Chinese investment in the continent of Africa welcomes the updated narrative of neocolonialism based on capitalist practices that reap benefits to China while leaving Africans disenfranchised.
The continent of Africa remains a resource pool divided by haphazardly drawn borders. With volatile states still recovering from the continued history of exploitation, Africans are left subject to the imperialists who once colonized them. This paper seeks to address the entrenchment of this colonialism through the capitalist practices of China on Africa. To make accurate judgements on this topic to discover who benefits, it is first vital to understand how capitalism’s entrenchment in Africa fomented incorrect assumption of the practice. Then, development practices in the African and Chinese context can be compared to see exploitation in the continent, demonstrating that Africans remain marginalized while the Chinese profit.
One is reminded that, when functioning as it should, capitalism delivers good things (Plessis 2016:1). With this in mind, it becomes apparent that African nations can enable the basic principles of capitalism as an economic system by implementing “free market competition, private ownership and investment of capital to make a return” (ibid). While ideal, this is not the case in Africa. The history of colonial exploitation is vital to assess why capitalism does not work in Africa. During European conquest, monopolies were given to powerful individual to extract valuable nation resources. This, according to Plessis “benefited small elites rather than the collective interest,” which fomented an incorrect case capitalism (ibid). Governments and people in the Africans circumstance thus believe that capitalism can only benefit the few.
With this understanding, it should become obvious that the diverse continent is easily exploited by politicians and investors. “The combination of Africa’s fertile land, abundance of natural resources, and governments that hope to benefit from foreigners’ investment” require technical expertise to maintain the benefits of any investment (ibid). From comprehending the origin of its exploitation, development practices in the African context can be understood.
African development can be assessed in regards to the continent’s appeal to FDI, or Foreign Direct Investment. Andrew Ross defines FDI as “investment involving a long-term relationship and reflecting a lasting interest and control by a resident entity in one economy in an enterprise resident in an economy other than that of the foreign direct investor” (2015:4). Through short discussion of how these practices work with Chinese interference, understanding African opinion on international cooperation becomes clear. With a focus on infrastructure advancement and a case study of FDI in Nigeria, recognizing the low benefit of Africans is discovered.
Due to the various marketable traits previously mentioned in Africa, investors’ interests are increasing in the continent. Similarly, Africa’s average ODA (Official Development Assistance) as a percentage of gross national income is declining steadily, from 5.3% in 2005, 4.2% in 2008, and 3.2% in 2012 (Mijiyawa 2015:392). These attractive moves toward a more productive system motivate investors, like China, to bring business to Africa. Hence, “GDP growth rate and trade openness can be used to improve the business climate for FDI” (ibid,394). Efficiency is crucial for FDI projects, where well-developed infrastructure and communication networks build up appealing market conditions (Ross 2015:9).
Similarly, FDI attractiveness is strengthened when regional integration boosts other neighboring countries. Mijiyawa notes that the “presence of FDI today in a country is likely to attract more FDI to that country in the future,” enticing government collaboration with investors (2015:400). Performing these practices can change perceptions about Africa, welcoming new investors to “consider the continent as a destination for their investments” (ibid). With this understanding, it is revealed why Africa is so appealing to China. The numerous FDI projects and decreasing necessity for aid mold Africa to be a beneficial investment. However, given its competitive advantage, China considers FDI inefficient. They could care less about international trends and diminishing inequality. Rather, China’s desire to secure natural resources motivates the new hegemon to provide trade and development assistance (Ross 2015:7).
Despite a seemingly fail-proof plan, Africa lacks the infrastructure to support such rapid investment. As “Chinese investment is driven by access to natural resources,” there remains a need for the right range of physical and telecommunication infrastructure investment for resource extraction (Ross 2015:9,15). This is a severe problem for Africa’s quest in acquiring FDI because the continent’s institutional infrastructure is generally accepted to be very weak by international standards (ibid). Ross elaborates, stating “not only does quality infrastructure reduce transportation cost, but it also increases efficiency of operations, and good infrastructure should encourage FDI” (ibid,11). Therefore, countries that lack well-developed infrastructure will struggle to attract international investment.
African nations remain cognizant of China’s desire of efficient natural resource extraction. Unfortunately, they continue to be unaware of how to improve their infrastructure to be more appealing. Thus, host countries are easily exploited by adhering to China’s terms and conditions for the proper investment of infrastructure (ibid, 16). This cyclical entrenchment of Chinese desires over African sentiment expands beyond sole IDF motivation. Not surprising, Chinese investors utilize their own workers in infrastructure programs. Manero finds that “instead of giving local companies and citizens a vital opportunity to grow experience and capital, these contracts overwhelmingly benefit Chinese corporations and bringing massive profits” (Manero 2017:1). Thus, the FDIs relied on so heavily by Africans is further controlled by the Chinese. They have capitalized on their presence in Africa by changing public sentiment to ensure their economy benefit.
Despite this, a 2015 PEW study found that 70% of Africans had a favorable view of China, likely due to their engagement with African growth (Chen 2015:2). Diplomatically, China had a formal relationship with 49 of the 54 African countries, with direct investments in 48 of the 49 (Cheung 2011:3). China has also utilized a policy to support African countries in “developing their own special economic zones” for Chinese companies to then invest (ibid). Here, it is apparent that China’s aid is motivated by increasing its own economic prowess. Cheung points out that Chinese invested money in Africa fuels the economic incentives that revamp undesirable political and economic conditions (ibid, 6). To understand this, one must see that African governments need to address their investors’ concerns, such as infrastructure, security, and the previously alluded political stability (Shen 2015:104). Yet fueling governments with economic incentives to blindly follow Chinese investors ferments exploitative investment in the continent. This is seen through the “labor-intensive and low-tech manufacturing brought in by Chinese firms [that] probably provides a desirable first step” for African leaders eager to eliminate their citizens unrest (ibid, 105). With this Chinese investment, African governments can transform from resourced based economies into more industrialized ones, where more FDIs are likely to follow. This can fuel a cycle of the wealthy paying themselves. This can easily be seen through a case study of Chinese investment in Nigeria.
Holding the largest economy in Africa, Nigeria was eager for Chinese investment. Nnanna recalls how both public and private Chinese companies developed economic zones to construct the proper infrastructure for greater resource extraction. New airports, roads, bridges and railways connecting major cities were funded by the Chinese (Nnanna 2015:41). Through exploiting the major port at Lagos, China increased exporting cheap goods that Nigerians can afford. This led to a .6% growth of the manufacturing sector’s contribution of GDP (ibid, 43). While this growth seems positive on the macro level, there are major limitations for microeconomic growth in regards to positives effects for Nigerians. With the rapid increase of foreign companies in Nigeria, local business owners have struggled to stay afloat. Chinese businesses that manufactured cheap auto parts, textiles, and building equipment caused Nigerian businesses to sink (ibid). Notably, over 90% of Nigerian-owned businesses were shut down because “Chinese firms were winning the price wars” (ibid, 46).
Even jobs are absent from foreign agreement. Chinese investors are expected to create jobs for local economies, but “many Chinese companies perfect using Chinese employees for administrative efficient, even if it means flying in a Chinese worker with the same level of qualification” (Timokhina 2014:9). Because Chinese businesses aim to maximize shareholder value, their investments disregard any micro-level effect on local communities. Due to the ambiguity in FDI and African governments’ drive for investment, there lacks any protection for current operations in effected industries. For Nigeria, there are no bilateral agreements, nor are there any economic or institutional safe-guard for local, micro-level business (Nnanna 2015:46). Therefore, while Chinese FDI seems positive holistically, it remains to be detrimental for the majority of society, whose work fortifies the elite’s power.
Recognizing African perspective for FDI is important when assessing overall economic benefit. Seeing how the capitalistic system appears to be beneficial and attractive for Africans, it is apparent that Africans are distracted. With this diversion, it remains an exploitative falsity, fueling the neocolonialist capitalistic practices of China. With this understanding, assessing Chinese motivation in foreign investment and development will foment the fact that African neocolonialism exists through Chinese capitalist practices that leave Africans disenfranchised.
With a growing population, China’s is depending on Africa to maintain its hegemonic power. As the world’s leader in manufacturing, China relies on a steady flow of natural resources from many Africans nations (Manero 2017:1). Specifically, “African has become China’s second largest engineering contract market” (Cheung 2011:5). With a growing dependence on energy, China has relied on Africa to provide for its domestic energy consumption (Ross 2015:8). From all of this, China’s focus on Africa is understandably large, even though it is still a small player in overall investment (Chen 2015:6). Not surprisingly then, the value of China’s relationship with Africa in 2014 totaled over $200 billion (Manero 2017:1). These statistics prove that China relies heavily on Africa.
If African nations knew the extent to which China needed their support, perhaps fairer negotiations and manners of conduct would persist. Nonetheless, China remains elusive to entrench their position as the greedy capitalist. In fact, China claims its goal in Africa has never been economic benefit. In 2011, Premier Wen Jiabao said “China had selflessly assisted Africa when itself was the poorest. We did not exploit one single drop of oil or extract one single ton of minerals out of Africa” (Timokhina 2014:6). Even more recently in 2015, Wang Yi, China’s foreign minister said while visiting Kenya “China absolutely will not take the old path of Western colonists, and we absolutely will not sacrifice Africa’s ecological environment and long-term interests” (Manero 2017,2). Thus, China hides their necessity for foreign investment so they can set the rules of interaction. As Shen discusses “Chinese investment is frequently criticized for its lack of transparency and for bringing its own workforce from home, thus depriving the host economies of the benefits of job creation” (2015:95). Further analysis of Chinese behavior will prove these comments by leaders to be then vague and deceitful.
China sets strict contracts with its African partners. To enforce these, African nations are forced to comply with two Chinese Policy Banks—The China Export & Import Bank and the China Development Bank (Cheung 2011:5). The contractors that manage the deals are employed by these banks. Thus, Chinese firms get control over project that include “building of highways and roads, bridges, schools, shopping centers, housing and office buildings, water conservancy, dams, and power plants” (ibid). Similarly, with influence in the developed and periphery worlds, China has “considerable leverage in the pursuit of its interests” with its seat on the UN Security Council and long involvement with Africa (Timokhina 2014:2). With this unique power, China has the ability to define the rules of the game for their own benefit. The hegemon seeks to grow its industrial trade and move up in the supply chain to foment China as the world’s most powerful economy. As Timokhina finds, “by relocating low-skilled jobs and labor-intensive industries to Africa, China seeks more capital-intensive, high-tech industries and jobs to improve its own development model and quality” (ibid,6). Therefore, China capitalizes on its control of information to hide their reliance on Africa to let them profit with every transaction they attempt to make.
Private Chinese firms also have a drastic effect on Africa. At the end of 2013, there were 2,282 Chinese investment projects in Africa, a majority of which with private Chinese businesses (Shen 2015: 86,102). This private participation is motivated through profits, or the self-interest of the Chinese, which rarely brings legitimate economic opportunities to a host country. Surprisingly, however, Shen notes that some private Chinese capital have some positive effect on local job creation. This is why the “host governments surveyed generally viewed Chinese investment as a positive happening in their countries,” as well as the aforementioned 70% approval rating of China (Shen 2015:103; Chen 2015). Nevertheless, it is apparent that China intentionally controls the market and information to ensure their domination over decisions in order to maximize their profit. Thus, with the effects of capitalism in Africa and China assessed, it becomes apparent how this refreshes a sense of exploitation in neocolonialism.
With this severity of evidence, it becomes clear that Africa remains subject to the desire of foreign adversaries. Effective capitalism requires a state that can function. This comes through rule of law, policies that enable entrepreneurship, and a strong civil society (Plessis 2016:2). As this paper has shown, African nations fail to provide these three vital factors. With weak central governments and vague law that is unevenly applied to its citizens, African nations remain subject to the imperialists that influence their economies. Demonstrating the flaws of capitalism then, it is apparent that difficulty ensues when driving infrastructure development (ibid). The benefits of capitalism thus are shared by a concentrated elite, controlling the produce and consumption of goods in the international economy.
To attempt to combat their exploitation, Tony Elumelu suggests adopting a policy he coins ‘Africapitalism’. This is an “economic philosophy that embodies the African private sector’s commitment to the economic transformation of Africa through long-term investments that create economic prosperity and social wealth” (ibid, 3). As turning inward and becoming protectionist are counterproductive, Plessis expands on Elumelu, suggesting that “better governance, transparency, and a stronger rule of law” are the best ways for Africans to escape their entrenchment into an unfair system (ibid). Encouraging this domestic private sector investment can lead to long term benefits, which increases foreign capital. Thus, economic and social benefit can lead to opportunities for African business expansion (ibid,2).
This paper has made it apparent that China actively seeks to hide their necessity for African resources by power in the deal. Kandiero further explores this when looking at rent-seeking motives in Africa. Because foreign firms seeks cheaper labor and resources, Africa fits a desired investment. A potential market-seeking FDI “ideally involves foreign firms exporting or opening new markets in host countries in order to boost their sales” (2006:356). This continues the capitalist exploitative narrative because the sole motivation for investment is cheaper production. Similarly, FDIs like China can get around trade restrictions, such as high transport costs, by altering the rules of engagement, arguing that using a few countries will serve a larger market (ibid). The key motives for efficiency seeking FDIs are then location, resource endowment, and government regulations (ibid). With awkward visa processes and contracts that block movement of labor, China removes the comparative advantage that Africans would have sustained. They do this through their strict contracts (ibid, 362). Realizing this, and the rest of the faulty practices in place in China discussed above, Kandiero suggests that Africa should adopt greater openness. “Even though opening the services sector seems to influence the FDI to GDP ratio more than opening the primary and manufacturing sectors,” an overall open economy will serve the continent better (ibid). While this paper discussed the severity of Chinese economic aggression against the African continent, Kandiero still offers a bit of positive advice on moving forward.
To conclude, it is apparent that the resource-rich continent of Africa is continually exploited for its cheap resources. In search of FDI investment, nations are eager to cater to foreign countries’ demands because they believe the increased investment and money flow will benefit their nation overtime. Contrary to this believe, China uses their power to control the terms and conditions of contracts, thus exploiting these nations. By using these rules, China sends its own workers to invest in infrastructure. As noted by Ross, Nnanna, and Chen, Chinese presence disturbs and even eliminates African business. Therefore, Chinese investment in the continent of Africa welcomes the updated narrative of neocolonialism based on capitalist practices that reap benefits to China while leaving Africans disenfranchised.
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