Buckets of ink are spilt every day opining over China’s courtship of Africa. Research reports either aim to keep investors abreast of the frenetic pace of investment or comment on the geo-political and economic fallout, as the world’s second-largest economy outpaces the West in the race for African resources.
But few research houses have fleshed out practical insights on how Africa can attach itself to China’s growth engine and rise up the value chain. This year Standard Bank economists Simon Freemantle and Jeremy Stevens have tackled the vexed issue of Africa’s relationship with the emerging Bric (Brazil, Russia, India and China) economies head-on through its ‘Bric and Africa’ series. Amid fears that the low cost of Chinese industrial production is torpedoing the continent’s diversification drive, the research team in April produced a report that looked at the likely composition and size of China’s domestic consumption pattern in the coming years.
The highly regarded report comprehensively outlined Africa’s export potential, trading agreements with China and examples of African multinationals expanding in the Chinese market. It also listed in full the 454 African export products that, in theory, enjoy preferential access to Chinese markets, according to a 2006 trading agreement.
This is the first time the list has been widely available to non-Mandarin speakers, after Standard Bank’s information request was accepted by the Chinese government – data not provided to the World Trade Organization.
In subsequent months, Freemantle and Stevens investigated the lessons learnt in India’s economic revival and the rise of Brazilian agricultural investment in Africa’s rural potential.
Standard Bank, 20% owned by the Industrial and Commercial Bank of China, has a huge self-interest in accentuating the positive in Sino-African ties. The bank’s insights shed light on how Africa’s courtship by emerging powers could create new investment opportunities.
The research offerings are not in the interests of academics or policy-makers exclusively: the size, composition and pace of Africa’s trade with Bric partners will have profound consequences on stock market returns and sovereign creditworthiness.
Traditionally a stronger player in macroeconomic, exchange rates and credit research, Standard Bank hired Matthew Pearson in February, a founder member of Renaissance Capital’s Africa research team, to lead its beefed-up equity coverage.
WHAT INVESTORS WANT:
In general, investors say they want better analysis of the Nigerian banking system – sell-side researchers spectacularly failed to warn of the crash – and more details on the clean-up operation. Specifically, investors are looking for scenario-based pieces that investigate possible valuations of toxic assets on local banks’ balance sheets to be snapped up by the government’s Asset Management Company of Nigeria.
Investors also want research on the medium-term economic and investment impact of Africa’s latest political and economic union project, known as the East African Union. And above all: more sophisticated macro insights in the vein of David Cowan at Citigroup, who boosts the profile of the bank’s limited Africa research operations with his opinionated commentary.