Rules of engagement

Many are the myths about the size, scale and scope of Chinese investment on the African continent. What lies behind the stories?

Focusing on myths and rumours has often detracted from the role Chinese-based FDI has and is playing in the development of vital infrastructure of emerging markets.

In 2014 alone, Chinese companies signed over $70 billion in construction contracts, yielding much needed infrastructure, millions of jobs and boosting the skillset of the local workforce.

Much has been said about the role technology and internet access is playing in development. The increasing number of cheap mobile handsets mean that farmers are able to call traders, nurses are able to text their patients, and everyone can access mobile banking. Access to cheaper mobile phones is one of the key pillars of Africaโ€™s telecommunications revolution, and is driving SME growth across the continent, all of which would not be possible without Chinese companies and their range of mobile handsets.

This is not the only role that Chinese companies are playing. Huawei, for example, has established training schools across the continent and is working with the public and private sector in all corners of the continent, rolling out infrastructure to connect once remote areas.

Another common myth, espoused by Barack Obama no less, is that Chinese companies tend to employ foreign labour. While this may have been the case a century ago in South Africa, a 2015 survey of 400 Chinese companies operating in over 40 countries found that while management and senior positions tended to remain Chinese, more than 80% of the workforce were local.

Chinese banks, over the years, have been increasingly demanded secure assets to guarantee loans in Africa, which has tended to result in a high number of projects actually being executed. For example, Ghana was awarded a $562million loan to build the Bui Dam from Chinaโ€™s Export Import Bank. This was secured by Ghanaian cocoa, providing a secure market for farmers and a 400MW hydroelectric dam for the country.

This focus on infrastructure, technology and finance, is a largely African driven project. Chinese companies are providing services to the continent, projects that are wanted and needed by the local markets. Although this is by no means the be all and end all of the development challenges facing emerging markets, but it provides an interesting glimpse into an international case of supply and demand, and one that is not looking to slow anytime soon.

Latest posts