Does China’s engagement make a difference to African development?
1. Introduction
Lately, China’s presence has been increasingly growing on the continent of Africa. It has already invested in more than 49 African countries and has become one of the major African trade partners. Although, the trade between China and the African countries is still relatively small as compared to the United States and the European Union it has attracted a considerable amount of attention due to its rapid increase. Some books and articles have been written on the subject, and different people seem to have different opinions regarding the reasons for and consequences of China’s economic presence in Africa. Some believe that it is a win-win situation for all of the countries as it is based on mutual benefits (Kolstad & Wiig, 2012). China has itself developed through a model of noninterference and independence, and it offers a similar policy in Africa. This economic presence presents a lot of opportunities for the development of Africa. While on the contrary, others state that China’s presence in the continent of Africa follows a similar policy to any past western country. Their relationship is quite imbalanced based on an exploiting model. All these China’s African investments have given rise to a lot of optimism as well as puzzles. These investments bring a lot of opportunities for Africa, which is capable of changing its financial position in the global system. This fact gives rise to the light of hope for Africans. However, China’s sudden interest in Africa and its willingness to invest more in the continent raise a lot of questions regarding the country’s actual purpose behind it (Kolstad & Wiig, 2011).
2. Chinese Agricultural Investments in Africa
China has been increasingly investing in Africa’s agriculture department since the 1980s. A lot of Chinese companies have invested in forestry, agriculture, and fisheries. Agricultural acquisitions have also taken place along with the development of new farms.
Figure 1: Number of Deals of China in Countries
According to Kolstad and Wiig (2011) China’s major imports from Africa are based on raw cotton and tobacco. While on the other hand, it exports grains and cereals to some of the African countries. Figure 1 shows that China has made a maximum of 240 deals in several countries in Africa. The number of deals per country is shown in the figure. It was reported that by the end of the year 2011, 2.5% of the total foreign direct investment (FDI) of China in the continent of Africa was based on agriculture that includes forestry, farming, fisheries and animal husbandry, a total of worth $406 million. The figure increased to $82.47 million by 2012 (Brautigam & Zhang, 2013). Table 1 shows the largest countries which have been the host for the Chinese foreign direct investment in year’s 2003 to 2006 largest one being the Sudan and Algeria (Kolstad & Wiig, 2011).
Table 1: Largest African Host countries for Chinese FDI
In the year 2008, it was reported by a French media group that a Chinese company named Sino-Cam IKO’s investment of 10-hectare rice in Cameroon was being transported to China by illegal means. An impression was being given that the Chinese were raiding Cameroonian land and all the investments were to provide Chinese peasants with a solution who were deprived of their lands. However, the report was only focused on a memorandum of understanding (MOU) that Cameroon’s government signed with a Chinese firm. It was decided that Sino-Cam IKO would be allowed to 10000 hectares of land in the country if they help in developing technological training centers along with selling all the rice produced on their lands locally. The controversy started when French reporters were shown bags of rice by local activists with Chinese characters printed on them. The reporters assumed by looking at the labels that the bags were meant to send to China. It makes no sense as China has been very self-sufficient in the production of rice from the year 2000 to 2010. But there exists a lot of differences between acquiring the land and announcing land programs. And the rate of Chinese companies acquiring the African land based on MOUs is quite higher than acquiring it through FDI, i.e. Foreign Direct Investment which raises a lot of questions in people’s minds (Brautigam & Zhang, 2013).
According to Brautigam and Zhang (2013) in 2007, it was reported by the media that the Chinese telecom firm, Zhongxing Telecommunications, has purchased three million hectares of land in the Democratic Republic of Congo for palm oil plantation. However, the government ministers and the Chinese firm’s representative released contradictory statements. The country’s Council of Minister only approved 1 million hectares of land. But the project never actually happened. It is stated that ZTE believed that the transportation costs were too high to make a profit, so they decided to decline the project.
3. Industrial Development in Africa
It is expected that with increased Chinese investments, Africa’s position should change in the manufacturing value chain of the World. It is because China moved up the chain in the past, so it is expected that Africa would do the same if China would expose the local firm of the African countries with its value chains to learn from their experience. Investments of Chinese private firms have proven to be very beneficial as when aid is not enough to cope up with various issues of Africa such as jobs shortage, poverty, production, and management issues; they help by providing additional investment capital (Donou-Adonsou & Lim, 2018). Although, Chinese investments can bring a lot of development benefits to Africa, four factors must be taken into account while investing. They include the investment motives, time horizon, the capacity of the local companies and the linkage to the rest of the enterprise (Gu, 2009).
Most of the Chinese investments in the African countries are quite environmentally sensitive resources such as gas and oil exploration, hydropower and timber, mining and the infrastructure development as well. But it is the part of China’s strategy to get access to the resources which have previously been inaccessible. This point minimizes the environmental risks as China’s investments in African countries, mostly lie in remote or fragile areas (Brautigam et al., 2010). However, China has always prioritized economic growth over the global environment. And it follows the same strategy in foreign investments as well. It can result in China’s worst polluters to start their production in Africa. Also, most of the Chinese investors have not yet adopted the environmental guidelines that have now become international standards to deal with environmental impacts. Thus, the world is concerned that China is making use of low environmental standards to win a larger share in the global market and extractive sectors. The economic development in Africa may prove beneficial forine short term, but it will bring destruction over the longer period. China’s investments in Africa might affect Africa’s governance, the environment, labor conditions, human rights and product quality (Ramasamy et al., 2012).
China’s share of total foreign direct investment in Africa is only equal to 3 percent, which is very low as compared to other western countries. Most of its investment is attracted to natural resources. Two factors that make it different from other western investments are that its model is not similar to the other recipient countries’ rule of law and that its investments are concentrated in poor governance countries in Africa. It is sensible because investing in a country that others are too arrogant to ignore can prove to be beneficial. But it also means that nobody will be able to examine the investments properly. It creates another reason to raise questions about China’s investments in African countries.
China’s ODI is found to be profit driven. They prefer investing in countries that are more skill intensive and less capital intensive. Mostly, countries that are politically unstable tend to possess such a pattern. Market-seeking is another reason of Chinese private firm’s increased investments in the continent of Africa as the size of the host country’s market is correlated to the incidence of outward direct investment (ODI) (Chen et al., 2016).
4. Conclusion
In the end, it can be concluded with these words that China’s engagement in Africa is quite a complex issue. Its strategy of investing in low-income and poor governance countries has led to difficulty in inspecting them. This strategy is itself considered suspicious because there exists a margin of non-transparency when working in such areas. However, the trade looks a win-win scenario in general for both China and Africa. China’s involvement in Africa was planned to be huge, but many of the programs never took place or worked out. Likewise, Chinese investment might economically help Africa, but it does not have the capability of changing Africa’s entire position in the global market. Another point that is highlighted in the paper is that although, China’s direct investments in the African countries are correlated to the rule of law and property rights, but its outward direct investments are not. The big enterprises of China are focused on making investments on natural resource extraction while smaller private firms are investing in service as well as manufacturing sectors. China has also contributed to the development of infrastructure in poor African countries. China’s main focus is on power and transportation. A lot of Chinese immigrants are now also found in Africa. The figure is more than one million, which is very large as compared to immigrants from other continents. It proves to be a trade-off for Africa as on one hand, they bring entrepreneurship and skills along with them, but on the other hand, they limit job opportunities for African workers.
References
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