When China launched its acclaimed reforms and opening programme in the late 1970s, part of the strategy was to encourage its enterprises to explore trade and investment opportunities abroad. Africa was one of the natural places Chinese companies set their eyes on. Africa was characterized by weak industrial chains, poor infrastructure connectivity and high levels of penury. The continent also presented less competition for Chinese companies given that the few western firms with footprints in Africa were more interested in resource extractions than sustainable economic partnerships.
Four decades down the line, private and state owned Chinese enterprises have provided the linchpin for rapidly evolving and deepening cooperation with the African continent. Midway, in the year 2000, the Forum on China Africa Cooperation (FOCAC) was established, and nine years later, Beijing overtook the United States to become Africa’s largest trading partner. In just two decades following founding of FOCAC, trade between China and Africa grew twenty-fold to hit US$ 200 billion.
A new report by the China-Africa Business Council indicates that the foreign direct investments by Chinese firms in Africa were valued at US$ 56 billion at the end of 2020; with private enterprise accounting for 70% of the FDI stock. Driven by market expansion, return on investments, industrial transfers and a search for resources, Chinese firms have made huge contributions to infrastructure modernization, job creation and industrialization.
The report is a build up to earlier survey results that have pointed to the utility of the Chinese firms in Africa’s socio-economic transformation. According to an article by the Brookings, between 2014 and 2018, the total China’s FDI in Africa was US$ 72.2 billion compared to US’s FDI stock of US$ 30.9 and France’s US% 34.2 billion. During the same period, China helped create 137028 jobs in Africa compared to Washington’s 62, 004.
Acknowledging China’s strong role in Africa’s trade, investment, infrastructure financing, and aid portfolios, another 2017 report by McKinsey which surveyed over 1000 Chinese enterprises across the continent indicated that China’s FDI in Africa increased by 25% between 2010-2014. The survey also found that 89% of employees in Chinese firms were Africans.
The China-Africa Business Council report comes at unprecedented economic challenges for the continent as a result of the Covid-19 pandemic. Government revenues in Africa have dropped by 25% while over 100 million jobs have been lost to the pandemic. There is therefore greater need for progressive economic partnerships with Africa’s development partners to jumpstart and hoist recovery from the global health crisis while grounding viable basis of achieving short to medium term goals of the Africa Agenda 2063 development blueprint.
Chinese firms are increasingly focusing on the development cooperation in new fields including high-tech manufacturing, pharmaceuticals, and digital economy. These new focus areas also hold great promise to reboot Africa’s economic vitality in the backdrop of the pandemic. Young Africans are looking for connectivity that can fuel virtual jobs while pharmaceutical investments will foster Africa’s self-reliance through current and future pandemics.
Projects like Kenya’s smart city at the Konza technopolis; vaccine manufacturing in Egypt and Morocco; and the joint efforts to cultivate digital security and governance capacity with different African countries are only early outcomes in the new development approach.
Certainly, the successes of Chinese firms in Africa have not come without intractable challenges. Besides planning and coordination shortcomings, inadequate international business experience and risk management capacity have dimmed the ability of the firms to operate optimally.
Africa embodies a compelling economic partner for China and other countries, even as the continental free trade area shapes up. Improving intercultural communication while leveraging sustainable investment and financing models can help localize and firmly root Chinese firms in the continent.
The upcoming FOCAC summit provides China and its African partners an opportunity to ground new partnership frameworks that can expedite the achievement of shared development aspirations. It is clear that Chinese firms, especially the private enterprises, remain important actors whose actions and synergy will fuel Sino-Africa ties for decades to come.
The writer is a scholar of international relations with a focus on China-Africa cooperation. Twitter: @Cavinceworld.