Chinese working at Chambishi Copper Smelter in Northern ZambiaRich natural resources and huge markets have turned Africa into a magnet for global investors. Which policies should the continent adopt in order to maintain its attractiveness as a lucrative investment spot whilst achieving sustainable development? Dongying Wang investigates.
As globalization deepens and the interaction among economies increases, Africa has become a focus for the world. Africa's natural resources and opening up of new markets are attracting interest from global companies.
China, a latecomer to Africa, has joined other countries in exploration of the continent to fuel its economy. China's involvement in Africa covers a wide range, including agriculture, manufacturing, construction, telecommunication, resource extraction, energy and social welfare. However, China's increased engagement in Africa has caused concerns and even fear from other competitors. It has also drawn criticism from the West over its lack of business and political ethics whilst investing in Africa.
China has become one of Africa´s important partners for trade and economic cooperation over the past few years, although Africa still accounts for only 3% of China´s outward foreign direct investment (FDI). During the first half of 2008, China's direct investment in Africa stood at 305 million dollars, less than 480 million dollars recorded during the first half of 2007.
China still remains a small investor in Africa compared to some Asian countries, not to mention those from the West like the UK, the US and France, according to a 2007 UN report (pdf).
The Sino-African bilateral trade amounted to 53.1 billion dollars during the first half of 2008, as against the 73.3 billion US dollars for the whole year of 2007, according to a seminar on investment in Africa, held recently in Xiamen southeast China. Bilateral trade has seen more than a 30% rise annually since 2000. China has become Africa's 3rd largest trade partner after the EU and the US.
Xinhua, China's state news agency, has reported that Sino-African trade has contributed 20% to economic growth of Africa. Chinese officials have also said that Sino-African businesses, based on mutual benefits, have become an impetus to economic development in Africa.
There is no doubt that China has a long list of achievements in Africa. These include the training of tens of thousands of Africans, relieving debts, offering of medical assistance, and the building of hydro-electric power plants in some 50 African states. In addition they have helped build thousands of kilometers of roads and railways throughout many parts of the continent.
All these achievements have been reported repeatedly by Chinese media. The mantra being promoted is one of mutual benefits and profitable gains. This differs from the past when the message was one of just developing bilateral ties.
Nowdays, Chinese investors have transformed from “comrades” to “capitalists” in less than half a century, says John Lungu, economics professor at the Copperbelt University in Kitwe, Zambia.
Professor Lungu’s view is echoed by Parkie Mbozi, regional director of Panos Southern African based in Lusaka, Zambia. Panos is an NGO promoting the participation of poor and marginalised people in national and international development debates.
"China, like all others, is now in Africa for business. It wants to present itself as a country that will give aid without strings attached, yet in essence it wants business. Unfortunately, state capitalism can be worse than individual capitalism," said Mr. Mbozi.
It is arguable that there is nothing wrong for Chinese people to make profits by investing in Africa. However, criticism is laid upon China's lack of consideration to environmental concerns and labour welfare. Chinese companies are reportedly developing oil fields, mines and dams in areas that are geographically remote, politically unstable and ecologically fragile, often ignoring the environmental and human rights impacts of their investments.
In a phone interview, Uwe Wissenbach, coordinator for relations with Asian countries in Directorate General Development of the European Commission, says that most negative reports on China's involvement in Africa were initially conveyed by media, which sometimes exaggerate these negatives. More recently reporting provides a much more nuanced picture. Rather than giving his opinion on China's presence in Africa, Mr. Wissenbach looks at the issues from a different perspective.
Mr. Wissenbach agrees with the argument that China should not be singled out for these problems. He says that some western companies maybe doing more harm to Africa than Chinese companies. However, he is dismissive of China's excuses that its status of being a developing country justifies its failures in protecting the environment and improving standards of business.
In the West, companies face pressure from media, civil society and other pressure groups to behave themselves abroad, but Chinese companies do not have similar organizations to keep their overseas operation in check, he says.
Mr. Wissenbach also points out that apparently China's private companies fare much better in Africa as opposed to state-owned companies in efforts to help improve the lives of Africans, as they are more efficient and fit well into African communities. On the contrary, state-owned companies, which enjoy favourable policies and government projects, often fail to fit into the reality of Africa and thus contribute less to local society.
According to the Export-Import Bank of China, of more than 800 Chinese companies investing in Africa, some 100 are state-owned.
Refering to Zambia, which sees China as a "genuine and all-weather" friend, Panos regional head Mr. Mbozi says that he can see the possible transformation of the Zambian economy by Chinese investment through jobs offered by Chinese investors, and permanent infrastructure.
However, Mr. Mbozi holds reservations about the quality of jobs offered by Chinese companies, saying that "Unfortunately, so far Chinese investment has been seen in a bad light due to poor working conditions for workers and low investment in essential services in areas their companies operate. China has fared badly in comparison to companies owned by western investors."
"We hope that the economic zone announced by Chinese President Hu Jintao, when he visited the country in 2007, will be modeled along the lines of Western investment, namely good jobs, investment in social services, including roads, hospitals and schools, that benefit the local people. So far this hasn't happened save for a few cases," he says. The Zambia-China Economic and Trade Cooperation Zone was the first of its kind ever launched by China in Africa.
This African quest for higher standards and quality is possibly part of the reasons why Mr. Wissenbach does not think that Europe faces competition from China in Africa except in aid and infrastructure projects.
However, he acknowledges that as Africa has more business options on the table than before, the EU development policy in the continent does not work as it did previously. Therefore the EU has had to change its African strategy and "its patronizing way of looking at Africa."
"China is the catalyst and one of the factors among others to urge the EU to change their policies in Africa," he says. "Most importantly, changes are needed from Africa itself to formulate a policy and set their own agenda in the face of globalization."
However, Africa cannot do so without help. This is why Africa, the EU and China should cooperate through better understanding and information exchange to help the continent develop sustainably. Mr. Wissenbach and his colleagues face the challenge of building trust and cooperation between the three parties.
"Ideally, our tasks are to cooperate between African governments, the EU and China to set up standards, socially and environmentally, for investment and development in Africa", Mr. Wissenbach adds.
Asked about how overseas investors should help Africa, Mr. Mbozi says that "genuine support and investment" is what Africa needs.
"They should teach Africa how to fish but not give it fish, transfer technology to Africa, help Africa build its capacity to do its own business, support manufacturing of goods in Africa as opposed to treating Africa as a net exporter of raw materials," he elaborates.
"Overall, they should respect Africa's priorities, and African solutions to African problems, " says Mr. Mbozi.
Flooding overseas investment offers a golden opportunity for Africa to fight its poverty and climb upon the economic ladder. However, African states must learn to set the ground rules so they can develop without over exploitation of both their resources and people.
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