China’s Investment in Africa

China’s Investment in Africa

It seems that every week we hear of further Chinese investments in the African economies. Although there are mixed opinions on how growth is being achieved, and at what “expense”, there is no doubt that the money is coming rolling in. South Africa’s Standard Bank, Africa’s largest bank, forecasts in their outlook for the next five years, that investment from China into Africa is likely to hit US$50 billion by 2015, up 70% from 2009.

The BBC reported at the beginning of 2011 that it will be a bumper year for Chinese investment and that Ethiopia is a good example. Addis Ababa, capital of the country which is home to an estimated 88 million people, is awash with cranes and half-constructed buildings, mostly financed by the Chinese.

At the World Economic Forum (WEF) Meeting held in Cape Town, South Africa in May 2011, Liu Guijin, African Affairs special representative of the Chinese government, stated that ” China’s investments in Africa have brought multiple benefits to the continent, providing better livelihood, more development opportunities and more choices for local people”. He announced that “In Zambia, Mauritius, Nigeria, Egypt and Ethiopia, China has invested more than 250 million U. S. dollars in economic and trade joint ventures, or local infrastructure”.

All this activity, however, is creating challenges for other investing countries as it is making for a more competitive market for labour and impacting on salaries. There is some criticism of possible Chinese exploitation of labour, their lack of commitment to skills development and the lack of use of local suppliers for their infrastructure projects. Questions have been raised by organized labour organizations about this new type of colonialism and whether China will contribute to real growth in the developing economies, or whether it will just source raw materials for its own production.

Of the Chinese funded projects in Africa, one of interest is the The Angolan Benguela Railway. The railway, one of the iconic rail routes in Africa, consists of 1344 kilometers of track and was opened in 1928 to transport copper deposits from inland DRC to the coast at Lobito in southern Angola. A major Chinese investment from

China’s state-owned Sinohydro Corp is enabling this key route to be fully operational again after twenty-seven years of civil war destroyed much of it. No doubt it is a business investment, not a social or benevolent project.

Companies including Aluminum Corp. of China Ltd. and China National Petroleum Corp. are seeking acquisitions in Africa, buying iron ore, oil and copper assets to feed a growing economy. The Chinese Government has recently announced plans to invest about $5 billion dollars in private equity funds in Africa, the majority directed t the Nigerian construction and energy sectors. It will be facilitated by the China-Africa Development Fund.

The Economist reported recently that The Heritage Foundation, a US think-tank estimates that between 2005 and 2010 about 14% of China’s investment abroad went to sub-Saharan Africa. Although much of this is invested in mining and infrastructure, China is now bringing funds to contribute to upgrades in technology, much needed to support its growing businesses.

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