This post is the first in a two part series exploring China’s role in Africa’s development. Part 1 focuses on the breakdown and impact of African exports to China, and Part 2 focuses on the role of Chinese investment and imports in Africa.
I think that those of us who are interested in the potential of market-based development need to initiate a conversation around one of the biggest elephants in the room, and that is the role that Chinese foreign direct investment (FDI) and aid is playing in Africa’s development. In particular, how this inflow could fuel potential base of the pyramid (BoP)-focused enterprises and mean new opportunities in both employment and a greater access to choice in goods and services for BoP consumers.
I became interested in doing this piece on a recent trip to Hong Kong, where I was studying strategies that have been taken to propel corporate social responsibility in Asia. One morning at breakfast I came across the headline, “China’s Investments ease Africa’s Poverty, says World Bank report” in the South China Morning Post. This July 12th headline grabbed my attention, as it was clearly at odds with those I had been seeing in the U.S., such as last August’s New York Times story entitled, “China’s Trade in Africa Carries a Price Tag.”
So, which is it? Clearly, the two seemingly opposing articles demonstrate that this is a very divided issue, and the strong journalistic stances risk convincing people one way or the other, when the reality of the effect is probably somewhere in the middle.
As China and Africa’s economic relations have strengthened, on some indicators, life has improved for those Africans at the BoP. Some are able to access cheaper, “Made-in-China” products, while others have benefited from the much-needed investment in infrastructure, which has contributed to everything from energy to ICT development. However, many argue that China’s no-strings attached aid packages ignore some of the structural changes that need to occur to ensure long-term peace and prosperity in the region, and that cheap Chinese goods have crowded out native industries.
The World Bank seems to be optimistic, saying that China’s “newfound interest in substantial international commerce with Africa—home to 300 million of the globe’s poorest people and the world’s most formidable development challenge—presents a significant, and in modern times, rare, opportunity for growth, job creation, and the reduction of poverty on the Sub-Saharan continent….”
While the prospects for job creation and poverty reduction surrounding greater exports are promising, there should be valid worries when it comes to the social and environmental implications of this resource plunder. According to the World Health Organization, developing nations, which emit the fewest greenhouse gases, will have the most serious problems associated with climate change. The jobs afforded to those in extractive industries are dirty, dangerous and unpredictable.
In addition, from a long-term poverty-reduction standpoint, the tiny percentage of value-added goods being exported, the minimal technology transfer, and the lack of skill development does not bode well for the hope of sustainable change. And while U.S. and European companies certainly do not have a clean history in Africa, they are now under much greater social and environmental scrutiny, while Chinese firms appear to be operating with little or no oversight.
One of the most comprehensive journalistic pieces on this topic that I came across was the May 2008 Fast Company Series Special Report: China in Africa. Author Richard Behar traveled to Mozambique, Zambia, The Democratic Republic of the Congo, and Equatorial Guinea in the six-part special. After all of his travels, he came to the conclusion (primarily through visiting extractive resource sites) that Africa is bearing the brunt of China’s massive energy and resource needs that are fueling the established Western and newfound hyperactive Eastern consumer economies. He compared China to a parasite infesting the Sub-Sahara, saying that the Chinese are, “there to get what they need to feed the machine.”
What Behar found was that, “while flat-footed Western governments largely watch from the sidelines, cash-flush Chinese firms—many with state-directed financing—are cutting deals at a dizzying pace, securing supplies of oil, copper, timber, natural gas, zinc, cobalt, iron, you name it.”
China needs Africa, and it has offered much in return for the resources that are driving its booming economy. However, the questions that we need to consider are, what does this means for those living at the BoP and, what role will the civil sector take in this changing landscape of south-south development relations? Should we point a finger at Chinese companies for potentially stripping Africa of its natural resources, or should we instead encourage this much-needed investment and potential job opportunity?
Or, in this case, should we step aside and suppress our White Man’s impulses to apply what Easterly would call the “intellectual hubris at the top that disdains the messy realities at the bottom?” According to some Africans, they welcome the partnership with China because China “treats them like a peer.”
* For a more in depth version of this article please visit NextBillion.net
Grace Augustine is a research associate with the William Davidson Institute, an educational institute focused on researching and supporting organizations in emerging markets. She writes for the NextBillion blog and has an interest in economic development and clean technology for the world’s poorest citizens.