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Rethinking China's role in Africa

Updated: 2014-11-28 08:58
By Zhang Yuchen (China Daily Africa)

Broader approach to investment in the continent would benefit Chinese businesses and Africans themselves

China needs to take a more comprehensive and nuanced approach to future investment in Africa by looking not only at immediate business considerations but also outside their immediate realm, experts suggested at a recent forum in Beijing.

"China and other countries doing business in Africa should realize that one size doesn't fit all," says Jacob Olupona, a professor of African studies at Harvard University, who is from Nigeria. "Africa and China should figure out the new direction in the future." Olupona spoke at a China-Africa investment summit on Nov 24.

Rethinking China's role in Africa

African executives attend a trade fair in Beijing. Experts say China needs to take a more comprehensive approach to invest in Africa. Provided to China Daily

It behooves China to become a better business partner of countries on the continent, Olupona says, as it faces situations full of opportunities as well as challenges. The stakes are very high, reports note.

Africa as the next frontier produces returns on investment that are among the highest in the world, and the upturn in national growth rates there provides a potent boost for Chinese businesses, according to the Boston Consulting Group.

China's outbound direct investment to Africa amounted to $1.7 billion in 2011, up remarkably from $56 million in 1996. But while that's only about 4 percent of China's outbound direct investment, it garners lots of attention given that it is the place where China is a newcomer in terms of massive investment, says Rong Liya, a professor at Peking University.

More than 2,000 Chinese enterprises are investing in 50 countries in Africa, says a white paper on "China-Africa Economic and Trade Cooperation" released by the Information Office of the State Council. A large percent of the investment is in the energy and mining sectors and the rest is mainly related to manufacturing, business services, agriculture and finance.

Along with fertile ground for agriculture, massive opportunities have emerged in telecommunications. The development of infrastructure has shifted from transportation of raw materials to regional and continental integration, Olupona says.

Still, China needs to improve its macroeconomic policies to encourage African countries to leverage its investment programs, says Huang Jianhui, deputy director general of the Research Department of China Development Bank, one of the major financial supports for China's investors in Africa.

"Helping Africa unleash its development potential and facilitate regional integration by improving infrastructure should be the main goal of China's investment in the region. At the same time it will meet China's development needs," says Huang.

Guidelines for Africa's infrastructure development from 2012 to 2040 prioritize programs and financing for cross-border infrastructure building in energy, transportation, information and communications technology and water, based on studies of the Programme for Infrastructure Development.

A sustainable infrastructure-financing model should be built on mutual benefits and communication and should be implemented, says Huang.

But trade does not exist in isolation. The staggering issues of poverty, high employment and poor access to healthcare must be taken into consideration while doing business, experts say.

Olupona says the corporate social responsibility activities of Chinese companies can also advance their business as they meet needs that address issues tied to their area of commerce.

Providing transfers of Chinese technology to African companies to support local African business is a part of corporate social responsibilities, he says. Training local African employees in technology is another demand made of Chinese companies.

"China is doing a very good job of building many roads, airports, schools, stadiums. But I think there is a desire to see China doing more to train African workers, to import technologies that they can utilize to develop skills," says Witney Schneidman, a former deputy assistant secretary for African affairs in the United States.

Experts also suggest China should not underestimate the role of philanthropy and religion in advancing business, along with investing in NGOs and community events as well as responding to social issues.

Corporate social responsibility projects boost the image of business, attract investors and increase profitability, experts say.

More than that, they help combat distrust over the intentions of Chinese companies. "Africans are a relational and celebratory people, and it's better for Chinese companies to find ways to break barriers to interpersonal relationships," says Olupona.

Africa also expects China to increase its voice in global governance, make more efforts in employment of African youth, heighten attention to labor standards and improve transparency of environmental contracts.

"There must be zero tolerance for corruption in the continent, no matter where the companies come from. The issue is very important and companies should set the highest standards of transparency. It should be a constant subject for discussion," Olupona says.


(China Daily Africa Weekly 11/28/2014 page19)

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