Chinese Investments in Africa are Both Welcome and Worrisome
China’s audacious incursions into Africa, which have manifested in its aid and economic investments in recent years, is among the most widely discussed aspects of its global rise. Although development theorists have credited China’s emergence as a global economic power with its homegrown development policies, its ambitious forays into Africa to push the frontiers of development is welcome, but also worrisome. With investments increasing ten-fold in the past few years, many reckon that China’s return to Africa arose from its identification of the continent as the future engine of global growth. However, controversy has continued to dot the path of the Sino-African economic relations as not a few fear it might be another “colonizing” enterprise.
Even with all the controversies, Africa appears to lag far behind in considerations for Chinese investments. According to UNCTAD Statistics, Chinese investment in Africa reached its height in 2008 when Africa accounted for almost 10 per cent of its total global Foreign Direct Investment from about 4.3 per cent in 2004. But in the following year, the figure fell roughly four-fold and in 2010, the number was almost negligible at 0.3 per cent. A country by country breakdown of Chinese investment in the African continent according to the Heritage Foundation (China Global Investment Tracker Interactive, January 2012) shows that in 2012, China’s investment in Africa focused primarily on five countries – Nigeria, Algeria, South Africa, Democratic Republic of Congo and Niger. Its construction sites in these countries are often flooded with hundreds of thousands of both skilled and unskilled Chinese migrant workers.
The breakdown by country showed that Nigeria has had $15.42 billion net investment from China, Algeria $9.23 billion, South Africa $6.64 billion; Democratic Republic of Congo $6.55, Niger $5.26 billion, Egypt $3.27 billion, Libya $2.68 billion, Zambia $2.49 billion, Sudan $2.210 billion, Ethiopia $1.9. In all of these, among China’s major investors in Africa are CNOOC (Nigeria), Sinopec (Angola), China Railways Construction (Nigeria), Sinomach (Gabon), CITIC and Chalco (Egypt), China Nonferrous (Zambia), Minsheng Bank (South Africa), SinoSteel (Zimbabwe), CNPC (Niger and Chad), and China Metallurgical and Sinohydro (DRC). All these enterprises invested in Africa actively in the period 2005–2008, but in 2009– 2010, their presence waned and in 2011, the only big Chinese investor in Africa was the China Railways Materials Commercial Corporation in Sierra Leone with total investment of $260 million.
Controversy has trailed the contractual agreements with these new-found Chinese enterprises in Nigeria. For instance, when the Nigerian government did the last oil bid round, most of the Chinese and other Asian companies promised out-of-the-box investment in other sectors of the economy, but none has been fulfilled. Some of those enticing promises will never be met because the companies involved have long left the shores of Nigeria. But trade between China and African countries has continued to surge by an average annual rate of 30 per cent for much of the past decade, driven by China’s appetite for oil and minerals, and its sales of clothes, cars, telecommunications and other goods to African markets. Investments in mineral or oil fields must go beyond simply buying up natural resources. In their attempt to attract investment from China, African countries must note what is happening around the world and not restrict investment drive with China to oil, gas and mining.
Britain, France and Germany have recently extended olive branches to China, but France has at least one major advantage over its neighbors: It’s particularly well-poised to cooperate with China on investment in Africa, with historical advantages to serve as a springboard for the Asian power’s ambitions on the continent. According to French foreign investment and jobs data, nearly 200 Chinese companies had operations in France as of last year, making it the country’s eighth-largest investor. Since 2010, China’s investment in France has steadily grown, at a rate of 6 percent between 2012 and 2013. On a trip to China, a French official observed that Chinese companies lack a basic understanding of Africa. As a past colonizer of many African countries, France has had a presence on the African continent for nearly 150 years compared to China’s mere 20. And China is often scolded by the West for some of the ways it does business there, without sufficient attention to local factors.
In a book on this economic relationship, Deborah Brautigam notes that China’s success as a developing country in reducing poverty and achieving rapid economic growth makes it an attractive and credible partner for African nations. Brautigam makes the point that even as the developmental impact of Chinese aid and economic cooperation varies across Africa, the “deciding factor” is not so much China as the country in question, and the stability of its government.
Chinese Premier Li Keqiang gave a promise recently at the World Economic Forum (WEF) held in Abuja, Nigeria that his country would continue its assistance in providing robust infrastructure transformation for Nigeria and other African states. To signal how seriously China takes its growing ties with Africa, Keqiang announced new funding commitments of $12 billion to Africa. He added, “We will add $10 billion to our already committed credit lines to reach a total of $30 billion and put an extra $2 billion into the China-Africa Development Fund to reach $5 billion. We will provide 18,000 scholarships to Africa and train 30,000 professionals of various types. The Chinese government means what it says, our co-operation with Africa will be based on mutual benefit.”
According to the Chinese leader, the Chinese and African economies are complementary to each other, with Africa needing investments, and China having surplus. To realise inclusive growth infrastructure, especially transportation, must be at the fore front, and he said China would assist Africa in building high-speed rail networks. Africa currently has 23 percent of the world’s landmass, but only 7 percent of global rail lines. China would also provide assistance for building and expanding Africa’s express and motorways, as well as build out a regional aviation network for the continent. “China proposes a China-Africa regional aviation plan through an aviation joint venture with African partners. China will also support the movement of labour-intensive Chinese industries and enterprises to Africa to help with job creation,” he said, and added that all the Chinese assistance would come without political strings attached.
“We will not interfere in the local politics of any African country, or ask Africa for things which are impossible to observe or do. We will also ask Chinese firms to abide by the environmental and other laws of their host nations,” Keqiang said. It was the Chinese premier’s first visit to Africa since his emergence in 2013, during which he also visited Kenya and Ethiopia. Many expressed the optimism that these promises rendered amid a standing ovation at the WEF summit, would be met in the years to come. That would be the only way to douse the present skepticism surrounding the Asian country’s involvement with the continent, which had a chequered history of exploitation with colonizers.
It is important to note that the investments in Africa and promises of more, create both challenges and opportunities. Now is a crucial time to ensure that regulatory agencies and lawmakers in both recipient countries and China adhere strictly to good practices in order to avert unwarranted harm to the environment, human rights, and local communities. China is a relatively new actor in development finance in the global economy, therefore, it is well placed to benefit from the lessons and experiences of other countries. There are many examples of foreign investors and companies creating or becoming embroiled in significant financial, environmental, and social setbacks in emerging economies. A few examples would suffice: Royal Dutch Shell in Nigeria, Shougang Group in Peru, and the Ilisu Dam in Turkey are corporations trailed by controversies owing to their practices. Also, the issue of shipping large contingent of both skilled and unskilled Chinese migrant workers into Africa should be closely examined. The continent is already home to millions of unemployed youths with few good prospects in sight.