There is a tendency in almost every piece of writing about Chinese investment in Africa to hint, or boldly point, at ulterior motives.
It’s true that there are myriad deals that will go a long way towards feeding the country’s energy needs, but China’s trade in Africa is far too complex to easily label. There are also factories, roads, railways, bridges, restaurants, plantations and a whole host of people dealing in cut-price Chinese goods.
In June, Premier Wen Jiabao became the third high-ranking official to visit Africa this year. His highly publicized tour of seven nations was the frosting on a cake of investment that grew to US$40 billion in 2005 – a one-year surge of almost 40%. China is buying up natural resources across the continent in record numbers but it is also building bridges (literally), while small Chinese entrepreneurs are often the only ones opening up new businesses.
At the same time, African countries are more than happy to deal with China, often willing to neglect relations with North America or Europe in the process. Zimbabwe, for example, has a "look east" policy that defies its status as a Western pariah. Still, it is hard to argue with critics that point to China’s proclivity for buying raw materials while exporting cheap goods.
"In Africa, most trade is in terms of commodities," said Ricardo Andrews, an official at the South African Consulate in Hong Kong. "In a sense it benefits Africa because it creates employment and [injects] foreign currency."
China – and Chinese businesses – are buying, building and dealing across the continent. There are already 600 Chinese infrastructure projects in Africa and more coming. Those infrastructure deals – and the business and resource extraction deals that are generally attached to them- provide plenty of investment opportunities and, for countries savvy enough to deal with China’s massive numbers, great potential for growth.
As Zhang Xiang of the China Society of African Studies told state media: "African countries are increasingly willing to cooperate with China because they want to find out how China developed so fast."
Model growth
The numbers speak for themselves. Between 1990 and 2003, household spending in China grew an average of 7.4% as the country grew from a stagnant centrally controlled monolith into the fourth-largest economy in the world.
Sub-Saharan Africa, by comparison, barely moved. Average spending in the same timeframe grew 0.2% on average, and the continent includes the poorest countries in the world.
China’s growth curve is one Africa would do well to emulate, and more trade deals with China are a good place to start.
During his June trip, Wen visited and discussed business in Egypt (US$50 million in loans and grants for a new investment centre); Ghana (a new, US$600-million dam); Democratic Republic of Congo; Angola (for a few months at the beginning of the year China’s biggest oil supplier); South Africa (where energy company Sasol agreed to a set up coal-to-fuel plants in China); Tanzania and Uganda (where he discussed investment in new car and motorcycle plants).
And at every step of the way, there were reports of millions in loans written off and fresh injections of cash into moribund African economies.
But the cash may not be getting to the people on the ground as quickly or easily as it may seem.
"My understanding is that all these reports are highly exaggerated," said John Robertson, a Zimbabwe-based economist.
Extracting natural resources takes time, sometimes decades. It is unlikely that Nigeria, Malawi or Sierra Leone will see quick returns on China’s investments into still-unexploited resources. "The probability is that we won’t see much in the next five to 10 years," Robertson said.
If the cash is not there, however, there are plenty of running shoes, air conditioners and transistor radios to go around as China works to build new markets for its products. This may be fuelling skepticism of China’s motives.
"The goods coming from China are undermining the security of our markets," said Robertson. "We have a lot of locals that are losing their jobs because factories are closing."
Beijing’s African infrastructure deals can have the same effect. "China will send its own people to build so it’s not good for African countries," Robertson added.
One exception is South Africa, a country with an economy light years ahead of others in the continent. During Wen’s June trip, for example, South African chemical company Sasol announced a deal that will see multi-billion-dollar plants built in China to convert coal to fuel using South African technology. Around the same time, trade unions pushed for limits in Chinese clothing imports in a move that could create 60,000 jobs in the country.
Sole mover
In Sierra Leone, a country plagued by 70% unemployment, the only economic moves of any significance are coming from Chinese investors.
The biggest hotel in the capital of Freetown, the Bintumani, is managed and owned by Chinese; the first company to export in a decade is the Malpass Sugar Factory, also owned by Chinese.
Neither pays workers particularly well but they are almost the only ones – aside from the ubiquitous Lebanese communities – employing new people.
The country’s policy on Africa encourages continued involvement on the continent. In its Africa policy, "the Chinese government encourages and supports Chinese enterprises’ investment and business in Africa, and will continue to provide preferential loans and buyer credits to this end," said Robertson.
China’s need for raw materials to feed its growth while exporting labour may feed the stereotype of a commodities-hungry nation dropping bucketloads of ready cash on the laps of African dictators in exchange for coal or nickel or bauxite or gold or oil; but doing business in Africa is not nearly as easy as that.
There are few checks and balances, markets are generally undeveloped and skilled labour is difficult to find. As Robertson put it: "It is more difficult to do business in Africa? than they originally thought."
Chinese businesspeople are making a fair go of it, though.