Interactive Investor

China in Africa: Who benefits?

6th November 2012 10:50

Darshini Shah from interactive investor

In the second part of Interactive Investor's look at the relationship between China and Africa, we ask how, and if, it benefits both parties equally. For part one, read: The battle for resources.

As Chinese investment in Africa increases, the emergence of small-scale Chinese retailers threatens to undermine existing local shops. In Huambo, Angola, Chinese shops have increased ten-fold, from two in 2002 to over 20 in 2006. In Oshikango, Namibia, the first Chinese shop was opened in 1999; by 2006, there were 75.

"The influx of Chinese trading shops has been met with a mix of enthusiasm and concern," writes Chris Alden in his book, China in Africa. In South Africa, Chinese migrants are seen as intruders, even by those who buy at their shops. A street vendor in Kenya scornfully remarks: "The Chinese come here with promises of new jobs and better lifestyles, but they are taking away even the simple businesses like selling groceries. Yet, the government says we should celebrate Chinese investment?"

This view has been echoed by Dipak Patel, former trade minister for Zambia: "Does Zambia need Chinese investors who sell shoes, clothes, food, chickens and eggs in our markets when the indigenous people can?" And in 2006, an opposition presidential candidate ran a "Zambia for Zambians" campaign aimed at expelling Chinese influence from his country.

Concurrently, there is a debate regarding China's practice of employing its own nationals. A study commissioned by the Angolan government showed that while non-Chinese employers were expected to pay between $3 (£1.85) and $4 a day to Angolan labourers, Chinese labourers were paid $1 day by their own employers.

At the World Social Forum held in Nairobi, Kenya in 2007, Humphrey Pole-Pole, head of Tanzania Social Forum, declared: "First, Europe and America took our big businesses. Now China is driving our small and medium entrepreneurs to bankruptcy. You don't even contribute to employment because you bring in your own labour."

Cultural barriers

However, a comparative study showed that contrary to widespread perceptions, Chinese companies did employ locals, in some cases comprising up to 70% of their labour force. While most of these jobs were casual labour, Africans also achieved managerial status.

The general manager of China National Overseas Engineering Corporation, based in Lusaka, Zambia, attributes the differences to cultural barriers: "Chinese people can stand very hard work. [They] work until they finish and then rest. [In Zambia], they are like the British; they work according to a plan. They have tea breaks and a lot of days off. For our construction company, that means that it costs a lot more."

While this low-cost model insinuates low wages, it has also become synonymous with bad working conditions, abusive practices and environmental degradation. In 2010, for example, 11 local employees of a coal mine in Sinazongwe, Zambia were sprayed with bullets by the Chinese managers while they were protesting about pay and working conditions. This followed a 2005 explosion in a Chinese copper mine in Chambishi, Zambia, which killed 46 workers. In 2007, the Nigerian government leased to China Nuclear International Uranium Company a tract of land belonging to ethnic Tuaregs, without compensating them.

Legal and illegal timber logging has wreaked havoc on the prospects for sustainable forestry in Liberia and Mozambique. Dams built in Sudan and Mozambique have displaced thousands of local residents, while over-fishing off the eastern and southern African coasts has impaired communities dependant on fishing for their livelihood.

Military co-operation is an important aspect of relations with some African governments.

"The early colonisers came to Africa with alcohol and useless gifts to lure the locals. China is doing the same with arms sales, especially to those African governments under threat owing to civil war, insurgency, or barred from obtaining weapons from traditional Western sources. In fact, no other major power has shown the same interest or muscle, or the sheer ability to cozy up to greedy African leaders," explains Navin Shah, a property developer in Nairobi.

However, China's arm sales to Africa, which stood at $1.3 billion in 2003, account for less than 7% of all arms delivered to Africa. In fact, a cable released by WikiLeaks showed that compared with the US, China actually shows a preference for relatively democratic clients such as Zambia and Namibia. According to the Stockholm data, the US sold five times more arms to Sudan than China.

Beijing's sales of arms to Egypt were also dwarfed by the US, which provided Egypt with billions of dollars worth of fighter jets, tanks, missiles and other arms from 2001 to 2008.

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