Chinese Investment in Africa
The conference I went to last week, Conference on Entrepreneurship and Economic Development in Africa at the University of London, was SO good. I learned more than expected, rubbed shoulders with people I never expected to be in the same room with, and really enjoyed the talks and ideas shared. It is so encouraging to have experiences like that which affirm what our new organization, Anda Leadership, is doing. It seems that the things God put on our hearts are timely and needed. Our task is to manage the opportunity well.
I’m going to post this week about some of my favorite talks.
The first was the one I tried to record after it got going and I realized the information is critically important… not just because of what the speaker said but also because of the response he received from the audience. Sadly I exited the recording app on my iPhone before saving it, but thankfully was sent the slides so I can remember more of it!
In the world of African business and development, the fact that the Chinese government and Chinese companies have been investing there has gained a lot of attention. Before the conference, I heard that the Chinese are there to take advantage of business opportunities and are not known to have many scruples about how they do that. There is concern that they win business because they might not have a problem with corruption, and are not known for highly ethical work. It has also been said that China is trying to use the continent for its abundant natural resources.
At the conference, this came up throughout the morning. I think a majority of the attendees were African, and the emotion in the room was perceptible when it came up. People who care about Africa feel strongly about China’s presence in Africa.
In the afternoon, William So, from China Unicom Africa, took the stage. He holds a high level position in international leadership for China, particularly in business and investment. I was extremely impressed by his presentation and poise throughout his time presenting and being cross-examined. He honestly and directly explained China’s position in Africa… the good and bad parts. He continued to do this even though the audience laughed at him and scoffed at much of what he said.
Here are my notes:
– The major source of funding investment in Africa are government owned businesses. Gradually, private businesses are investing more. During the question and answer time, he said that government sponsored businesses generally produce the low-quality goods Africans expect from Chinese companies. He thinks private investment is much better.
– Funding from the government comes in two forms. The first is sovereign loan/donation, which is infrastructure focused. Sometimes this is done in the form of non-cash donations, which are usually infrastructure focused. So, maybe China would come into an African country and build a road or rail system. Because one of African development’s most important physical need is infrastructure (according to most speakers at the conference), this is important for Chinese businesses working in Africa. As one participant pointed out in the Q&A time, this investment might also be why Africa is the greatest growth-market in the world. The second way the Chinese are investing is direct investment. These are business acquisitions or new local entities focused on resources. Apparently this has become more popular in recent years.
– Funds in the form of sovereign loans/donations from the Chinese government usually go directly to local governments. China sees the reigning government as the legitimate one, and are hurt that they have been accused of supporting evil regimes like the former Libyan government when, in fact, they were supporting the only recognized, legitimate government at the time. He pointed out that Americans were supporting rebels. (Interesting cultural valuation difference, huh?) Then the African government can invest money back into Chinese companies, which can then build infrastructure.
– Funds from the government in the form of investment are put directly into the Chinese companies. They then support local economies in the normal ways, and taxes go to the benefit of local governments. The African government is able to access natural resources and then sell them to the Chinese. (I’m pretty sure this is what he meant).
– The benefit of funds from the Chinese government to Africa is that Africa reaps the long-term benefit of infrastructure development. However, local economies don’t see much short-term benefit since they bring in the companies from China, so not everyone is initially impacted. Mr. So seemed to think this is a reason the investment isn’t appreciated by the masses.
– Funds from the private sector “inject cash into the local economy.” Chinese companies begin an African operation, buy from African suppliers, hire African employees, provide goods for African consumers and by providing jobs create more ability for Africans to be consumers, and then those consumers can purchase from the Chinese company again. Mr. So believes this is the better way for Chinese investment in Africa.
Mr. So also explained why China got involved in Africa. They wanted more friends at the UN, and by making friends in Africa they figured they could get a lot of support with little resistance. I assume you can see some of the problems with this — friendships could turn into political strong-arming if a government owes significant money to a strong country like China. He said later they realized that the natural resources would be good for China as well and started investing to that end. China is not shy to say that they are investing for their own benefit, but also will point to the ways their input is of benefit to Africa as well. He pointed out that other superpowers have done the same thing, but lacking the honesty (think colonization).
The question and answer time was emotional and informative. It is clear that things have not been done perfectly and there is debate as to whether the outside involvement is good or bad. One African journalist asked to speak and thanked Mr. So for being so honest about China’s selfishness and then admonished the Africans in the room to take control of the future of their own continent, and not be mad that others are using them.
At Anda Leadership, we would like to be a part of helping African entrepreneurs to evaluate opportunities and do as the journalist suggested. We think that African leaders are fully capable of managing their communities in a way that will benefit them now and for generations to come. It is our mission to help them to that end in the ways they identify that they need… not in ways that makes us feel good.
I recently posted internship opportunities on our web site. Take a look if you or someone you know might be interested!
