Understanding Chinese investment in Africa
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Another concern is that most Chinese investment comes from state-backed organisations, although investment from China’s private sector is increasing. Investment projects in raw materials and energy are dominated by Chinese state-funded initiatives, usually in the form of sovereign wealth funds and largely aimed at energy and resource security, according to Tarling-Hunter.
“The state-backed sectors have in some cases been criticised for a colonialist bent,” added Tarling-Hunter. “Although this accusation is perhaps overly-dramatic, there is no doubt that China’s investment in Africa has taken a long term perspective.”
Other critics are concerned about the work conduct by Chinese corporations or that African governments will enter into corrupt – or uninformed – contracts with Chinese investors. For example, How we made it in Africa reported last month that a ‘ghost town’ – comprising 750 eight-storey apartment buildings, a dozen schools, and more than 100 retail units – was built in Angola by the China International Trust and Investment Corporation (CITIC). The $3.5bn development was supposed to house half a million people but remains empty as it is out of the affordability range of the vast majority of Angolans.
However, not everyone views Chinese investment in Africa as negative, but rather as a mutual business relationship where everyone wins. China needs resources and their willingness to invest early in African markets could arguably be seen as a means of establishing a long term business relationship. Africa needs investment, particularly in infrastructure, and China is providing this.
China is investing in markets which many developed countries historically would not consider because they found them too risky.
“The general approach China has taken with investment and trade has meant investment in unstable countries,” explained Tarling-Hunter. “China has partnered with Zimbabwe, providing a $10bn loan in 2011 in return for mining rights in the country, again to ensure China’s raw material security.”
While China may only be investing to secure long term access to Africa’s oil and precious resources, Africa has the resources available but needs the investment. If investment deals are transparent and properly directed by African leaders, China and Africa can have a mutually beneficial business relationship.
“I think even businesses and other companies active on the continent are starting to see the Chinese as partners, and investing in the infrastructure that is so critical to do along the whole resource boom, but also to enable … the growth which is everywhere forecasted for the continent,” commented Standard Bank’s Heloise Smith.
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