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Criticism of China's role in Africa misguided

Updated: 2014-11-14 10:16
By Seamus Grimes (China Daily Africa)

Criticism of China's role in Africa misguided

Criticism of China's role in Africa misguided

Nation's investment model for continent little different than that coming from other countries

After many decades of grinding poverty, Africa is on the move, with real evidence of considerable progress. Despite widespread pessimism about Africa, a World Bank study shows that 17 of the 50 economies with the greatest economic progress are in Africa with the GDP of sub-Saharan Africa expected to grow by 5.3 percent this year and 5.5 percent in 2015.

An important prerequisite for this progress has been the improvements made in how countries are governed, with the number of functional democracies growing from only three of 53 African nations at the end of the Cold War to the current tally of 25 out of 54 countries. If effective governance becomes more widespread, Africa has real potential for benefiting from the same demographic dividend that has propelled other less developed regions to prosperity. By 2050, it is projected that 2 billion people will live in Africa, accounting for one-quarter of the global labor force.

While a rapidly expanding middle class is driving much of this economic growth, there are overall improvements in living conditions with child mortality, illiteracy rates and HIV/AIDS infection rates declining and a 10 percent increase in life expectancy. But Africa is a huge continent, with significant variations throughout. On the one hand, there are middle-income countries like South Africa, and there are oil-rich countries like Libya, which is in turmoil. On the other hand, the Central African Republic and South Sudan continue to be ravaged by war. In fact, the majority of the 48 Sub-Saharan countries still fall at the bottom of the list for global prosperity. The biggest threats to recent progress are widespread political corruption, government mismanagement and capital flight.

But the positive news is that foreign investment reached $80 billion in 2014, with the United States, the United Kingdom and France leading the way at a combined share of $178.2 billion. The BRICS bloc collectively invested $67.7 billion, of which $27.7 billion came from China. According to a recent survey of the African Development Bank, the United Nations Development Program and the Organization for Economic Cooperation and Development, the top six recipient countries, representing one-third of the continent's population, received the same amount of foreign investment as the remaining 48 countries combined. The top destinations were South Africa and Nigeria. In 2013, 65 percent of the investment flowed to resource-rich countries. While foreign aid as a proportion of total capital inflows will decline to about 26 percent in 2014, or about $55 billion, the poorest countries will continue to depend heavily on it.

It is within this context of overall progress and considerable variation in development that Chinese investment in Africa should be examined. China's recent period of significant economic expansion has created a huge demand for energy, mineral and food resources and also the need for developing markets for its goods. Africa, with its cheap land and labor, expanding markets, enormous wealth of natural resources and its underdeveloped potential, is significantly compatible with Chinese investment. Together with other less developed parts of the world, parts of Africa have presented Chinese companies such as Huawei Technologies Co Ltd with considerable opportunities to expand their global reach by using their experience in servicing the Chinese market. Although much of the foreign investment in Africa has come from established Western multinational companies, the media have paid particular attention to the more recent growth in Chinese investment in Africa, sometimes questioning the motives for that investment, and in some cases suggesting that China is partly responsible for a new phase of colonialism in Africa.

Much of this coverage, however, does not make a clear distinction between China's attempts to promote its global foreign policy of "soft power" with African nations and the more general thrust of foreign investment that in many cases is little different than the investment coming from other parts of the world. Some argue that, rather than being economically motivated, China is interested in Africa partly to build political support and alliances among less developed countries within international organizations such as the United Nations, particularly in relation to sensitive issues at home.

In many cases, however, investment is focused on natural resources and particularly on oil in China's case. What is somewhat different is that China's growing investment in Africa has been taking place at a time when investment from other major regions has been somewhat lower. In the case of the US, for example, its dependence on African oil imports has been declining as it becomes more oil-independent. China's willingness to secure business deals with African leaders, irrespective of their reputation, does appear to differentiate its approach in relation to foreign policy.

But, much to the dismay of Western leaders, China's reputation among many African leaders appears to be growing. A major reason for this may be related to the fact that the willingness of China to invest in Africa, without too many preconditions, provides African leaders for the first time with a significant alternative to its previous dependence on Western aid, loans and investment, often with harsh conditions imposed by the World Bank and the IMF. It also allows African leaders the opportunity to use this new leverage of potentially competing investors to negotiate more favorable terms.

The Chinese investment model in Africa, however, is by no means without criticism, but such criticism is little different than what has been applied to investment coming from other countries to Africa. For example, the significant Chinese investment in developing the port in Mombasa in Kenya is seen by some as a modern form of barter, by which China is assured of mineral resources over a period in exchange for providing infrastructure. Similar criticism has been leveled against the president of Niger for providing France's nuclear industry with a long-term uranium concession. Some of the criticism of Chinese investment in large projects in Africa is related to the control exercised by Chinese companies, in employing a significant proportion of Chinese labor, and in providing cheap credit. Others argue, however, that these projects are decided in an open tendering competition, and that local companies cannot compete with large Chinese companies.

To some extent, the divisions of opinion about Chinese investment is related to the lack of trust on the part of African electorates in their leaders, who may not always negotiate deals that provide the best outcome for the local population. There are cases where the political elite itself is suspected of being a major beneficiary from large projects. But there is also an appreciation that Chinese investment at least provides African countries with some latitude for negotiating better deals than was previously possible. Perhaps a good part of the frustration felt among people in many African countries is the lack of capacity of both their leaders and their companies to exploit the real opportunities that present themselves. To the extent that political stability and security improves and diffuses throughout the continent, Africans will depend less on outside investors to improve their situation.

The author is emeritus professor with Whitaker Institute for Innovation and Societal Change at the National University of Ireland. The views do not necessarily reflect those of China Daily.

(China Daily Africa Weekly 11/14/2014 page10)

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