Africa has exactly what China needs
http://www.iol.co.za/business/international
6 September 2011
Londiwe Buthelezi
An array of African businesses could capitalise on China's growing urbanisation
as the second-largest economy slowly failed to meet its people's demands
while Africa had exactly what it needed, local investment managers said
on Friday.
Speaking at the second annual African Cup of Investment Management conference
in Cape Town, Sanlam strategist Alex Pestana said China's accelerating urbanisation
would require the country to go out and seek food, oil and minerals.
The country's rapid economic growth had exacted a serious environmental
toll and desert areas were expanding by up to 10 400km2 a year.
China's statistics show that its current urbanisation rate is 24 million
people a year and city dwellers are expected to increase by up to 400 million
in the next 20 years.
"This put tens of millions of people at risk of food shortages," Pestana
said.
Since China's household consumption was expected to rise to 50 percent of
gross domestic product in 2025 from 36 percent now, there would be a steepening
protein demand.
"That will have an impact on the consumption patterns in China. As the Chinese
become wealthier, higher income will translate into higher food needs. So
a more intense form of agriculture will be required to feed the huge population."
But China's farmland per person was declining. According to the World Bank,
it fell from 0.5 hectares a person in the 1950s to 0.3ha in the 2000s. So
Africa had what China wanted, said Pestana.
The 2010 Société Générale Cross Asset Research findings showed that only
15 percent of sub-Saharan Africa's potential arable land was being used.
This meant 85 percent of arable land could be turned into farmland.
China had already started providing technical assistance to African agriculture.
By the end of 2009 there were 142 Chinese agricultural investment projects
in Sub-Saharan Africa.
"Africa will continue to be a key focus of Chinese investment and this is
an opportunity to capitalise on other sectors, not just commodities," Pestana
added. Currently, 80 percent of South Africa's exports to China are commodities.
Frontier Advisory chief executive Martyn Davies said sub-Saharan Africa's
growth was now driven by political reform, in which China's capital supply
and commodities demand had played a significant role.
The growth projectors of sub-Saharan Africa and China had 92 percent correlation,
showing that a component of China's growth depended on Africa.
"There is now the Brics (Brazil, Russia, India, China and South Africa)
frenzy on South Africa which has opened opportunity for us to also capitalise
not only on China but all other emerging markets," he said.
Carl Marais, the director of Grail Research in Africa, said: "Most South
African companies have Africa on top of their agenda and we've seen that
a lot with financial institutions. But they now need to realise that the
world is changing and not investing in emerging markets is not investing
in the global market at all."
Shamoil Arsiwala, a manager at research firm Factset, said although unpredictable
geopolitics posed a threat to frontier markets, these economies were "diamonds
in the rough and they will shine".
"Yes, when you compare them (frontier markets) with emerging markets, the
preference is on the emerging markets, but just observe in the next decade
which will outperform," he said.
But this would depend on the structural reform in developed markets, which
would determine whether as much capital flowed to the frontier markets as
to emerging markets. |
