China trades investment for resources in Africa

Western countries increasingly see Beijing’s relationship with the continent as a threat

Kenyan men work  on a road being built by China Wuyi, a Chinese state company: China has played a crucial role in Africa’s economic development over the past 15 years. Photograph: Antony Njuguna/Reuters

Kenyan men work on a road being built by China Wuyi, a Chinese state company: China has played a crucial role in Africa’s economic development over the past 15 years. Photograph: Antony Njuguna/Reuters

 

The crucial role China has played in Africa’s economic development over the past 15 years has become so pronounced that western countries now see it as a significant threat to their interests across the continent.

The Asian giant’s stated objectives in Africa are to promote development and mutually beneficial trade, much like the goals cited by the US and European Union in regard to their involvement on the continent. But the manner in which China goes about its business there is very different to that of western nations.

China has adopted a policy of “non-interference” when getting involved with African nations, which means it usually does not publicly intervene in countries’ internal affairs or impose political preconditions as part of its rules of engagement with them.

This approach to Africa is often criticised by observers from the West, who say it allows China to ignore human rights abuses and undemocratic practices that take place in the recipient nations.

Rather than being mutually beneficial, critics say the strategy is designed to tap the continent’s vast reservoir of natural resources and that it enriches an African country’s elite class rather than benefiting the general population.

Internal affairs

Sudan

According to a 2013 research paper by South Africa’s Institute of Security Studies, China’s approach to the continent “has proved inviting to African leaders weary of Western meddling, and [it] allows China to maintain influence in parts of Africa that the West views as undemocratic”.

Chinese state-owned enterprises undertake their government’s infrastructure projects across Africa, which are usually funded by Chinese state loans that are repaid through the export of resources by recipient countries.

Smaller privately owned Chinese firms also invest in countries where opportunities can be maximised, says Edinger. But due to shifts in local policies, they increasingly have to partner with local companies. This has had a knock-on effect of increasing China’s private investment into Africa, which she believes could be an ongoing trend.

Chinese state-owned enterprises usually employ workers from China, an approach that has led to anti-Chinese sentiment emerging in countries such as Zambia and Angola.

In addition, a number of these companies have faced international criticism for their lack of compliance with labour, safety and environmental laws, but so too have companies from the West.

Edinger says that one of the key drivers of China’s move into Africa was that it was unable to access energy sources it needed to sustain economic growth from Iraq and other countries locked down by the US.

“As a result, it invested in markets such as Angola and Sudan for energy security. China probably does not see Africa as the stage to conduct power struggles with the US, but it certainly has invested in a lot of relationship capital through political ties and the economic boost it has given a large number of African countries.

Anti-Chinese sentiment

In terms of foreign direct investment in Africa, China’s stock increased more than 20-fold between 2004 and 2012, from $900 million (€720 million) to $21.7 billion (€17.4 billion), says Edinger. Top recipients have included South Africa, Zambia, Nigeria, Algeria, Sudan, Angola and the Democratic Republic of Congo.

“These countries are predominantly resource-rich. However, China’s investment focus in Africa has been diversifying to include sectors spanning agriculture, finance, IT, tourism, healthcare, and so forth. All African economies with diplomatic relations with China have been recipients of Chinese foreign direct investment and are trading with the country,” she says.

According to Prof Ron Sandrey, a trade and agriculture economics associate with South Africa’s Trade Law Centre, what is interesting about the Chinese model of engagement with Angola, for instance, is that it cuts down on the potential for corruption.

“Corruption is a major problem in that country, and it does hold back growth and development there. But if you look at the Chinese model for engagement with Angola, you’ll see that they do not give the government large amounts of money to develop infrastructure.

“They set up projects that they fund and do much of the work themselves, which sidesteps the corruption potential,” he says

Sandrey also believes the influx of Chinese goods into Africa that has been evident in recent years is hurting local African manufacturing significantly. “Not only is China flooding the local markets with low-cost goods, 95 per cent of exports from some African countries to China are either oil or minerals. This means that African manufacturing is losing its local base.

“Perhaps just as importantly, these African manufacturers are also struggling to export to their regional neighbours, as those markets are also flooded with Chinese goods. But China is doing the same to the rest of the world, it’s not an approach unique to Africa,” he said.

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