TWO pieces of conventional wisdom have been overturned in recent months. First, that the commodity “super-cycle” of the past five years would, if not last forever, plateau at a higher level than ever before, based on demand from India and China.This has not happened, with potentially disastrous results for some African countries, which have enjoyed, on average, growth rates of 5% or more for the past few years. Such growth has been based on economic reforms, but fuelled by the large increases in commodity prices.
Second, that the Chinese were in Africa to stay, as part of a long-term strategy. In practice, Chinese entrepreneurs have been the first to leave when the market turned. More than 60 Chinese mining companies have left the mineral-rich Katanga province in the Democratic Republic of Congo in the past two months, as cobalt and copper prices have more than halved. More than 100 small Chinese operators are reported to have left Zambian mines for the same reason.
The implications for Africa are many. Economic growth will be slashed. Indeed, the price declines have been so sudden and so brutal many African leaders, who believed they were doing what the west recommended, suddenly find their economies again in tatters.
What positive spillovers?
An article in today's Business Day drives home the point that China's recent adventures into Africa aren't about Africa -- they're about China, driven entirely by Beijing's opportunistic motives. Those who continue to optimistically muse over the ways in which China might bolster Africa's economic development may quickly find themselves out of arguments: not only has the commodity 'super-cycle' created by the Chinese imploded (or finds itself close to doing so), but with the recent economic downturn, Chinese investors who previously flocked to the continent are now exiting faster than they entered, seeking economic opportunities elsewhere: