Chinese Investment in Africa: Neo-Colonists or Economic Heroes
China’s relationship with Africa stretches back a long time to when Mao was in power. At that time, China relied on many countries in Africa for support at the U.N. as they had been alienated by most other countries. However, Chinese investment in Africa was negligible until the “Going Out” strategy was implemented in 1999; encouraging Chinese companies to invest in and work on, projects around the world.
Since then, Chinese trade in Africa has been growing 30% annually, to the extent that, in 2009, China surpassed the USA to become Africa’s largest trading partner with trade amounting to USD198.5 billion. However, despite China being Africa’s main trading partner, Africa still only accounts for 5% of China’s global trade and only 4% of China’s total outgoing foreign direct investment (FDI). Europe and the USA are still China’s most significant trading and investment partners (Africa in China’s Foreign Policy, 2014).
In the past, China’s main focus in Africa was on resources, especially mining and oil. Nowadays, infrastructure has become the priority with companies like Huawei winning contracts to provide telecom services in Kenya, Nigeria and Zimbabwe. Developing power grids has also become important in the bid to support and grow power hungry, Chinese-owned mining interests. In Zambia, a USD600 million hydroelectric power plant is being constructed with the help of Chinese investors (PWC, 2013). Such projects are welcomed as they help to speed up economic development and can provide hundreds of jobs.
Chinese investment in Africa has not always been welcomed with open arms by the target countries. Zambia, the third largest recipient for FDI from China, has long received aid and investment from China and, in the early days, this was encouraged. However, more recently, the relationship between Chinese companies and local communities has begun to turn sour with some people even likening China to the European colonists that used to occupy the African continent.
Chinese companies are accused of not keeping up their social responsibility by not investing in and developing local communities. Many Chinese companies also bring management and other talent over from China rather than employing local staff meaning that technology and know-how is not being passed on to local people. Using Chinese management has led to communication problems between Zambian staff and the management team, causing friction and leading to conflicts.
Chinese businesses are also becoming known for poor working conditions after several major incidents occurred at Chinese-owned companies. There has been a string of protests over working conditions and pay levels. In 2006, 5 workers were shot dead while protesting about the lack of pay rises at their Chinese-owned mining company. In 2010, 11 workers were shot and injured during a protest against low pay and poor working conditions (The Developmental Implications of Sino-African Economic and Political Relations, 2014).
Although the pay level and conditions in Chinese companies have not been found to be much dissimilar from those at other companies, the Chinese incidents have been more high-profile due to the perception that China is taking over Africa. This viewpoint stems from the rapid increase in Chinese investment and immigration into China in the last 15 years. As of 2012, there were approximately 1 million native Chinese who were living in Africa (Africa in China’s Foreign Policy, 2014).
Even though Chinese companies have experienced problems in Africa, China is still an important strategic partner for the continent, especially as China has continued a steady stream of investment and infrastructure building, even as the rest of the world had to pull out due to the financial crisis. Many Chinese companies, with support from the CCP, even managed to create jobs while other foreign-owned enterprises were having to make heavy cuts to their workforce.
China has made itself indispensable to African governments. The country offers investment to Africa through concessional loans on the understanding that the projects it invests in will be either entirely awarded to Chinese companies or will be built in collaboration with Chinese companies, thus securing business for Chinese interests in Africa.
The China-African Development (CAD) Fund, for example, has a policy that all the investments it funds must be in cooperation with Chinese companies. As of 2012, the CAD Fund had invested USD1.6 billion in projects in Africa (Africa in China’s Foreign Policy, 2014).
Investment from China also carries none of the human rights constraints that funds from Western countries hold, meaning countries like Zimbabwe and Somalia are also able to benefit and increase their development.
It seems that Africa’s traditional investment partners (USA, UK, Europe) have been blind to China’s increasing focus on developing African countries and are missing out on many lucrative investment deals. Western countries still appear to hold the view that Africa is a backwater of poor, undeveloped nations however, this is no longer the case, with many countries in Africa weathering the economic crisis better than their rich Western counterparts. With the help of Chinese investment, countries like South Africa and Zambia are now stronger than ever and developing at a break-neck speed.
If the West does not want to miss out on investing in and building up influence in Africa, then Western governments need to wake up and start taking notice of the changes going on on the continent. Otherwise, China, the benefactor of many African countries will become an even more powerful force on the international stage. This is because the 54 African states which make up a quarter of the U.N. will be more likely to support China and China’s policies and political agenda over other countries, especially if their support means they can get China’s help with a new high-speed train line or high-tech power station.
German L., Gumbo D., Schoneveld G., Working Paper: The Developmental Implications of Sino-African Economic and Political Relations: A Preliminary Assessment for the Case of Zambia, Center for International Forestry Research, Bogor, Indonesia: 2014.
Sun Y., Africa in China’s Foreign Policy, John L. Thornton China Center and Africa Growth Initiative, Brookings: 2014.