The burgeoning interest of the Chinese in sub-Saharan Africa (SSA) has not escaped the lens of global watchdogs, and has become an area of both apprehension and admiration depending on the context.
To some, the Chinese are a threat and a competition, while to others they are a unique model for development. China has not always been a global superpower. It has taken years of religiously implementing a development strategy that has resulted in their rise to power. Until 2001, China had not joined the World Trade Organisation (WTO) and had minimum engagement with the rest of the world in terms of trade.
Joining the WTO implied that they would have to adhere to certain principles, some of which could potentially impose Western influence in their strategy. They were like a parent protecting their young teen from worldly pleasures. But just as every parent has to let go of their teen when time has come for them to explore the world of university on their own, China in 2001 had to compromise. The journey to becoming a global force could simply not be achieved without integrating with the rest of the world. There was simply too much to gain than lose in becoming a member of the WTO. They took the bitter pill of globalization – which was not so bad after all.
China’s induction into the WTO was considered as a win for everyone; especially the US, which hoped to use this an opportunity to keep tabs on China. George H.W. Bush, then president of the US said: “No nation on Earth has discovered a way to import the world’s goods and services while stopping foreign ideas at the border”. However, as far as the East is from the West, so far is the distance between expectations of the US and the reality of what happened after China became a WTO member. But that is a story for another day.
One thing remains unequivocally clear: there is no way China would have risen to become this powerful if it had not joined the WTO. China has skyrocketed since 2001, and is on track to dethroning the US as the world’s largest economy. Again, over 400 million Chinese have been lifted out of extreme poverty since 1999; and recently, China overtook the US in 2020 to become the leading recipient of foreign direct investment (FDI) in the world. It goes without saying that the Beijing magic worked, and every other developing nation can take lessons from China.
Whenever the relationship between China and Africa is discussed, there are mixed feelings. On one hand, we see multilateral bodies like the African Development Bank touting the Sino-Africa relationship as one that is essential for Africa’s development. Together, the AfDB and China have established the Africa Growing Together Fund (AGTF), which has earmarked about US$2billion for different projects in Africa since 2014 (AfDB, 2014). Again, there is no scarcity of evidence laying out China’s impact on Africa’s infrastructure development. This often gives the impression that China’s contribution to Africa is certainly doing more good than harm.
On the other hand, many reports describe the Sino-Africa relationship as “neo- imperialism” and “authoritarian capitalism” in nature; and claim the Chinese exploit Africa’s resources and local labour, and interfere with its democracy (Brautigam, Diao and McMillan 2014). It is no surprise that many of these assertions have come from the West – who are not mere observers themselves but also investors in Africa, and thus direct competitors with China. The stock of Chinese investment in Africa has grown sharply from 2% of United States (US) FDI stock in 2000 to 55% in 2014; an obvious challenge to US dominance in Africa (Campbell 2008; Feng and Pilling 2019).
Amid all of this scramble for Africa, let us ask what the opinion of the African is: because usually we are the ones to bear the brunt of governments’ poor policies and unsatisfactory negotiation when dealing with superpowers like China. Interestingly, the perception of some Africans does not necessarily reflect the claims of an unbalanced and unfair relationship between China and Africa.
Research by Afrobarometer in their 2014/2015 survey reveals that in 36 African countries, about 63% of respondents opine that China’s influence is “somewhat” or “very” positive, while only 15% see it as somewhat/very negative. In their 2019/2020 survey, when the same question was asked, about 60% of Africans said China’s influence is “somewhat” or “very” positive while about 15% see it as somewhat/very negative. These results suggest that Africans may not be that concerned about Chinese engagement in Africa, and largely view it as positive. Obviously, there are nuances which have to be acknowledged as Africa is not one big country.
For that reason, opinions on Chinese involvement varies across different African countries. Looking at Ghana, for example, there has been a sharp increase in the perception of China’s influence being “somewhat” or “very” positive from 34% (2014/2015) to 47% (2019/2020).
In Ghana, China has become synonymous to ‘galamsey’, an illegal practice that has become a hazard to our water-bodies and the livelihood of our people. Our media is awash with stories of how Chinese kingpins have ‘taken over’ some rural areas, assisted by some locals to propagate these illicit activities. That being the case, an increase in the positive perception of Chinese presence makes me wonder if, indeed, we forget too quickly as we say every election year; or perhaps the respondents for this survey took a holistic view of China’s impact on Ghana and decided that the positive outweighed the negative.
The attacks from the West against China’s business in Africa are not unfounded. Indeed, China is no saint, maybe just the lesser of two evils as some would put it. But I am of the view that in the race to the top, no country is ever looking out for the other unless it is beneficial for them to do so. It is an ‘each country for itself, God for us all’ affair. Africa must look out for its interests as much as China or any other country does.
The relationship between China and Africa primarily spans across trade, investment and aid. China has been Africa’s largest trading partner since 2000, and Chinese FDI and financial assistance to Africa keeps increasing. My greatest fear for Africa is that for a long time we have developed an aid-dependent mentality, so we actually look forward to a ‘free lunch’ from China and other developed countries – which in fact is never free and have strings attached that further exacerbate our plight. No country has ever made it out of poverty through an aid-driven growth model. It simply does not work. So, what should Africa focus on?
Risk perception in Africa
Let me point fingers at the ordinary African before I do the same to African government leaders, as is usually the norm. As Africans, we have to do our part in seizing every suitable moment to tell a positive African story.
If you have ever worked with Chinese, you have probably seen how they exude nationalistic pride without effort, despite all the bad press they get. We have to be what I call ‘Afrivangelists’ and preach the good news of Africa.
The perception of risk in Africa is still very much an active problem that needs to be addressed. Even though investing is such an individualistic exercise, in some pockets of discussion Africa is very much bundled as one.
This means the level of risk perception in Africa is not only as a result of Africa being a ‘dark continent’, where many automatically assume the worst-case scenario without comprehensive evidence; but also in some cases, the level of actual risk in African country A is almost by default perceived to be present in African country B.
Changing this narrative takes years but gradually, positive stories Afrivangelists share will become needle movers. How can African governments help? For years we have romanced with the idea of setting up institutions to demystify the risks of investing in Africa, but have not quite achieved this yet.
If our fate is left to credit rating agencies such as S&P, Moody’s and Fitch – who have been accused of implicit bias when assessing African risk, we may always be left with higher premiums to pay and higher perceived risks.
This African proverb captures it well – “Until the lion learns how to write, every story will glorify the hunter”. While the creation of African credit rating agencies may take some time to gain international legitimacy like existing ones, we had better start now than never.
Global and Chinese FDI inflows to Africa
Africa sits at the bottom rank of global FDI inflows in comparison to other regions and developing economies as a whole. Figure 1 below shows what the figures were in a ‘normal’ year (2019) versus the year of the pandemic (2020). Domestic investment may not offer much relief either, as research by Adams, Sakyi and Opoku (2016) suggest that FDI is a positive driver for domestic investment. In other words, when FDI is high, domestic investment follows suit. In terms of Chinese FDI to SSA compared to the rest of the world, there is still more room for improvement. The graph (see figure 2) shows that historically we have shared the bottom rank with Latin-America.
The low Chinese FDI inflow may be one of the reasons why even though there is a positive impact of Chinese FDI on SSA growth, the impact remains meagre. Although Chinese investment in SSA is growing at unprecedented levels, it is still not as much as anecdotal evidence might suggest. The governments in SSA have to pay much attention to the determinants of Chinese FDI and leverage the value of their individual countries – and more importantly, the continent – to lure in more foreign investment. The African Continental Free Trade Agreement (AFCFTA) offers some hope in this regard if we play our cards right. One of the pull factors for FDI in general is a well-connected market, something which Europe and North America have to their advantage.
Targetted sector improvement
Finally, the data available on FDI reveal the imbalance in how different sectors within SSA countries are patronised by Chinese investors. Sectors such as energy, metals, real estate and transport seem to be overcrowded with Chinese FDI, while sectors such as agriculture, tourism, finance and technology have not been paid much attention. This situation can be attributed to the perception versus actual risk, poor regulatory framework that crumbles when tested, inadequate infrastructure, among other barriers.
To further capitalise on the growing Chinese investment in SSA, governments have to develop plans to revamp such sectors to make them more attractive. Brautigam and Zhang (2013) argue that other regions such as Southeast Asia, which have been a major destination for Chinese FDI in agriculture, have relatively better conditions of infrastructure and governance quality – thereby putting them in a better position than Africa. In Ghana, for example, if we can implement the right policies, the budding cashew industry can massively benefit from investment to help move away from the current export model to value addition.
Source: Author’s calculation and China Global Investment Tracker, American Enterprises Institute, 2019. (Only accounts for investment and construction transactions worth US$100million or more)
Africa remains an attractive destination for investment, as we hear in every public debate; but this is yet to reflect in figures and, most importantly, the livelihood of its people. The burden lies on those with and without political power – skewed largely to the former, to drive forward an agenda for growth and development. Regarding the Sino-Africa relationship, that is one which is likely to improve over time, given current indications. The question of whether China is good or bad for Africa is a difficult one to answer, given how multi-faceted the relationship is. But the answer to that question should not determine whether or not Africa ought to continue to work with China, but only seek to identify areas where the working relationship can be improved.
The writer is a Development Economist in training, a poet and storyteller with pockets of experience in diverse industries and sectors; Insurance, Higher Education, Renewable Energy and Finance. Currently, he serves as the Postgraduate Officer at the University of Manchester Students Union, where he advocates for various concerns of the student body. He also sits on the University’s Board of Governors.
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Linkedin: Nana Fredua Agyeman