note regarding the Belt and Road initiative is the current position of China’s economic path. The report on the work of the government that was earlier delivered by China’s Premier of the State Council, Li Kequiang, stated that “China’s economy is now in a pivotal period in the transformation of its growth model, its structural improvement, and its shift to new growth drivers.” In simple terms the Belt and Road initiative, currently at infancy stage with five years since inception, is expected to one, improve trade routes through China’s assistance on infrastructural developments as a way of easing access to new and distant markets, two, reduce input and transport costs, three, reach further markets in shorter time and four, gain access to information, technical services that enhance higher quality of products and improve productivity, among other things.

An important vein of the Belt and Road initiative is the African continent especially because Africa is China’s largest trading partner. When addressing African Journalists in Beijing recently, Dai Bing, Director General of the department of African Affairs in the Ministry of Foreign Affairs in China cited that the size of trade between China and Africa was $220 billion in 2014 up from $10.5 billion in 2000. He added that in 2015 China’s investment in the continent exceeded $100 billion excluding private capital by individual investors. The figures, though indicative of the growing economic relations, provide a vague picture of trade between China and the individual 54 African countries. “African continent consists of 54 individual countries with different histories, development models and political regimes. Consequently, country case studies are of necessity when studying the impact of China on developing countries,” reads an excerpt from the Botswana Institute for Development Policy Analysis (BIDPA) working paper titled The Impact of Trading with China on Botswana’s Economy by Kedibonye Sekakela. The paper highlighted the distinctiveness of the continent as a fact that should not be disregarded.

The BIDPA working paper stated that the impact of China on each country depends on commodities in which the country specialises in. It pointed out that countries producing and exporting labor intensive goods were likely to face competition from China whereas those exporting raw commodities gained. According to the paper bilateral trade between China and Botswana increased from P265 million in 2006 to P2.1 billion in 2012. In terms of export and import volumes Botswana’s exports to China came significantly less compared to imports from China at P353 million and P1.14 billion respectively. “As Botswana exports primary products, it is not surprising that exports to China are also mainly raw materials and intermediate goods. These include non-industrial diamonds, copper and nickel ore concentrates and crude vegetable materials,” stated the paper. It highlighted main imports from China to Botswana as intermediate and capital goods (machinery and equipment, iron and steel products), which were mainly used as inputs in the infrastructural development projects in Botswana. It is worth mentioning that the BCL mine which produced copper and nickel closed down in 2016 which suggests that the export value of Botswana declined as a result. The closure of BCL could be seen as undermining Botswana’s export growth from her trade with China. In 2011 China was Botswana’s third largest import supplier after South Africa and United Kingdom and it was the 12th largest destination for Botswana’s exports.

Particularly relevant to Botswana is to establish where she fits in on the Belt and Road economic and social vein. Given the closure of BCL mine and by extension the termination of copper and nickel which was a major export product to China it means that non-industrial diamonds remain as the main export commodity. However diamonds in the past five years have been subjected to volatility that consequently marked disappointing financial results. This placed Botswana in an unfavorable state as the commodity was susceptible to unstable global demand trends.

Putting context to China’s economic relations with Africa which are largely evidenced in the East region of the continent, Dia mentioned, among other things, three things which have generally influenced the relations. First was the proximity to China, second was the preference for English speaking countries and third was the openness of trade structure in addition to the size of the market. Botswana ticks the box for English speaking but it does not augur well the other two given that it inherently has a small market size and it is also a distant market on top of being landlocked. Botswana in that context doesn’t demonstrate a strong trade and economic relation with China. She pales against her African counterparts whose trade structures show a more direct relation with China. To cite an example, China is the world’s largest energy consumer and due to both its huge population and rapid economic growth her energy demand and need to establish energy resource security forms an inevitable part of her trade structure. African countries such as Angola, Congo and Sudan which export crude oil fare significantly better than Botswana in terms of gaining from the Belt and Road initiative because they feed straight into the immediate as well as growing needs of China. It was in fact reported that oil from Middle East and Africa reached 80 percent of total oil volume that China imported. Director Bing emphasised that a win-win ethos is behind the China-Africa co-operation that ensures equal relationship, mutual benefit and inclusiveness. This therefore leaves a big assignment to China and Botswana to continue to strike a win-win in their bilateral structure whose trade relation dates back to 1975.

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