The exponential rate of Chinese investment in Africa over the past few years has been noted with both optimism and scepticism by mainstream media, political commentators and influential role players in the developed and developing world.
Opinions triggered by this new development are deeply polarised.
A positive view of increased and concentrated Chinese investment on the African continent argues that China is facilitating a fundamental role in filling financial and technological gaps for Africa — a role which western countries and corporations have been reluctant to play especially since the 2008 economic crises which crippled most of the developed world.
Conversely, sceptics question the motivation behind Chinese investment and its consequential impact on Africa, nefariously including charges that China is attempting to re-colonialise the African continent.
Subtle criticism of Chinese activity in Africa has also come from the traditional super-power of the world over the last century.
In 2012, the US issued a statement hinting that African countries should consider partnerships with more responsible countries as against countries that just “come in, take out natural resources, pay off leaders and leave” — an unmistakable reference to China.
However, beyond accusations and foreign policy rhetoric, it is important to look at the data when developing a balanced and accurate opinion of Chinese activity in Africa.
On the surface, current data does not justify the level of attention or criticism China’s investment in Africa is receiving. Official data from the ministry of commerce (MOF) on Chinese overseas investment shows total Chinese outbound foreign direct investment (OFDI) in 2011 reached a record high of about US $74.65-billion, but only $1.7-billion, or a mere 2.2%, went to Africa.
Compared against the global foreign direct investment (FDI) flowing to the continent that year, about $42.65-billion according to the United Nations Conference of Trade and Development (UNCTAD 2012) China’s contribution was a mere 4%.
When measured in terms of FDI stocks, Chinese OFDI in Africa appears even more trivial — reportedly standing at $14.7-billion by the end of 2011, or 2.6% of the total $570-billion FDI stock for the whole African continent.
Based on these statistics, why is China’s investment activity in Africa receiving some much attention and scrutiny?
One main reason may be the incredibly pace at which Chinese OFDI has risen in Africa over last few decades.
Until about 15 years ago, China’s capital flow to Africa was almost all government-aid related.
Most noticeably, just as the world FDI outflow plummeted following the 2008 financial crisis, China’s overseas investment more than doubled in 2008, with the portion going to Africa actually more than tripling that year and consistently increasing steadily thereafter.
Keeping in mind the pessimistic prospects for many a western economy; many foreign policy proponents and economists predict that China’s place in the FDI arena — for Africa and the world == is likely to further accelerate in the near future.
Another reason for the critical stance on the role of China in Africa can be seen as more political in agenda.
Critics hold the strong opinion that China’s investment in Africa is predominantly “state investment”. This specifically refers to investment made by government-owned enterprises (SOEs). Critics also emphasise the concentration of investment in oil, gas and mining to meet the ever-growing demand for resources to fuel the startling expansion of China’s domestic economy.
Further to these accusations include China’s growing involvement in Africa has been routinely cast as dependent on deals made at elite political levels — profiting these so called “African elites” — while satisfying China’s ambition for enlarged geopolitical influence.
Finally, Chinese investment is frequently criticised for its lack of transparency and, disputably, for bringing their own workforce from home, thus depriving the host economies of the benefits of job creation.
Conversely, those who are slightly more optimistic about the role that China is playing in Africa have pointed out that the country’s focused interest on the continent’s energy and mineral resources, even if true, is not that different from the FDI traditionally attracted to the continent.
In addition, the point must be made that the net impact of China’s involvement in Africa, especially in the infrastructural development, has been tremendously positive, as investment in transportation and power is exactly what Africa urgently needs.
The fact of the matter is that Chinese investment in Africa is far from monolithic and continues to grow increasingly diverse and dynamic.
This trend has and will continue to have a wide-ranging impact on Africa’s development.
The injection of private capital, technology and entrepreneurial ideas offers host countries significant economic opportunities, especially in early industrialisation and job creation. For these reasons, they are particularly welcome by African countries and governments.
Chinese investment overseas also reflects less the rising economic power of China than China’s integration into the international trade and investment market.
From an African perspective, to ensure and cement a large share of the Chinese OFDI, African governments should maintain an open and friendly investment environment by encouraging competition and by providing better infrastructural support.
African governments should in addition further develop policy and strategy to encourage more technology transfer and Chinese-local business integration. Surely the ultimate goal is not just to attract more private Chinese investment but render more benefits from it for the continents national economies.