If there is a moral mineral-rich African countries can get from the negative impact of China’s recent slowdown is over reliance on mining, and, subsequently, the urgent need to explore other avenues of benefiting from their growing links with China.
This is the theme of an award-winning paper that lecturer, Tomi Oshokoya, a lecturer from Wits University School of Mining Engineering, the University of Johannesburg, jointly compiled with a postgraduate student, Peaceful Mathebula.
Mathebula is completing a Master of Science degree in Engineering (Mining) at Wits University’s School of Mining Engineering. She is a corporate and institutional banker with research interests in trade policy, mineral economics and political international trade.
Oshokoya is an engineering surveying lecturer at the Wits School of Mining Engineering, and is a PhD candidate in the school. Her research interests are mineral economics, mineral policy, mineral taxation and investment in mineral projects.
The paper, which focuses on disruptive technology and innovation, urges mineral resource-rich countries in Africa that have close economic links with China to review their trade policies and map out ways of creating a buffer against fluctuating commodity demand. This is in view of the negative impact of China’s recent slowdown.The two authors note, referring to South Africa as a case in point, lower mineral and metal product exports to China have seen a decline in key economic indicators like GDP growth and employment rates.
And so, after being exposed to changes in China’s economic growth trajectories, it is high time developing countries forged ‘more beneficial engagements’ with China, the two authors suggest. “New policy directions can provide buffers that will help the economies of mineral-rich developing countries to handle unexpected global economic changes, as well as the aggressive nature of China’s approach to her trading partners, in preparation for an another cycle of China’s economic advancement.”
China’s approach to engaging with developing countries makes it “the perfect” partner for undertaking development projects, the authors point out. “The ‘less’ stringent trade terms and conditions, as well as infrastructural development offered by China, have been hailed as the answer to the key economic challenges of many mineral-rich developing countries.”
Furthermore, according to the International Monetary Fund, exports of mineral-rich countries as a percent of GDP have risen sharply, thanks to demand from China over the past two decades. Currently, China – yes, not Trump’s USA – is South Africa’s biggest trading partner. Hence, in view of this, the authors say: “As mineral commodity trade relations between developing states and China continue to grow, it is imperative to use this relationship more advantageously – as a platform for the exchange of information and strategies to increase opportunities for all partners.”
Developing other sectors
The authors recommend that developing countries should use trade relations with China to expand their knowledge on how to develop other sectors of their economies – including agriculture, industry and science and technology. Beyond trade policy, the authors note that it is important to also use industrial and minerals policies to steer away from being excessively dependent on minerals and other products with fluctuating global prices.
Lessons from China
Last but not least, Mathebula and Oshokoya advise mineral-rich developing countries to take a leaf from China. First, they point at China’s recent economic success, which was built on its culture of savings and investment in long-term efforts like promoting the manufacturing sector, increasing labour productivity and prioritising technological innovation – especially during buoyant economic times, Another key economic driver that they highlight is China’s impressive strategy on research and development expenditure, which is estimated to account for 15% of the world’s total spending on R&D..