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Both
China state-owned enterprises and private
sector concerns are involved in Africa.
However their guiding philosophies are quite
different, "While the state-owned enterprises
are driven by the state's interest to invest
heavily in the extractive sector, Chinese
private companies are driven by profit and
the goal of creating lasting economic opportunities
for a host of countries," they said.
The
relationship has had its ups and downs.
From 10 per cent of China's total foreign
direct investment (FDI) in Africa in 2008
it fell to just over zero two years later.
The
two Nigerian researchers blamed the decline
on finding Africa a hard place to do business
- a universal complaint. "This has
much to do with uncertainties in regulations,
layer of regulatory control, multiple types
of taxation and political instability. One
big disappointment was a Nigerian railway
investment.
"It
is on record that one of China's main global
failures was the investment of $8 billion
by China Civil Engineering Construction
Corporation (CCECC) for the upgrade of Nigerian
railway shrank to $850 million in 2006,"
they said.
On
the plus side, the IPPA team noted that
China's demand for mineral and other extractive
material has increased the world prices
for such commodities as copper, aluminum
and others. The demand for these minerals
has helped in reversing the decline in prices.
This in turn gives African governments much
needed revenue.
"Many
of the deals closed by Chinese firms in
Africa are the ones that western companies
would not stake their investment
African
imports from China are more diverse but
three major areas are dominant: machinery,
transport equipment, manufactures and handicrafts.
Nevertheless, Chinese products are considered
to be more suitable to African demand. Prices
are affordable by a large number of people.
These
products fit into the income levels of each
African country. Low prices in mobile phones
in Africa are largely because of the influx
of mobile phones that flooded the market.
"This
ultimately drives down the price of other
market suppliers. Again access to a computer
in Africa has been driver up because of
the importation of cheap computers from
China," said the IPPA report.
"This
has made many not well off families have
access to the computer which was once seen
as exclusively for the rich in African countries.
China helped drive down prices to the level
within the reach of many," it said.
The
IPPA team lay much of the blame for Africa's
dysfunctional economics on Africans themselves.
"Every
country that is prosperous today once was
poor. China, six decades ago, was extremely
poor. Within a short time China commenced
the gradual economic domination of the world.
There
is a consensus that African manufacturers
are threatened by the competition from Chinese
exports in three areas domestic, intra-African
and global.
According
to the World Bank, Africa Competitive Report.
Africa's competitiveness is low. Its exports
remain undiversified and its share of world
trade is low. The report further said regional
intra-African trade is particularly limited
and regional integration could also help
African countries become more competitive
and resilient to external shocks.
Where
intra-Africa trade exists, volume is low.
Given the situation in Africa, it is quite
possible for African products to compete
with Chinese products. The problem is high
transaction costs for local entrepreneurs.
The
impact of Chinese in Africa is more visible
in infrastructure development, investment,
trade and human capital development. It
has also meant African commodity producers
command higher prices considering China's
massive importation.
Africa
is still well behind the rest of the world.
Even in South Africa, the most modern of
its states is comparatively primitive -
and dangerous - beyond a number of razor-wired
cantonments. Yet progress is being made.
Container terminals are growing, meaning
that incomes are rising to buy the goods
everyone buys the world over. It is clear
China contributes mightily to this process.
But
it is fair to say that if one wanted a range
of expectations of the "One Belt One
Road" initiative coming out of Beijing
in the last few months, one would be well
advised to have a look at Africa and what
has been done there.
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