The Astonishing Growth of Chinese Investment in Africa

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SEATTLE — Chinese investment in Africa began in the early 1960s. While the United States and the Soviet Union vied for influence over the globe, including Africa, the Chinese government saw an opportunity to compete with the two dominant world powers, offering a third option to African countries who sought aid after gaining independence.

While the Chinese government has always sought to aid its partners in Africa, much of the aid comes in the form of investments, often as loans to the countries’ governments or business aid. When Chinese governments make deals with a nation’s government to mine or build in a country, in return Chinese companies employ and train the people of the country, both in skilled and unskilled positions.

This Chinese investment in Africa is viewed as both a blessing and a curse. Some say it is great that new money is being pumped into the African economy, new roads are being built and there are more jobs, but others see it as a form of neo-colonialism.

It cannot be denied that Chinese companies and in turn the government are concerned with the Chinese economy first. Chinese investment in Africa is based on the fact that China cannot meet all of its resource needs domestically. Energy is a major concern. In 2004, the Chinese bank Eximbank began to loan money to the Angolan government, backed by their oil reserves. In 2005, the Chinese oil company Sinopec began to acquire drilling rights for specific areas controlled by Eximbank in Angola.

As early as 2016, Angola began to see the pitfalls of an undiversified oil-based economy. The Angolan government struck similar deals with Western companies and Chinese companies. As the price of oil dropped, companies needed to extract more oil to continue loan repayment, leaving Angola vulnerable to these companies and governments. Much of Angola’s oil is used for debt repayment, so it was unable to extract as much oil for itself. Earlier that year, when China and Angola reached a new prefinancing deal, estimated to be worth $5 billion, Angola was left with little revenue of its own.

A similar deal was struck between the government of the Democratic Republic of the Congo and the Chinese government in 2008. The Chinese government would give the DRC $3 billion for mining and $3 billion for infrastructure development, to be used to build roads, hospitals, schools and dams. In exchange, the Chinese mining company Sicomines would be given access to DRC’s copper and cobalt reserves. Cobalt is an important mineral in the manufacturing of batteries and the DRC is in control of half of the world’s cobalt reserves. Unfortunately, from 2008 to 2015, less than half of the money earmarked for infrastructure improvement was spent on improvement projects. This is due to the high level of corruption in the Congolese government.

According to Amy Jadesimi, the managing director of Lagos Deep Offshore Logistics Base, a private company involved in foreign investment in Africa, China is improving its ability to work with local companies and governments under Chinese President Xi Jinping’s corruption crackdown, alongside select African nations’ similar crackdowns. She claims that this helps Chinese investment in Africa on two levels.

The first is that the money that China lends to nations in return for their natural resources will be used wisely, and not just to line the pockets of corrupt officials, bureaucrats and business owners. This helps the Chinese option look more attractive to other African nations that have yet to commit to large trade deals with China. Less corruption will also improve investment returns in both China and in Africa.

As population growth slows in the West, by 2050, 25 percent of the world’s population will live in Africa and the majority will be under the age of 30. By furthering closer cooperation between African governments and China, leading to an increase in effective Chinese investment in Africa, many opportunities will await these future generations.

– Nick DeMarco

Photo: Flickr

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Nicholas DeMarco

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