The patient capitalist

The global financial crisis is spurring emerging powers like China, Brazil and India to Africa in search of resources and markets. These new states on the international political scene are using, according to Christopher Alden, “their economic prowess, diplomatic acumen and military might…to challenge the dominance of traditional mainly Western powers”. China, the dominant of the three, is the new face of globalisation.

China’s “rapid and omni-dimensional” engagement in Africa is rising and Nigeria is swooning – trade between Nigeria and China is expected to grow to $10 billion by end of the year. President Jonathan is expected to sign $3 billion in loans from China during a five-day state visit starting today. The loans will be given on concessionary terms: 15 to 20 years period at an interest rate of less than 3 percent. The loans are for airport terminals, a hydro power plant, and a light railway.

Aside from government-to-government bilateral and multilateral relations, there are other initiatives, such as the China-Africa Business Council, representing 550 Chinese companies, which wants to set up a $1 billion fund. A survey of 198 members showed they earned $2.4 billion in revenues in 2012 (16 percent of their business); are in 32 African countries; employ 34,000 local and 6,400 Chinese workers. Unlike state-owned Chinese companies that invest in roads, bridges, ports and stadiums, CABC will focus on investment opportunities in steel, cement, electronic products, textiles, and clothing and car assembly lines. Members include Lifan, a car manufacturer; Huajian, a shoemaking company; and Shenzen Energy Corporation.

Shrinking margins due to the cost of Chinese labour and the abundance of raw materials and a ready market are making companies like Huajian to expand into Africa. Huajian is building a shoe hub in Ethiopia and plans to invest $40.3 billion over five years.

The Chinese government is championing this commercial, long-term approach to investments strategy to strengthen ties with Africa through private and government-owned enterprises. They are convinced that Africa’s development trajectory is similar to China’s three decades ago. Hence they are best suited to provide infrastructure and investments for transforming the continent.

China-Africa Development Fund (CADFund), though backed by government, is China’s largest private equity fund with an African focus. Chi Jianxin, president of CADFund, commented lately in an interview with ChinaDaily, thus: “In comparison with funds managed by Western companies or governments in Africa, we are more inclined to pay attention to medium-term and long-term investment, because African countries are at a different stage of development, industrialisation and urbanisation.”

Some economists, commentators and government officials are wary. Though Chinese investments have made a dramatic change on the continent, they are convinced that Africa is not getting the full benefits of Chinese presence in terms of jobs.

The more cautious among them have called for a reappraisal of Africa’s relationship with China. Others argue that the jobs will come, over the next five years. As Chinese companies get more sophisticated, they will relocate their light manufacturing activities to the continent. (Huawei lately launched the slimmest smartphone in the world). Lagos State has adopted a hard-headed approach: its secondary school students are being taught Mandarin and vocational education is being promoted.