China’s Giant Export Opportunity in Africa
January 19, 2022 is a day Ethiopian Ambassador to China Teshome Toga will likely remember for years. That day was the day he – and Chinese live-streaming star Austin Li Jiaqi, also known as the “Lipstick King” – helped sell more than 11,000 bags of three coffee brands from his country in a second.
It’s easy to think of this as a marketing gimmick promoting Alibaba, one of China’s biggest e-commerce platforms. But it is also an example of a serious trend that deserves to be understood, not least because it also has links and implications for Africa’s new continental free trade area.
The 11,000 sales came on the heels of the eighth Ministerial Conference of the Forum on China-Africa Cooperation (FOCAC 8), just two months ago in November 2021 in Dakar, Senegal – at which one of the authors of this article attended alongside Ambassador Toga and others.
While headlines from Bloomberg and the FinancialTimes focused on major financial commitments made at the conference, among the lengthy speeches and papers released were significant trade commitments that were the precursor to the Ambassador and Lipstick King accomplishment, but did not yet been really digested by African companies and organizations.
New commercial commitments
Let’s explain. New trade commitments set the framework under which these bags of coffee were sold, commitments which Ambassador Toga and others have worked hard to propose and negotiate, and which we believe will impact African businesses in 2022 and the rest of the Lunar New Year of the Tiger.
In the headlines, the documents included a commitment by China to reach $300 billion in annual imports from Africa by 2025. That’s not a particularly big step forward – given that imports, even in 2021, were $106 billion – but this could nevertheless make China Africa’s top export destination, ahead of the EU, not least because the commitments came with three specific measures.
First, China has pledged to open “green lanes” for African agricultural exports to China. Secondly, the country has pledged to explore the recognition of “geographical indications” of African products, and thirdly, it has even announced specific e-commerce ideas – claiming that online shopping festivals to promote African products and a campaign to market 100 African stores and 1,000 African products would all be created.
As we know from running a Chinese market access program for African companies, it’s not just promises or numbers that matter when it comes to working with China, it’s specific details.
Three promises that will boost trade
Rationalization of agricultural imports
“Green lanes” mean that certain entry processes can be streamlined to allow products like coffee to be sold in the Chinese market, minimizing formal tariffs as well as so-called “non-tariff barriers”. » when products cross the border, such as certificates and labels of origin, which can lead to long delays at customs or the destruction of African agricultural products.
Indeed, many important African agricultural exports, such as maize, raw cotton, rice, sugar, wheat, wool and wool fibers are effectively excluded from duty-free regimes for least developed countries. advances.
Beyond that, “geographical indications” are a way to preserve and potentially increase the value of products such as Ethiopian coffee that have special and unique processes that should be recognized as intellectual property in the rest of the world, thus preserving their value, such as Canadian maple syrup or French champagne.
With this commitment, China has become the first country or region to agree to a process of recognition of African intellectual property associated with agricultural products, which means that 11,000 bags of branded coffee could well be sold at much higher values. higher in the future.
Promotion of e-commerce
And last but not least, e-commerce is the only way forward in China, a country where 80% of the population is registered with online outlets, and retailers use online platforms for business-to-business transactions, trends that Covid-19 has necessarily accelerated. This means that the country’s potential market size is huge and growing. Shanghai already has 7,000 cafes, almost double those of New York.
However, when it comes to African products, most Chinese consumers are unaware of what the continent has to offer. This means that all subsidies and platforms for marketing African products to Chinese consumers – as announced in Dakar – can make a significant difference.
So how does this relate to the AfCFTA in 2022, and will the Dakar FOCAC commitments be positive for African trade or not? Could they, for example, encourage a continued focus of African producers on external sales rather than internal trade?
This is certainly still possible, but we believe it is possible to do both at the same time. China’s new policies, although some are ostensibly focused on agricultural products, have the potential for value-added brand entry and therefore create new incentives for regional value chains, particularly if African governments and the Secretariat of the AfCFTA itself is quickly engaging with the Chinese authorities to ensure this.
In the meantime, we can expect a lot more online exploits in the headlines. Perhaps we will see Kenyan and Ethiopian roses being sold in China for its unique Valentine’s Day equivalent on August 4, 2022? Watch this place!