Chinese foreign minister Wang Yi visited several African countries in the first days of January 2022. He spent time in Comoros, Kenya and Eritrea between 4 and 9 January. The purpose of his visits were to solidify the relations of trade and investment between China and Africa.
The trip marked the 32nd year of a tradition in which the Chinese foreign minister’s first journey abroad in the new year is usually to Africa. It came just less than five weeks after Wang’s previous visit to the continent, during which he chaired the Forum on China-Africa Cooperation conference in Senegal and also stopped in Ethiopia.
Their first objective is to work with Africa to defeat the pandemic, Yi explained.
“The world is facing a new round of impact of the Omicron strain. As a friend of Africa, China will never sit by. President Xi Jinping has announced that China will provide another 1 billion doses of vaccines to Africa, and this largest-scale assistance plan to Africa is in progress.
“Batches of vaccines are being transported across mountains and seas and delivered to every corner of Africa where there is in need. We have announced an additional 10 million doses of vaccines for Kenya. We will absolutely stand by our African brothers and sisters until the final victory is won,” Yi said as reported by Silk Road Briefing.
In 2021, the minister also visited Tanzania, the Seychelles, Botswana, Nigeria and the Democratic Republic of the Congo. Some have lauded Yi for his consistent visits, while others have raised concern at what is being viewed as China’s quiet takeover Africa.
“China’s increased trade with, and investment in, Africa have boosted the continent’s economic growth but have also generated considerable controversy,” the World Bank said via a report which investigates why China is investing in Africa.
“The aggregate data on China’s overseas direct investment (ODI) in African countries reveal that China’s share of the stock of foreign investment is small, though growing rapidly. China’s attraction to resource-rich countries is no different from Western investment.”
According to research by the China-Africa Research Institute (CARI), relations between China and Africa have been ongoing since 2003 and steadily increasing.
“Chinese foreign direct investment (FDI) annually flows to Africa – and is also known as OFDI (“Overseas Foreign Direct Investment”) in Chinese official reports – have been increasing steadily since 2003.”
China-Africa Research Institute
“From 2003 to 2019, the number has surged from US$ 75 million in 2003 to US$ 2.7 billion in 2019. Flows peaked in 2008 at US$ 5.5 billion because of the purchase of 20% of the shares in Standard Bank of South Africa by Industrial and Commercial Bank of China (ICBC).”
One of the avenues through which China-Africa investment and trade has been increasing, is through the formation of the the Forum on China-Africa Cooperation (FOCAC) in 2000. The FOCAC has served to establish strategic collaboration, and diplomatic and cooperation initiatives between the two countries.
Nearly all African countries involved
Currently, nearly all African countries are benefitting from Chinese FDI. Although oil and extractives still account for a major portion of Chinese FDI in Africa, financial services, construction and manufacturing now account for half of all Chinese FDI. China’s banks have backed large-scale infrastructure expenditures on the continent, and more than 2 200 Chinese companies, primarily private, are actively doing business in Africa.
According to the World Bank, commodity exporters have greatly benefitted from the China-Africa relationship, as there is now high demand and associated price rises.
“As China-Africa trade cooperation moves into its next phase, there is significant scope for diversification of exports, particularly agriculture and manufactures. Based on its own experience, China could help African countries to address structural and logistical constraints that limit the competitiveness of these exports.
“Chinese FDI in Africa surged during the global financial crisis of 2008, when local governments also introduced preferential loan programmes. Investments in infrastructure, particularly energy and transportation, have helped to address the physical infrastructure constraints faced by many African countries.
“In recent years, Chinese investment has extended to mergers and acquisitions and to the relocation or expansion of Chinese-owned manufacturing operations on the continent. While investing in Africa has provided new opportunities for Chinese firms, African countries have benefited from the skills and technology that it has brought.”
The World Bank believes that as Chinese investment increases and more firms establish operations in African countries, the challenge for local firms will be “to remain competitive and take advantage of opportunities to integrate into global value chains”.
Chinese investment in Africa
Tanzania: China’s entire investment stock was $541 million in 2012. The majority of private Chinese businesses operate in low-tech, labor-intensive sectors that cater primarily to the domestic market. They have produced between 80 000 and 150 000 positions, with many of them offering on-the-job and management training. After working for Chinese companies, a number of local entrepreneurs started their own enterprises.
Ethiopia: A shoe factory was established by the Huajin Group with a $10 million investment. It dispatched around 90 personnel to China for technical training before it began operations. The plant was opened in 2012, and the first year was profitable. Its 3 500 employees manufactured 2 million pairs of shoes in 2013.
Nigeria: A Chinese business, the Yuemei Group, committed $1.2 million in 2006 to develop a domestic manufacturing subsidy and $50 million in 2007 to construct a textile industrial park with a comprehensive production chain. By 2009, the park has grown to include five textile enterprises and 1000 local workers. The company now has ten plants, as well as sales offices in various countries and a facility in Senegal.
“There is scope for China’s considerable investments in Africa to have greater impact on economic transformation and export diversification. For this to happen, both African countries and China need to maximise the development impact of their partnership. There are successful experiences to build on, and African countries are interested to learn from China’s own experience of generating growth and reducing poverty.
“A proactive approach on the part of both African governments and private companies is required. Improvements in the business climate could attract more large Chinese firms to invest in Africa, bringing with them access to technology, skills and training, and knowledge transfer, as well as linkages to global value chains. Partnerships between Chinese and African firms though joint ventures and upstream and downstream linkages would also help to expand the private sector in African countries, creating employment opportunities,” the World Bank concluded.
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