1. Introduction
The Forum on China Africa Cooperation (FOCAC) remains the longest and the most important standing mechanism for cooperation between China and Africa. FOCAC was established in 2000 at the request of African governments for more coordination in their bilateral relationships with China, there is a belief and narrative that FOCAC itself has strengthened the cooperation between China and African countries. FOCAC meetings over the years have resulted in different initiatives and mechanisms (Figure 1).
The 2021, the eighth FOCAC Ministerial Conference (FOCAC 8) was held under uniquely difficult circumstances – the Covid- 19 pandemic – which was the biggest heath crisis facing the world at the time and was simultaneously driving the world economy into a recession that would impact African economies the most. At the same time, FOCAC 8 seems to have marked the turning point of China – Africa relations, at least when seen from the array of important issues covered in the FOCAC 8 talks. The outcomes generally focused on infrastructure, lending, climate change, green lanes, debt, boosting intra-Africa trade, security. There was also a focus on China’s vision 2035.
One of the notable aspects of FOCAC 8 was for its heavy emphasis on trade that specifically reflected key African priorities laid out in frameworks such as Africa Agenda 2063 and points raised in dialogues between African leaders in the lead up to FOCAC 8.
Most African countries had large trade deficits with China even prior to Covid-19, which in many ways put a strain on the Africa-China relationship, as it made many African countries heavily reliant on Chinese imports whilst exporting little of value to China. The negative consequences of this trade imbalance were thrown into stark relief in the wake of Covid-19. In turn, trade facilitation measures to reduce trade balances between African countries and China become even more essential.
This brief analyses FOCAC 8’s trade facilitation measures that can support African Small and Medium Scale Enterprises (SMEs). Specifically, it looks at logistics infrastructure and supply chains improvement, improving China market access and trade finance. The analysis takes the following format. Chapter 2 provides context to the challenges regarding Africa-China trade prior to FOCAC 8 to explain the importance of the trade pledges. This is followed by three chapters that each examine a major trade facilitation pledge at FOCAC 8. Chapter 3 focuses on the green lanes and its implications for African producers accessing Chinese market; Chapter 4 looks at how shopping festivals on Chinese e-commerce platforms are helping drive a demand for African products in China and Chapter 5 discusses the financing to support African exports to China. Finally, Chapter 6 makes conclusions and recommendations. The report is based in desk research, and analysis of empirical data.
2. Pre FOCAC 2021 Challenges
The FOCAC 8 was held in the wake of the Covid- 19 pandemic, which had caused health and economic challenges for African countries. The impact of Covid-19 also heavily impacted Africa-China trade specifically.
In terms of trade between African countries, the pandemic exposed further the challenges that African businesses have experienced in their quest to access the Chinese market. Research shows that over the past decade, as China’s ever-increasing consumer market has developed a growing appetite for unique tastes and flavours including those from Africa and this demand has created opportunities for many African economies. Nevertheless, Africa is still one of China’s smallest trading partners. Although Africa’s agriculture trade with China has grown at an average annual rate of 17.3% from 2000 to 2018, reaching $6.92 billion, this is less than half of the $18.48 billion that China imported from the ASEAN in 2018. Trade of value-added products is even less, and apart from roasted coffee and South African wine, any other value-addition African product in China is unheard of.
African products face several the challenges when accessing China. First is the supply side constraints. African countries face challenges in developing their agricultural sectors especially with the majority of Africa’s agricultural sector is comprised of smallholder farmers, whose individual ability to break into large international markets, such as China, is limited.
Second is Non-Tariff Barriers such as China’s stringent Sanitary and Phytosanitary Standards which African products must successfully meet before accessing the Chinese market. Many African producers face challenges in meeting some SPS requirements for selected agricultural products that sometimes require purchasing expensive technology to meet the standards. For instance, it took more than two years for Kenya’s avocado farmers to comply with Chinese standards.
Third, African businesses are in most cases not familiar with the customs procedures such as the bill of lading, the invoice, the packing list, the customs declaration, the insurance policy, the sale contract, and the inspection certificate of the AQSIQ (General Administration of the PRC for Quality Supervision, Inspection, and Quarantine) or other licenses of safety and quality.
Fourth is the logistical challenges faced in the export of products to China including the packaging and transportation needs as well as the knowledge of the digital infrastructure which is essential for e – commerce transactions.
Finally, most Chinese consumers are not aware of what agricultural and value-added products Africa has to offer and favour products from more well-known regions, such as Europe, Asia, and the USA. Thus, there is low demand for African products that reduces export opportunities for African SMEs.
For these reasons, the FOCAC pledges are regards green lanes, are hugely important and have the ability to overcome the key challenges that prevent African SMEs from exporting more goods to China and in turn contribute to boosting their domestic economies. The next chapter discusses these pledges in more detail.
The FOCAC 8 was held in the wake of the Covid- 19 pandemic, which had caused health and economic challenges for African countries. The impact of Covid-19 also heavily impacted Africa-China trade specifically.
In terms of trade between African countries, the pandemic exposed further the challenges that African businesses have experienced in their quest to access the Chinese market. Research shows that over the past decade, as China’s ever-increasing consumer market has developed a growing appetite for unique tastes and flavours including those from Africa and this demand has created opportunities for many African economies. Nevertheless, Africa is still one of China’s smallest trading partners. Although Africa’s agriculture trade with China has grown at an average annual rate of 17.3% from 2000 to 2018, reaching $6.92 billion, this is less than half of the $18.48 billion that China imported from the ASEAN in 2018. Trade of value-added products is even less, and apart from roasted coffee and South African wine, any other value-addition African product in China is unheard of.
African products face several the challenges when accessing China. First is the supply side constraints. African countries face challenges in developing their agricultural sectors especially with the majority of Africa’s agricultural sector is comprised of smallholder farmers, whose individual ability to break into large international markets, such as China, is limited.
Second is Non-Tariff Barriers such as China’s stringent Sanitary and Phytosanitary Standards which African products must successfully meet before accessing the Chinese market. Many African producers face challenges in meeting some SPS requirements for selected agricultural products that sometimes require purchasing expensive technology to meet the standards. For instance, it took more than two years for Kenya’s avocado farmers to comply with Chinese standards.
Third, African businesses are in most cases not familiar with the customs procedures such as the bill of lading, the invoice, the packing list, the customs declaration, the insurance policy, the sale contract, and the inspection certificate of the AQSIQ (General Administration of the PRC for Quality Supervision, Inspection, and Quarantine) or other licenses of safety and quality.
Fourth is the logistical challenges faced in the export of products to China including the packaging and transportation needs as well as the knowledge of the digital infrastructure which is essential for e – commerce transactions.
Finally, most Chinese consumers are not aware of what agricultural and value-added products Africa has to offer and favour products from more well-known regions, such as Europe, Asia, and the USA. Thus, there is low demand for African products that reduces export opportunities for African SMEs.
For these reasons, the FOCAC pledges are regards green lanes, are hugely important and have the ability to overcome the key challenges that prevent African SMEs from exporting more goods to China and in turn contribute to boosting their domestic economies. The next chapter discusses these pledges in more detail.
3. Focus on the Green lanes and the implications for African brands accessing Chinese markets
In FOCAC 8’s Dakar Action Plan, Beijing announced the opening of “Green Lanes” to increase African agricultural exports to China by “speeding up the inspection and quarantine procedures for agriproducts, and further increasing the scope of products enjoying zero-tariff treatment for the least developed countries (LDCs) having diplomatic relations with China.” Green lanes are intended to help fulfil another FOCAC8 pledge – “to reach US$ 300 billion in total imports from Africa to China by 2024, compared to US $5.03 billion worth of agricultural imports from Africa in 2021.” Also, at FOCAC 8, China announced giving free taxation to 98% of products from Least Developed Countries (LDCs) in Africa. In the past five years, the top African agricultural exporting countries to China are Sudan, South Africa, and Ethiopia (Figure 2), with the most popular agricultural exports, including oleaginous fruit, coffee, ground nuts, mollusks, and frozen fish. Even though overall, a trade deficit still exists between China and African countries, this deficit has been decreasing over time, and the newly announced Green Lanes initiative seeks to further decrease this imbalance (Figure 3). Although much progress has been made, there are several structural factors that continue to impede Sino-Africa agricultural trade.
Figure 2: Top 10 Agricultural Exports to China 2015-2021
Source: UNCOMTRADE
Specific actions that underline Green Lanes include: 1) Prioritising African agricultural products for risk assessment, 2) Accelerating the risk assessment process for the same product from different countries or similar products from the same country, and 3) Simplifying the registration process for enterprises that already produce products with a market entry permit into China. Additionally, China committed US$ 10 billion in trade financing to support African agricultural exports to China and to build a pioneering zone for in-depth China-Africa trade cooperation.
Figure 3: China-Africa Agricultural Trade Deficit 2010-2022
Combined, these trade initiatives are a step in the right direction to correct Africa’s overall trade imbalance vis-a-vis China. Following FOCAC 2021 announcements, several African agricultural products were allowed market access to China. For example, Kenya signed a Phytosanitary agreement with China in January 2022, which allowed Kenya to export fresh avocados to China for the first time. The Chinese government reduced tariffs from 30% to 7%. Even though only 15 Kenyan traders of Haas avocados were approved, it still impacted Kenya’s overall horticultural export values, which grew by 3.9% in 2021. More agricultural exports to China moving forward will undoubtedly increase this value.
Similarly, during President Hassan’s November 2022 visit to China, Tanzania signed two agreements that include a protocol on inspection, quarantine, and veterinary sanitary requirements for the export of wild aquatic products from Tanzania to China, and a protocol of phytosanitary requirements for the export of fresh avocados like Kenya. The 98% duty-free treatment provides a strong incentive for Tanzanian avocado exporters. According to China’s White Paper on China-Africa Cooperation published in 2021, over 350 kinds of agricultural products from Africa can be exported to China. As Beijing increases its diplomatic activities with other countries following Xi’s October re-election, we can expect to see more similar agreements signed between African countries and China.
Yet there are still more structural changes needed to realize the potential of Green Lanes and for it to widely benefit African traders and farmers. On the African side, inadequate production and processing capacities, immature logistic chains, and limited branding constrains its potential to increase exports to China. On the China side, despite the many new trade facilitation initiatives, the Chinese market remains inaccessible to many African agriproducts due to stringent regulations and mounting trade barriers exist which impede import growth.
Many African countries have such low production capacities and cannot meet the Chinese demand for products like dried chili and beans. The low added value of African products is also a constraint to Africa-China trade cooperation as raw agriproducts often take up more space and weight in the container and are more vulnerable to international price fluctuations. In terms of logistics, many African countries still have immature cold-chain logistic capabilities, which increases the cost of exporting agriproducts to China (i.e. by air), which is exacerbated by the long distance between the two regions. Finally, many African agriproducts have weak branding and marketing capabilities making them less competitive and appealing than products with strong branding.
Although China’s Green Lanes have made African agriproducts more accessible in China, there are still significant bottlenecks that impede African market access to China. Firstly, very few African exporters can meet China’s stringent phytosanitary standards for the import of agriproducts which would require additional investments in new technologies to reduce agricultural residue. Additionally, the tariff policy for certain key African agriproducts like cashew nuts and cocoa beans is still relatively high for many African countries. In some cases, tariffs are as high as 30%.
So, what can African countries and the Chinese government do to realize the potential of Green Lanes and enhanced agricultural trade between China and Africa? Firstly, African governments and Agri-exporters would do well to familiarize themselves with the relatively high phytosanitary standards of China regarding agricultural imports and lobby the Chinese government to continue increasing access to the Chinese market. Secondly, they should make the necessary investments in technologies that can process agriproducts and decrease agricultural residue so they can be imported into China. Lastly, African embassies and brands can collaborate with Chinese marketing experts to increase the appeal and reputation of African agricultural products in China. Beyond signing more SPS agreements with African countries, decreasing tariffs, or reducing trade barriers, the Chinese government can provide more technical training to African exporters to help them meet China’s stringent agricultural import regulations. Additionally, China can help boost African countries’ production and agro-processing capacities to make African agriproducts more exportable to China and resilient to international price fluctuations of commodities.
As mentioned above, the pledged “green lanes” have also come into fruition in August 2022, which again could be a sign of where the financial pledge is being channelled. A portion of the proposed 10bn financial pledge should be maintained and even increased to expand the scope of the “green lanes” to ease the export process to China and ensure African produces are able to fulfil supply demands continuously and efficiently. This will help African producers to remain competitive against imports from other regions, such as Asia, that has both the advantage of geographical proximity and well-funded, high-tech trade channels to China.
4. Online shopping festivals promoting African products and the implications for African brands accessing Chinese markets
Online shopping festivals and campaigns to promote African products and brands was announced at FOCAC 8 to increase Chinese consumer demand for value-added exports, and again, help fulfil the pledge “to reach US$ 300 billion in total imports from Africa to China by 2024.”
This is because most exports from Africa to China are still made up of unprocessed, lower-value products, such as, minerals, metals, agricultural products, crude oil, and agricultural products from a handful of countries. In fact, South Africa, Angola, the Democratic Republic of the Congo, and Zambia accounted for 71% of Africa’s exports to China in 2021 of the aforementioned products.
For this reason, up until recently, most Chinese consumer have been unaware of what value-added products Africa has to offer which has sustained a very low demand for processed and well-branded African products in China. This is a missed opportunity for African brands looking for new export markets given China has one the fastest growing middle-class populations in the world, and one that is keen to spend their disposal income on foreign products. Thus, the promotion of value-added African products, at this moment in time, is arguably more important than the sales volume to increase demand over time.
Because African countries have consistently pushed for China to do more to address the trade imbalances between African countries and China, the Chinese government has responded by sourcing buyers and promoting a selection of value-added African products in China. Given the importance of innovating Africa’s agricultural sector and that African value-added, agricultural-based products such as roasted coffee, wine, dried mango, and roasted nuts have high, consistent demand in the Chinese market, these products have been the focus of these promotion and sales. Consequently, within the past five years, exports of value-added products from Africa to China have increased.
For example, China is quickly becoming a main destination for Ethiopian coffee as both the volume and value has been rapidly growing each year. In 2021, Ethiopia exported 11,935.65 metric tons of coffee to China, earning 65.31 million U.S. dollars, up by 84% year on year. Similarly, South Africa’s wine exports to China has more than doubled over the past two years and increase by 193% in volume and 125% in value in 2021.
However, there is still much work to be done, as imports, such as Ethiopian coffee and South African wine still lag far behind other regions. For example, French, Chilean and Italian wine still dominate China’s wine imports (Figure 4) and China’s coffee imports by Malaysia, Vietnam and Japan.
Figure 4: China’s 2021 top wine imports by country.
Source: https://www.statista.com/statistics/1008210/china-wine-import-share-by-country/
This is mainly because these countries have been promoting their exports to Chinese consumers consistently for a much longer period of time. Africa’s value-added exports, on the other hand, have only recently started to be sold and promoted largely through B2B channels, which has reduced Chinese consumers’ awareness of and exposure to these products. Thus, online shopping festivals and campaigns to sell and promote African products and brands can play a key role in increasing a demand for value-added African products in China.
The “4th Brand and Quality Online Shopping Festival and Quality African Products Online Shopping Festival,” the result of the pledge at FOCAC8, was held from April 28th to May 12th, 2021. During this festival, more than 100,000 African brands were showcased on over 300 Chinese e-commerce platforms. This was the biggest online shopping festival for African products and brands in China in terms of the number of products, brands, e-commerce platforms, media campaigns and activities involved, as well as its reach across China and East Africa. Agricultural-based, well-branded and value-added products such as South African wine, tea, roasted coffee, Rwandan chili oil, roasted nuts and dried fruits were the focus products.
This online shopping festival was officially announced as being in accordance with the requirements of MOFCOM and designed to “expand domestic demand, coordinate the work of epidemic prevention and control and online consumption promotion, and to promote the continuous recovery and upgrading of consumption, and better serve the construction of new development pattern.”
The shopping festival consisted of activities and events held in several Free Trade Zones focused on Africa-China trade, such as in Hunan, Zhejiang, and Anhui provinces. The events were livestreamed on WeChat, CCTV and CGTN, as well as China’s biggest e-commerce platforms, namely Alibaba. The reach of these events covered China and East Africa.
The events and activities included:
- Influencers and African students introducing African value-added products and brands during live-streaming events.
- Offline exhibitions of value-added African products where Chinese businesspersons were invited to learn about the products and brands.
- Broadcasting of the brands’ promotional videos on social and media channels (led by Kiliselect).
- A coffee tasting and business match-making event.
- Sales festivals on e-commerce stores found on Tmall, Jingdong and Pinduoduo, discount coupons on Douyin and Meituan and offline sales in the permanent exhibition centres of African products.
- Livestreaming of Chinese consumer good experts introducing products from Kenya, Rwanda, Ethiopia, and South Africa on Douyin.
- Ceremonies and broadcasting of speeches by the leaders of MOFCOM, the African ambassadors to China the Chinese ambassadors to African countries and the leaders of the Provincial Department of Commerce.
Africa Reimagined (AR), our flagship China market entry programme for African premium African brands, also participated in the shopping festival. Four of the African brands that AR works with displayed their products in the Hunan Gaoqiao Grand Market’s permanent exhibition centre to be introduced to businesspersons and three of the African brands that AR works with had their promotional videos selected to be broadcasted on Chinese media across China and East Africa.
The shopping festival reportedly “resulted in high sales volumes and awareness raising of African products across China,” although exact figures are unknown. Since, the festival exports of products, such South African wine and Ethiopian coffee have continued to rise, which suggests an impact could have been made. For products, such as Kenya’s Java House roasted coffee, roasted nuts and chilli oil that were featured in the more specialised and high-profile events (influencers introducing African products during livestream events), these achieved more success and become best sellers on Chinese e-commerce platforms, such as, Kiliselect.
Overall, these shopping festivals are an extremely cost-effective way for African brands to promote their products to consumers across China to boost demand for their products although their impact could be improved. Firstly, these festivals are intermittent whereas effective advertising needs consistency. Thus, regular advertising of the products promoted during the shopping festivals and the e-commerce platforms they are sold on, needs to be carried out throughout the year.
These products should also be advertised on a wider number of platforms. As well as advertising on the e-commerce platforms themselves, apps such as “Little Red Book (Xiao Hong Shu)” should also be utilized. Little Red Book is China’s answer to Instagram and Pinterest in one. Users and influencers post pictures and videos of them using and reviewing products resulting in trusted user-generated content, word of mouth advertising, and online community-building. It is an extremely important and influential platform for foreign brands to introduce new products into the Chinese market and gain a following.
Now that African consumer products, such as roasted coffee and wine have grown in popularity, these shopping festivals could start to diversify the products they promote beyond food and beverage items, for example, organic skincare and fashion items, both of which are popular luxury items in Chinese market and which Africa has many high-quality brands in both sectors.
Finally, MOFA and MOFCOM could also consider opening a cross-border e-commerce store, which will also participate in the shopping festival, which would allow a larger number and variety of African brands to promote their products in China, as brands that have not yet entered the Chinese market but wish to do so could also participate.
5. 10bn of trade financing to support African exports to the Chinese market
Pledging to increase African exports to China is one thing but turning this pledge into reality is quite another. In short, exporting and selling goods in China can be a lengthy, complex, and expensive process. Furthermore, China’s vast consumer market is vast and competitive, which means marketing and advertising costs can be high to successfully drive consumer demand and find business partners. Both are out of reach for many African producers and African SMEs, and accordingly, African, and Chinese policy makers have recognised that there is a need to provide financing for both.
Since the pledge was made in November 2021 at FOCAC8, it has been unclear where and if this 10bn trade financing proposal has been spent apart from financing of the “Green Lanes” as mentioned above. However, we have noticed some other significant progress in terms of increasing and diversifying African exports to China since FOCAC8 that may have been supported by the financial pledge. These changes will now be presented alongside some recommendations.
Agricultural products have been the focus of new trade deals between African countries and China. For example, Tanzanian President Samia Suluhu Hassan secured a new trade deal to export avocados to the Chinese market during her trip to China and Kenya has started successfully exporting their avocados to China, Rwanda has secured several trade deals with China for its dried chilli’s and South Africa its fruits.
Exporting agricultural products to China involves a lengthy process to ensure the products meet China’s high import standards and increasing production to meet China’s large supply demands – both of which are extremely expensive and too costly for many African producers. Thus, financial support is necessary if the trade pledge is to be fulfilled. As Rwanda, Kenya, and South Africa have all been successful in passing the requirements and increasing their exports of their produce to China in 2022. This could be a sign that financial support has been given to support African producers to help prepare their produce to be exported to the Chinese market.
To ensure this trend continues and expands to other countries, portions of the 10bn trade financing pledge to support African exports to China should be channelled through organisations such as Kenya Plant Health Inspectorate Service and other similar organisations in a wider range of African countries to provide funds for agriculture producers to purchase the chemicals and technology needed to meet China’s export requirements. Kenya Plant Health Inspectorate Service and other similar organisations in different African countries can also be given funds to purchase equipment and machinery to help properly prepare and process products for exports from Chinese suppliers to serve the policy of Sino-African win-win cooperation.
Finally, another portion of the pledged finance is also needed to promote these products to create demand in the Chinese market. As mentioned above, additional funding is needed for continuous and widespread marketing and advertising of African products to Chinese consumers, as well as potential Chinese business partners. Accordingly, another emerging trend since FOCAC8, as examined above, is much larger scale and better funded shopping festivals and promotion campaigns for African products and brands, which could be funded by the financial pledge.
Another emerging trend in 2022 has been an increase in business match-making events between African SMEs and Chinese business partners. The Chinese MOFA and the MOFCOM have been hosting business match making events in partnership with Chinese banks, such as the Industrial and Commercial Bank of China (ICBC) and the International Trade Centre (ITC). For example, in July 2022, an “African wine and coffee tasting & business matchmaking event” was held in the Hunan Gaoqiao Grand Market to connect ten South African wine brands and ten African coffee brands to almost 60 Chinese agents, importers and distributors who are keen to promote and sell such products in China, as there is an increasing demand for roasted African coffee and South African wine in China.
These events are beneficial in the sense that most African brands that participate are able to find a quality business partner that can them sell and distribute more of their products in China. This is because the organisers, conduct a thorough selection process to ensure that the potential business partners are experienced, and the brands, high quality and prepared for the Chinese market, and that each suit one another’s interests.
On the negative side, the only brands that can participate are brands that already have a Chinese business partner (agent, importer, or distributor), stock in China and ideally a registered Chinese brand name. This limits the type and number of African SMEs that can participate and benefit from these opportunities. More funding should be directed to these events to make them more frequent and for other African consumer goods, such as roasted nuts, chocolate, shea butter skincare products and dried fruits. Funding can also be used to support high-quality African brands with preparing for the Chinese market, for example, funding and support with registering brand names and trademarks and reduced tariffs for imported products so that they have a sufficient supply in China.
6. Conclusions and Recommendations
The following pledges have already shown that they can overcome supply chain, demand, and non-tariff barriers to trade. For example, the Green Lanes have started allowing certain agricultural products to rapidly enter China through Hunan province and the shopping festivals have contributed to roasted African coffee becoming hugely popular in China and to a lesser extent, South African wine, roasted nuts and Rwandan chilli oil.
- The first recommendation is to expand the scope of the products that are heavily promoted during the e-commerce shopping festivals and then can access the Green Lanes.
- Secondly, is increased financing for African producers to obtain, install and use the technology needed to meet China’s SPS requirements.
- Third, increased funding to expand trade enhancing measures such as creating more free storage space in Chinese ports for African products and more agencies that can support African exporters with registering for their GACC numbers.
- Fourth African countries should increase information exchange especially as regards China’s standards and make this information available for the exporters who are accessing the Chinese market.
