To what extent does China influence African economic development?
For a number of years, China has been influencing the economic development in Africa. The continent is an important recipient of investment from the Middle Kingdom, as countries such as Angola, Ghana, Nigeria and Zambia have signed strategic economic partnership programmes with China.
KPMG convened the Africa Conversation series to discuss China’s role in Africa and possible responses by African countries in dealing with prevailing challenges. The panel discussion titled ‘Africa-China Trade and Investment’ was broadcast live across the continent by CNBC Africa.
Glenn Ho, Head of KPMG China Desk in South Africa, highlighted at the beginning of the discussion that China’s foreign direct investment into Africa is still about twice the global average and continues to target natural resources on the African continent. The biggest single investment occurred in 2007 when the Industrial and Commercial Bank of China bought a 20 per cent stake in South Africa’s Standard Bank. But, there is a trend of increasingly smaller companies undertaking investment. “A fair amount of the investment has been directed towards infrastructure development, generating businesses in the vicinity of the locations, to the benefit of the African people,” says Ho.
Investment model
However, it is misleading to speak of an investment model when it comes to Chinese investment in Africa says Dr Greg Mills, Director of the Brenthurst Foundation. While at the top level, the Chinese government is clearly interested in natural resources and opening new markets for Chinese goods, lower level business activities and exchanges are not following any clear strategy.
The biggest challenge in the relationship between China and Africa is that China is coming from a completely different political background that sets the government at the centre stage of foreign economic relations.
Gloria Serobe, CEO of WIPCapital, noted,
“In South Africa, the relationship between business and government is not very strong. Businesses work in silos. When you are dealing with Chinese businesses you are dealing in fact with all layers of the Chinese government.”
