Chinese investment: Good for Africa?

2006 is a long timeframe in China’s rapid footprint into Africa. In the intervening years until the global financial crisis struck, Beijing had not only increased its investment portfolio in Africa through the launch of its US$5 billion China-Africa Development Fund, announced during the 2006 Forum on China-Africa Co-operation (FOCAC) Summit, but had managed to achieve more than US$100 billion in bilateral trade with Africa, which was two years ahead of the 2010 schedule. And so the debate remains juxtaposed between two competing trends, of whether Chinese investment promotes development across Africa or is mainly driven by mercantilist market-seeking imperatives.

It is difficult – and perhaps dangerous – to actually compartmentalise this debate into such dichotomies. Simply because both sides make compelling arguments justifying their positions, but also due to the push and pull factors that underscore the investment benefits. This is definitely the case in respect of the infrastructure projects that Beijing is constructing across the continent. If viewed from a complementary perspective it is seen as connecting people to markets and in some case providing the impetus for markets to be created, hence providing an enabling environment in which Africa’s people can carve out niche areas for their livelihoods. But this is where the market driven approach of China’s investment trajectory in Africa perhaps reaches a cul de sac.

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While we cannot deny that China has created new markets in Africa, stimulated access to cheaper goods for African consumers and even provided an opening for Africa’s migrant petty traders to trade in cheap exports in Africa’s formal and informal sectors, we should be asking whether this is enough. But, more importantly, we should be asking which Africans are benefiting from this investment.

Second, as the costs of the current financial crisis are being measured, questions remain whether China will continue with its large-scale investments in Africa. Fahamu’s China in Africa programme has discussed this matter in several of its China-Africa Watch newsletters and it would seem that the conclusion is yes. But the real question is whether Beijing will become more strategic and perhaps more prudent around which of its investment projects it wants to initiate based on overall benefits and viability. As much as China can reassure African governments about their commitment to deals and contracts signed, it is not a fait accompli that Beijing will operationalise these immediately simply because the domestic challenges facing China would definitely weigh far more, given the massive unemployment crisis that faces the 20 odd million Chinese economic migrants.

So to bank on China’s massive foreign reserves should be done cautiously, since it cannot be assumed that the US$500 billion plus stimulus package that China unveiled late last year is going to stimulate Africa’s supply and demand commodity dynamism.

Therefore, while pundits may predict that the current financial crisis may be a catalyst for speeding up China’s African investments, market gurus would do well to remember that following narrow derivatives of financial packages is what created the current global credit crunch in the first place. And in Africa’s case, the trickle down effect of Chinese investment to the people is a slow drip, which is causing restlessness and unease amongst sections of Africa’s citizenry.

Third, the type of development that is being floated through Chinese investments is not one that is unique or differs with Africa’s other development partners. Like all other investments they, amongst other things:

- Cause environment hazards
- Displace local producers
- Challenge labour rights
- Displacement of communities.

Having said this, it is also critical to highlight that African leaders and governments must bear responsibility for their complacency in allowing investors, including the Chinese, to get away with such injustices.

So if – as the chairman of the China African Development Fund (CADF) recently said during the launch of the fund’s first African office – Chinese investment will lead to a better life for all, then the point of departure is a bottom-up approach that recognises the daily social justice struggles of ordinary Africans for socio-economic survival rather than intensifying them.

* Sanusha Naidu is the research director of Fahamu’s China in Africa Programme, based in Cape Town and Oxford.
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