Sino-African love story takes a turn

COMMENT

President Xi Jinping is expected to increase China’s financial and development commitments to Africa when he attends his first Forum on China-Africa Co-operation (Focac) in December.

South Africa is hosting the sixth ministerial-level conference, established in 2000 and held every three years to promote political dialogue and economic co-operation between China and the continent.

China and Africa are undergoing significant changes and are redefining their relationship, giving rise to the expectation that Xi will forge a new strategy with which to engage the continent.

Furthermore, Focac 2015 comes at a time when China’s biggest economic rival, the United States, is reasserting its economic influence in Africa.

Last year, President Barack Obama hosted the largest gathering of African leaders ever held in Washington. The summit, which signalled a decisive shift in US-Africa relations, attracted nearly 50 African heads of state and yielded investment deals worth more than $14-billion for Africa, marking the start of a new economic relationship.

Increased US investment
More than 60 US companies attended the summit and pledged to increase investment in Africa over the next few years. Among them was General Electric, a company with a century-long history in Africa. It is planning to invest $2-billion by 2018 to train workers, develop facilities and improve supply chains.

Blackstone, one of the largest private equity firms in the world, announced a $5-billion partnership with Africa’s richest man, Aliko Dangote, to invest in energy projects across the continent. Marriot and IBM committed $200-million and $66-million respectively.

Despite this, US interests in Africa pale in comparison to China’s, whose economic inroads have grown at breakneck pace over the past decade. China outstripped the US in 2009 to become Africa’s biggest trading partner.

In 2013, China-Africa trade hit $200-billion, a tenfold increase in the past decade, but US bilateral trade with the continent barely reached $85-billion. The flow of China’s foreign direct investment (FDI) also increased steadily, from $392-million in 2005 to $2.5-billion in 2012.


Moreover, although less than 1% of US global FDI goes to Africa, about 3.4% of China’s worldwide FDI is on the continent.

Admittedly, there is an ongoing debate about the promised rather than realised Chinese investment in Africa. The issue demands more empirical evidence and research into the size and nature of its interests.

No-strings-attached model
Apart from the sheer numbers, China also employs a very different approach in its involvement with African countries. Long seen as pursuing a so-called no-strings-attached model, with scant regard for traditional political institutions and Western-styled economic governance, the Chinese have been criticised for taking a strictly bottom-line approach to business.

But more recent studies reveal a far more nuanced approach that also takes in Chinese economic development. The US has long attached conditions to its economic ties with Africa, which have been received with mixed reaction. The rule of law, sound political governance, democracy and anti-corruption laws typically govern the behaviour of US multinational corporations’ trade deals. The building of strong institutions is at the centre of economic co-operation with the US. Despite its good intentions, African leaders by and large see this partnership as unequal and as meddling in their internal affairs.

The nature of the Chinese and US investments, and the sectors in which their companies invest in Africa, do differ. For example, in 2011, 80% of Chinese imports from Africa were raw materials, such as crude oil, copper, iron ore and agricultural products.

This has raised concerns about the exploitative nature and often unscrupulous deals associated with these transactions.

Even Obama, in a less-than-subtle swipe at China at the 2014 US-Africa summit, stated: “We don’t simply want to extract minerals from the ground for our growth. We want to build partnerships that create jobs and opportunity for all our peoples that unleash the next era of African growth.”

Infrastructure investment
China has invested extensively in key areas of African development such as infrastructure. Until recently, the US’s priority was not the development of infrastructure.

The much-needed Chinese-built infrastructure has been criticised. The failure to hire local skilled and unskilled workers has raised tensions with people in need of jobs. The quality and long-term viability of some of the infrastructure built has also been questioned.

Chinese Premier Li Keqiang, during his tour of the continent last year, admitted there were growing pains in the China-Africa partnership and promised to take issues raised by Africans seriously.

Africa is one of the fastest-growing regions in the world and has vast natural resources, so it is no surprise that both the US and China see the continent as an important source of growth and opportunity.

The rapid increase in Chinese investments has boosted Africa and is certainly part of the much-anticipated “Africa rising” narrative.

Labour law
But African countries and their people have begun to question China’s approach to the continent, especially concerning its poor regard for labour laws, institutions of good governance and development that is sustainable.

Renewed interest from the US in Africa is also to be welcomed. But if it is to build trust, based on economic partnerships and not just for security reasons, the US will need to work hard at improving investments and building long-term economic and political ties, with a healthy dose of reciprocity, confidence and less suspicion.

Support for security and intelligence is important but this must be coupled with an economic interest that is evident to all Africans.

Ultimately, though, the onus lies on Africans, and African leadership in particular, to manage and balance relations with these two great powers more effectively.

Dr Lyal White is the director of the Centre for Dynamic Markets at the Gordon Institute of Business  Science. Adrian Kitimbo is a senior researcher at GIBS.

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Lyal White
Guest Author
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