Trade balances in North Africa remain in China’s favour

North Africa offers Chinese companies the opportunity to “Europeanise” goods it makes, which benefit from easier access to European markets than products made in China.
Saturday 20/07/2019
Growing footprint. Chinese President Xi Jinping (R) and Moroccan Prime Minister Saad Eddine El Othmani at a meeting at the Great Hall of the People in Beijing, last September. (AFP)
Growing footprint. Chinese President Xi Jinping (R) and Moroccan Prime Minister Saad Eddine El Othmani at a meeting at the Great Hall of the People in Beijing, last September. (AFP)

Economic exchange is the fundamental driver of China’s relations with the Middle East though strategic considerations are no longer absent. The aim of its grand political strategy known as the “Great Rejuvenation of the Chinese Nation” is a self-assigned mission to return China to the prosperity and prestige it enjoyed before the encroachment of European colonialism in China in the 19th century.

China defines the region as “West North Africa” and includes all countries from Sudan to Morocco in it. Beijing has established strategic partnerships with Morocco, Sudan, Algeria and Egypt.

The quest for resources to fuel its industrialisation — hydrocarbons from Algeria, Sudan and Libya; iron ore from Mauritania; copper zinc, lead and fertilisers from Morocco — cannot hide the special importance of Sudan, which sent 94% of its exported oil to China in 2016. Libya used to export 10% of its oil to China, a figure that collapsed in 2011 but shot up to $3.5 billion last year as oil production in Libya increased.

Trade balances everywhere are in China’s favour. Its aggregate exports of $25 billion are worth five times its imports. The Chinese commercial surplus is noteworthy in the case of Algeria, which imports an average of $7 billion-$8 billion of goods annually and exports around $1 billion.

Chinese exports of $1.4 billion to Tunisia are not matched by imports worth a meagre $25 million. Tunisian exports to China were multiplied by one-and-a-half from 1999-2015 but imports grew by a factor of 35. Machinery of every kind account for more than half of all imports and displaced French, German and Italian equivalents because they are cheaper. Chinese imports account for 28% of Tunisia’s trade deficit.

There are two ways to counter this: make Tunisia more attractive for Chinese tourists and encourage investment from the Middle Kingdom. The number of Chinese visitors to Morocco and Tunisia has been increasing.

China’s presence in the region is often focused on infrastructure — big-ticket projects such as the East West Highway and Africa’s longest railway tunnel in Algeria, bridges in Morocco and Egypt’s new administrative capital.

Under former Tunisian President Zine el-Abidine Ben Ali, discussions with China led to projects that included a large new port at Enfidha and upgrading the Tunis-to-Algiers railway. Since 2011, the Chinese have failed to find in the Tunisian government an interlocutor of influence and projects get waylaid in the morass of bureaucracy and corruption, which characterises that country’s economic management.

Where there are big-ticket projects, the number of Chinese workers is much greater — 90,000 in Algeria where Chinese companies have done a lot of work in construction over the past 20 years and 35,000 in Libya until they were evacuated in 2011. In all these countries the mobile company Huawei is making inroads.

In a strategic sense, China is keen to be present in Tunisia and Morocco because those countries offer easier access to the EU markets. Hence, its interest in Tangier and Kenitra, which have become major hubs for the assembly of cars for re-export across Africa.

Such a region offers Chinese companies the opportunity to “Europeanise” goods it makes, which benefit from easier access to European markets than products made in China.

As Morocco increases Tanger Med 2’s container handling capacity to 4.5 million tonnes by the end of the year, the port will become the primary port destination in the Mediterranean and is expected to soon surpass the two largest commercial ports in the region — Algeciras and Valencia in Spain.

Equally important was the launch in March 2017 of Mohammed VI Tangier Tech City, a 2,000-hectare project in which 200 Chinese companies specialising in aeronautics, vehicle spare parts, textile and food processing will eventually constitute China’s biggest industrial platform in Africa. This project is a joint venture between the Chinese group Haite, BMCE, one of the kingdom’s two leading banks; and the Tangier-Tetouan regional government.

Since November, Tangier is linked to Casablanca, which boasts an active Casa Finance City whose focus is Africa, by the first fast rail train built in Africa. Tunisia could provide the basis for the Chinese manufacturing of photovoltaic solar panels, train and metro carriages and fertiliser, which Tunisia produces from its phosphate rock. Here again, Morocco’s state phosphate and fertiliser company OCP is way ahead in its joint ventures with China.

Tunisia suffers from another problem, the massive illicit import of Chinese manufactured goods, from toys to white goods and counterfeit luxury brands. These goods enter the ports in Tunis and Sfax illegally, as they do from Libya where Misrata serves as the port of entry from Istanbul, the two having retained links that go back to Ottoman times.

Smuggled Chinese goods come in a wide range of quality and are very attractive to Tunisians but the problem has little to do with China. As long as Tunisian authorities fail to regain control of their major ports, they not only lose money from unpaid customs dues but allow on to the market goods that compete directly with domestically manufactured ones, thus leading to factory closures and loss of jobs.

Tunisian Minister of Finance Fadhel Abdelkefi fell on his sword two years ago when he tried to clean up the Augean stables of the customs at the port of Rades. That said, all North African ports are finding it very difficult to adapt to new World Trade Organisation rules — low customs dues but tighter surveillance.

In Tunisia, beyond the porosity of the Libyan border large quantities of cigarettes and petrol are smuggled across the country’s south-western border with Algeria. This results in large tax revenue loss for the Tunisian government. This situation will only improve if the government dares to confront the powerful interests that protect such smuggling.