Black Affairs, Africa and Development

China and Africa: a Strategic Relationship

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China and Africa: a Strategic Relationship

China and Africa have always shared a common interest in business growth and it seems that Chinese investment in Africa is set to increase substantially, with extensive plans for the near future, which include companies in China intending to move abroad, according to the world’s top economists.

At the Asia Annual Conference recently, the focus was on the rise of Africa. At the conference, the secretary-general of the China Centre for International Economic Exchange stressed that this is the time for great co-operation between the two nations and that the emphasis was on quality as well as quantity.

Investment in Africa has exceeded $20 billion up to this point, and it is thought that this will increase further. Within the next five years, China hopes to invest $500 billion abroad, and a proportion of this will be within Africa.

The benefits of Chinese/African business

Importing Chinese equipment has been blamed for a ‘deindustrialisation’ of Africa recently, but it has been seen that if Chinese companies are able to use local equipment they do so and if they cannot because of a lack of availability, they import it as a cost effective solution.

Recruitment takes place locally in Africa, accounting for around 85% of employment within Chinese companies. In Zambia, the ratio of local to Chinese employees is thought to be more than 13 to 1.

Initiatives such as the China-Africa Economic and Trade Co-operation Zone and China-Africa Development Fund act to encourage interest and future enterprises in Africa, with investment at their heart. With Chinese manufacturing being outsourced to other countries due to rising labour costs, it makes sense for Africa to benefit from this initiative, which will help develop their business infrastructure.

As Chinese investment continues to rise, the U.S seems to be receding. In 2011, Chinese companies made up around 40% of the business contracts within Africa, whilst the U.S only accounted for 2%. This has led to western anxieties about the relationship between China and Africa, with accusations that China is its new colonial master.

In 2011 China made a gift of the African Union building in Ababa, costing $200 million. This was a public demonstration of its good will in Africa, although some saw it as more of a demonstration of China’s neo-colonial ambitions. The glass tower has primarily been seen to reflect a new Africa and the future of its business partnerships, as many see China as freeing Africa from its past.

Mutually Beneficial

China itself is quick to refute the new colonialism tag being attached to it. The nation claims that its business investments in Africa are mutually beneficial and that it has no interest in colonialism. Africa’s exports of oil, steel, minerals and agriculture have influenced the livelihood of the Chinese people. In return, China is providing Africa with technology and sought after products, with Beijing helping to improve infrastructures and the manufacturing industry in Africa. The term ‘a new type of China-Africa strategic partnership’ has been coined by President Hu Jintao.

China has developed training for more than 40,000 African employees and it has also provided 20,000 scholarships. The pressure is now on for China to invest money in African factories, rather than building infrastructures and importing machinery, so that African business can take a more independent stance. With many countries offering loans to African businesses to enable start-ups, including India’s $5 billion loan package in May 2011, the hope is that China will invest in local manufacturing plants to really boost the African economy.

Investment Opportunities

There is impressive growth in many sectors in Africa, such as petroleum and telecommunications. Cell phone usage is rising at a dramatic rate, more so than in Asia, and there is proof that the vast number of consumers can equal good profits. With a consumer base of over 900 million people, half of Africa’s population are eager for services and products. There are investment opportunities for small businesses in Africa that are beginning to be truly realised. In fact Africa offers the highest return on foreign investment than anywhere else, according to UNCTAD, the UN trade agency. Individuals and businesses are making the most of this growth and taking out loans for investment purposes, as well as business and life insurance, for a variety of uses. There are many offers available that allow individuals and businesses to compare life insurance deals before their ventures. This may be for small start-ups or for travelling to Africa to experience its business first hand. With Africa experiencing such growth in certain business sectors, and with China offering long-term enterprise partnerships, now is the time to invest in this nation and help to develop the local economy.

 

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