Trade between Asia and Africa is rising, driven by two key factors. First is huge demand from Asia for commodities exported from Africa. Second is African demand for manufactured goods from Asia.
Rapid economic expansion in China and growth across Asia has led to strong demand for commodities. Last year, Asia-Pacific accounted for 45% of global demand for copper, 39% for aluminium, 50% for tin, 47% for zinc and 29% for crude oil. These are huge figures. Asian demand is even stronger than before the Asian financial crisis hit in 1997. China dominates demand from Asia as it experiences huge growth in demand for commodities, especially from the energy and construction sectors.
Consequently, African countries that benefit most have been exporters of commodities that support these key industries. These commodities are primarily oil, metals and wood. Over the past couple of years, South Africa has grown exports to Asia by over 50%, supported by rising metal exports. Meanwhile Angola's exports to Asia - mainly oil - have surged by over 100% over the same period. Recent developments in the Middle East have also increased pressure on oil importers to diversify their sources of imports. Africa is benefiting from this new paradigm.
However, increasing 'South-South' trade is not only benefiting exporters of core commodities. Senegal stands as proof this. Between 2001 and 2003, Senegalese exports to Asia rose to $270 million from $108 million, mainly due to phosphate exports to India.
But trade between the regions is two-way. Africa provides a ready market for cheaper manufactured goods from Asia. The value of Asia's exports to Africa has risen by 100% since 1996. Here too, China is one of the top three Asian countries exporting to Africa. The type of goods imported from Asia tends to be machinery, electronics, textiles and apparel. But Africa is also an important market for Asian grain.
Almost half of Thai rice exports go to Africa and recent figures show the region consumed 20% of global rice exports. Agricultural commodities could become a key issue to focus on longer term. Although China faces significant problems in meeting energy demand, an even bigger potential problem in the future will be how it feeds its huge population.
For the past decade, Asia has emerged as a big investor in Africa, second only to South Africa. Asian investment in Africa is matched by increasing cooperation in science and technology. The Tokyo International Conference on African Development (TICAD), first held in 1999, highlights this trend. TICAD promotes development initiatives that could help Africa break into the export of manufactured goods. Its inability to do this so far has been a major handicap to growing its share of world trade.
But there are risks to Afro-Asian trade. Over-dependency on Asian demand could significantly affect African economies if Asian demand slackens. Nevertheless, there is evidence suggesting that Afro-Asian trade will flourish in the medium term.